Volatile weather and shoppers' worries about the economy muted demand during Lowe's key early-summer selling season, leaving its second-quarter net income nearly flat, the nation's second-largest home improvement retailer said Monday.
Lowe's Cos. lowered its sales forecast for the second half of its fiscal year due to consumers' uncertainty, CEO Robert Niblock told The Associated Press.
Niblock cited three factors likely to hurt spending: the debate in Washington this month over the debt ceiling, the subsequent downgrade by Standard & Poor's of the nation's credit rating and the recent stock market fluctuations.
"(Consumers) have a somewhat fragile mindset already, and we don't believe any of those things helped," he said.
Shoppers continue to focus on repair and maintenance projects under $500, he added, rather than larger home-renovation jobs.
Lowe's closed seven stores Sunday that it said were underperforming; the move eliminated 650 jobs.
The company's net income for the three months that ended July 29 was $830 million, or 64 cents per share. That compares with $832 million, or 58 cents per share, a year earlier.
Excluding a charge related to the long-term value of the stores it closed, it earned 68 cents per share. Analysts expected adjusted earnings of 66 cents per share, according to FactSet.
Revenue rose 1 percent to $14.54 billion. Analysts expected $14.77 billion.
Niblock said in a statement that the performance fell short of the company's expectations, despite some recovery in seasonal sales.
Lowe's shares fell 33 cents to $19.18 by noon.
The company said its revenue in stores open at least a year fell 0.3 percent. That comparison is a key gauge of retailers' financial health because it excludes stores that opened or closed during the year.
Lowe's results were strongest in the North Central and Northeast regions of the U.S. as customers made repairs after a winter of snow and ice storms. Results were weaker in the Gulf Coast, which has suffered heat and drought this summer.
"Even after taking into account the challenges of the macro environment, we are still not pleased with our performance this year," Niblock said in a call with analysts. "For both do-it-yourself and commercial business customers we must drive more trips, close more sales and build bigger baskets."
He said Lowe's is focusing on offering key items that are readily available elsewhere at the lowest price possible, while reducing promotional discounts. Lowe's also is revamping its flooring selection and expanding its ceramic tile offerings.
In the third quarter, Lowe's expects net income of 30 cents to 33 cents per share, including a charge of 1 to 2 cents per share related to closing the seven stores Aug. 14. It expects revenue to rise 2 percent, implying revenue of $11.82 billion.
For the fiscal year ending Feb. 3, Lowe's expects net income of $1.48 to $1.54 per share, including a reduction of 6 cents per share for the store closings. It now predicts revenue will rise 2 percent, including an extra week in the fiscal year. That's down from a prior forecast of 4 percent. The new forecast implies revenue of $49.8 billion. Analysts expect revenue of $50.38 billion.
Lowe's said its store in Sanford, N.C., which was destroyed by a tornado on April 16, will reopen Sept. 8.
The company, based in Mooresville, N.C., operates 1,753 stores in the U.S., Canada and Mexico.