Lowe’s Quarterly Earnings Rise 44%
Home improvement chain Lowe’s Cos. said Monday that its fiscal first-quarter profit rose 44% as the company continued to expand offerings.
The results beat Wall Street estimates, but shares of Lowe’s fell 4.5% as it slightly reduced its guidance for revenue and earnings in the current second quarter. Chairman and Chief Executive Robert Niblock said the price decline reflected confusion over a calendar shift that boosted the latest revenue totals.
During a conference call with analysts, Niblock said the company was gaining market share in appliance sales and continued to expand sales of installed products, special orders and commercial sales.
Lowe’s also predicts that the real estate boom that prompted so much worry in 2005 is going to have a soft landing. Sales of new and existing homes are essential to retail sales at No. 2-ranked Lowe’s and larger rival Home Depot Inc.
“We’re optimistic about the underlying fundamentals of the home improvement industry,” Niblock told analysts.
Net income rose to $841 million, or $1.06 a share, in the three months ended May 5, compared with $586 million, or 73 cents, in the year-earlier quarter. Sales climbed 20% to $11.92 billion.
Analysts on average had predicted a profit of 94 cents a share on revenue of $11.84 billion, according to Thomson Financial.
Shares of Lowe’s, based in the Charlotte suburb of Mooresville, fell $2.82 to $59.82. The stock is down 10% this year.
Lowe’s said it expected sales to rise 12% in the second quarter from a year earlier, compared with the 13% to 14% the company anticipated at the start of its fiscal year. Earnings per share for the quarter are expected to be $1.21 to $1.24 instead of $1.22 to $1.25.
For the full fiscal year, Lowe’s said, it now expects a sales increase of 13% instead of the 13% to 14% predicted in February.
The first quarter of Lowe’s fiscal 2006 ended one week later (May 5) than it did in 2005 (April 29), giving the company an extra week of warm-weather sales. That shift could result in a negative effect in the second quarter, and it also means that the fourth quarter of the current fiscal year will contain 13 weeks instead of the 14 weeks in the fourth quarter of fiscal 2005, the company said.
Sales in stores open at least one year, a widely used industry gauge known as same-store sales, grew 5.7% during the quarter. The company said same-store sales were not affected by the sales week shift.
Lowe’s plans to open 24 stores in the second quarter and 155 this fiscal year, including four relocations of existing stores.
Niblock has led an effort to expand Lowe’s beyond its traditional business model to that of a one-stop home destination that can cater not only to the do-it-yourself market but also to a growing market that the company calls “do it for me,” which includes installation, repair and even some activities traditionally handled by contractors.
