Tags: Lowes | Sales | Profit

Lowe's Lifts Sales Forecast as Profit Tops Estimates

Monday, 14 Nov 2011 11:15 AM

Lowe's Cos. Inc. reported better-than-expected quarterly results, but analysts worry the home improvement chain will continue to underperform larger rival Home Depot Inc. in the foreseeable future.

Lowe's, a victim of the weak economy and housing market, has been slower to cut costs than Home Depot, whose sales at stores open a year or more have beaten its rival's for nine straight quarters.

Even in the latest third quarter, Lowe's same-store sales performance was lackluster and below some analysts' estimates. Sales at stores open at least a year rose 0.7 percent in the quarter. Analyst Alan Rifkin at Barclays was looking for a 1 percent increase.

Larger rival Home Depot is due to report its results on Tuesday. Analysts across the board expect the market leader to outperform Lowe's in the third quarter as it stands to benefit from its recent attempts to improve its distribution and customer service as well as efforts to cut costs.

"They have been feeding share to Home Depot," Rifkin said, adding that a recent move by Lowe's to offer low prices permanently helped sales a little but hurt margins.

"We do prefer Home Depot over Lowe's," Rifkin said.

Others agreed.

"There is still room for Home Depot to outperform relative to Lowe's heading into 2012. What Lowe's needs to do is take a hard look at their merchandising, their supply chain, their operations in order to flip that back into their favor," Morningstar analyst Peter Wahlstrom said.

Lowe's recently revamped its management and regional structure in an attempt to improve its U.S. operations.

Its U.S. stores now operate under three divisions — North, South and West. Previously, it had divided its largest market into at least five regions. The chain also consolidated its merchandising operations into two product units from four.

Last month, Lowe's said it was closing 20 of its U.S. locations and eliminating nearly 2,000 jobs, and slashing its store-opening plans to improve profitability. It laid off about 1,700 middle managers across the United States in January.

Lowe's has also slashed its prices permanently rather than offering temporary discounts, a strategy that some analysts think will help the chain win back some shoppers.

The company nudged its fiscal 2011 sales growth forecast higher to a range of 2 percent to 3 percent from its August forecast of 2 percent.

Lowe's net income fell to $225 million, or 18 cents a share in the third quarter ended Oct. 28, from $404 million, or 29 cents a share, a year earlier.

Excluding charges related to store closings and discontinued projects, it earned 35 cents a share, beating the analysts' average estimate of 33 cents a share, according to Thomson Reuters I/B/E/S.

Sales rose 2.3 percent to $11.85 billion, while analysts expected $11.69 billion.

It expects full-year profit of $1.37 to $1.40 a share, including charges of 20 cents a share associated with store closings and discontinued projects.

Lowe's shares were down 0.3 percent at $23.03 on Monday morning, while Home Depot shares were up 0.2 percent.

"Although Lowe's benefits from a relatively attractive valuation, we see limited upside potential from current levels based on our view of likely continued same-store sales underperformance vs. principal competitor Home Depot," Citigroup analyst Kate McShane wrote.

© 2017 Thomson/Reuters. All rights reserved.

 
1Like our page
2Share
Companies
Lowe's Cos. Inc. reportedbetter-than-expected quarterly results, but analysts worry the home improvement chain will continue to underperform larger rival Home Depot Inc. in the foreseeable future. Lowe's, a victim of the weak economy and housing market, has been slower to...
Lowes,Sales,Profit
537
2011-15-14
Monday, 14 Nov 2011 11:15 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved