By Dhanya Skariachan
NEW YORK (Reuters) - Lowe's Cos posted
weaker-than-expected quarterly results, but kept its outlook
for same-store sales growth this year, assuring investors it
will benefit once consumer demand picks up.
Lowe's, the second-largest home improvement chain behind
Home Depot, said it still expected sales at stores open
at least a year to rise about 2 percent for the fiscal year,
which some analysts viewed as a good sign given persistently
soft U.S. consumer sentiment.
Chief Executive Robert Niblock described the consumer
mind-set as fragile and said it was still not clear when demand
would pick up, after signs earlier this year that the economy
was on track for recovery.
"We see the economy bouncing along the bottom in 2010,
resulting in a transition year for our industry," Niblock said
on a conference call with analysts.
"We don't expect strong industry growth until we experience
consistent improvements in the labor and housing markets, which
likely will not occur until 2011," he added.
JPMorgan analyst Christopher Horvers said Lowe's should be
able to meet its own same-store sales goal as consumers resume
long-delayed projects to maintain or repair their homes.
A return to big-ticket projects would accelerate sales
growth beyond that pace, he said in a research note. Horvers
also credited Lowe's for clearing inventory in the quarter,
boosting gross margin slightly.
The company said overall inventories were in good shape and
that it does not expect any major markdowns on appliances.
Shares of Lowe's rose 1.9 percent Monday after having
performed worse than the wider market this month. Home Depot,
which reports results on Tuesday, gained 1.1 percent.
For a Reuters Insider piece on Lowe's results, see:
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PROFIT, SALES FALL SHORT
While Lowe's profit and sales fell short during its latest
quarter, analysts said that Wall Street had looked for even
weaker results given data showing consumers are again hesitant
"We expect the 'not so bad' second-quarter results that
Lowe's reported today to alleviate growing market concerns of a
significant deterioration in trends at the chain over the past
few months," Oppenheimer analyst Brian Nagel said.
Net income rose to $832 million, or 58 cents a share, in
the second quarter ended on July 30, from $759 million, or 51
cents a share, a year earlier.
Analysts on average were expecting 59 cents a share,
according to Thomson Reuters I/B/E/S.
Sales at Lowe's lost some momentum during the second
quarter due to the expiration of a U.S. homebuyer tax credit
and cash for appliances programs. Both had helped results
significantly in the first quarter.
Sales rose 3.8 percent to $14.36 billion, but missed Wall
Street's average estimate of $14.52 billion. Sales at stores
open at least a year rose 1.6 percent.
Lowe's forecast current-quarter profit of 28 cents to 32
cents a share, while analysts were expecting 31 cents. The
company said it expected a sales increase of 3 percent to 5
percent for the period.
(Reporting by Dhanya Skariachan; Editing by Michele Gershberg,
Lisa Von Ahn and Gunna Dickson)