Reuters: Global Markets: Lowe's cuts profit outlook; shares fall

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Lowe's cuts profit outlook; shares fall May 21st 2012, 12:20 A Lowe's logo is seen in South San Francisco, California February 22, 2010. Credit: Reuters/Robert Galbraith By Dhanya Skariachan Mon May 21, 2012 8:20am EDT (Reuters) - Lowe's Cos Inc (LOW.N), the world's second-largest home improvement chain, cut its fiscal-year earnings outlook and said demand had slowed toward the end of the traditionally strong first quarter, sending its shares down nearly 6 percent. The news came just days after larger rival Home Depot Inc (HD.N) missed Wall Street's quarterly sales estimates as demand weakened in April following a jump in home improvement projects earlier this year because of a warm winter. "While we capitalized on better-than-anticipated weather during most of the quarter, demand for seasonal products slowed toward the end," Lowe's Chief Executive Officer Robert Niblock said in a statement on Monday. Spring is traditionally the biggest selling season of the year for home improvement chains. But this year, homeowners stepped out earlier than usual to take advantage of the unseasonably warm winter weather across the United States. For the year ending on February 1, Lowe's expects earnings of $1.73 to $1.83 a share. It had earlier forecast $1.75 to $1.85. "We continue to maintain a cautious view of the housing and macro demand environment, and are focused on what we can control," Niblock said, echoing comments from Home Depot. Goldman Sachs analyst Matthew Fassler called Lowe's outlook "disappointing," especially since the company exceeded profit estimates in the first quarter. "My biggest concern about the sector is the underlying demand dynamics," Fassler said. He has a "buy" rating on Lowe's and a "neutral" rating on Home Depot. Lowe's, which runs 1,747 stores in the United States, Canada and Mexico, continues to expect total sales to rise 1 percent to 2 percent for the fiscal year, with an increase of 1 percent to 3 percent in sales at stores open at least a year. Shares of Lowe's were down 5.7 percent at $26.85 in trading before the market opened. STORE-LEVEL CHANGES Sales rose 7.9 percent to $13.15 billion in the first quarter ended on May 4, while analysts on average had expected $12.99 billion, according to Thomson Reuters I/B/E/S. Sales at stores open at least a year rose 2.6 percent, including a 2.7 percent increase for the U.S. business. Fassler said he was excited about the changes Lowe's is making in its stores. Late last year, Lowe's decided to move away from promotions to everyday low prices. It also started offering products targeted to specific areas and improved its website, signage and technology. Net earnings rose to $527 million, or 43 cents per share, in the first quarter from $461 million, or 34 cents a share, a year earlier. Excluding a charge for a previously announced cut in U.S. headquarters staff, the retailer earned 44 cents per share, compared with Wall Street's forecast for 42 cents. (Reporting By Dhanya Skariachan; Editing by Dan Lalor and Lisa Von Ahn) Link this Share this Digg this Email Reprints

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