Lowe's Cos. reported weaker-than-expected quarterly results on a slow start to the spring selling season, prompting the world's second-largest home improvement chain to cut its forecast for the year.
The disappointing results in a key season renewed concerns about demand levels in an uneven U.S. economy and pushed Lowe's shares down 5 percent in premarket trading Monday.
In spite of hitting the bottom end of its first-quarter forecast, Lowe's slashed its fiscal-year outlook to $1.56 to $1.64 a share, down from its prior outlook of $1.60 to $1.72 a share, raising concerns about demand for the rest of the year.
Analyst Christopher Horvers at JP Morgan called the reduction in fiscal-year outlook as "unexpected."
The lowered outlook implies Lowe's has less confidence about sales in its second half, Credit Suisse analyst Gary Balter said.
"There is little evidence that the underlying housing market in America is stabilizing and improvements from the macro are looking more like a 2012 event if then," Balter said.
Lowe's results raise more questions than give answers, RBC Capital Markets analyst Scot Ciccarelli said.
"Is it all weather? Is it the impact starting to get felt from higher gas prices? Or probably, most ominously, is it the recent double dip we started to see in home prices?" Ciccarelli said.
INCLEMENT WEATHER HURTS
Both Lowe's and larger rival Home Depot Inc are up against strong numbers from last year, when a first-time home buyer tax credit and "cash for appliances" program boosted demand. Home Depot is due to report its results on Tuesday.
Colder-than-usual weather also kept shoppers away in many parts of the United States, Lowe's main market.
"During the quarter, we faced ongoing economic pressures, unfavorable weather conditions and tough comparisons to last year's government stimulus programs," Lowe's Chief Executive Officer Robert Niblock said in a statement. Its shares fell 4.9 percent to $24.50 in premarket trading.
Sales at stores open at least a year fell 3.3 percent, while Horvers at JP Morgan expected only a 2 percent decline.
"As our national store tour has indicated, sales have appeared to recover in May as the weather broke," Horvers said.
Net income fell to $461 million, or 34 cents a share, in the first quarter that ended April 29 from $489 million, or 34 cents a share, a year earlier. Analysts on average were expecting a profit of 36 cents a share, according to Thomson Reuters I/B/E/S.
Sales fell 1.6 percent to $12.19 billion, missing the analysts' average estimate of $12.52 billion.
For the second quarter, Lowe's forecast sales increases of about 4 percent overall and about 2 percent on a same-store basis. It expects earnings of 65 cents to 69 cents a share.
For the fiscal year ending on Feb. 3, 2012, the company sees sales rising about 4 percent, with same-store sales flat to up 1 percent.
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