Tags: Lowes | earnings | profit | outlook

Lowe's Cuts Outlook After Results Miss Expectations

Monday, 20 August 2012 07:16 AM

Lowe's posted a 10 percent drop in second-quarter net income, hurt by a timing shift and a charge tied to job cuts. Its performance missed Wall Street's expectations.

The world's second-biggest home improvement retailer also lowered its fiscal 2012 earnings and revenue outlooks on Monday.

Lowe's Cos. shares fell more than 6 percent in premarket trading.

Lowe's performance was in contrast to last week's report from rival Home Depot Inc., which offered encouraging news about the beleaguered housing market. The nation's largest home improvement retailer last week boosted its full-year outlook, citing its performance so far this year. And said that strong cost controls and healthy sales of paint, bathroom accessories and kitchen installations helped lift its net income by 12 percent during the period.

In response to stiff competition from Home Depot and a still weak home market, Lowe's has been working on strengthening customer service, reviewing all of its products and focusing more on e-commerce business. The chain last summer returned to its "everyday low price" strategy" by making price cuts permanent on a wide array of products across different categories. When the housing market slumped in 2006, Lowe's had strayed by ramping up temporary discounts across the stores. But the pricing strategy is expected to take time to resonate with shoppers, accustomed to big discounts.

"Our results fell short of our overall expectations," said Robert A. Niblock, Lowe's chairman, president and CEO in a statement. "However, I have confidence in our strategy and in our employees, and while we recognize the significant magnitude of change that we've asked the organization to absorb as we transform our business, we fully understand that we must improve our level of execution."

Lowe's earned $747 million, or 64 cents per share, for the period ended Aug. 3. That's down from $830 million, or 64 cents per share, a year ago.

Fiscal 2012 has one less week than last year. The timing shift lowered earnings by about 3 cents per share.

Removing a charge tied to previously announced job cuts and the impact of the timing shift, earnings were 68 cents per share.

Revenue fell 2 percent to $14.25 billion from $14.54 billion. Lowe's said that the timing shift accounted for 1.8 percentage points of the decline.

Analysts polled by FactSet expected earnings of 70 cents per share on revenue of $14.44 billion, on average.

Revenue at stores open at least a year dipped 0.4 percent and edged down 0.2 percent at U.S. locations. This figure is a key gauge of a retailer's health because it excludes results from stores recently opened or closed.

For fiscal 2012, Lowe's now expects earnings of about $1.64 per share and revenue to be about flat with 2011's $50.21 billion. It previously predicted earnings of $1.73 to $1.83 per share, with revenue rising 1 percent to 2 percent.

Wall Street foresees full-year earnings of $1.80 per share on revenue of $50.58 billion.

Lowe's, based in Mooresville, N.C., operated 1,748 stores in the U.S., Canada and Mexico at the end of the quarter.

Lowe's shares fell $1.72 to $26.15 in premarket trading on Monday, after closing at $27.87 on Friday. Over the past 52 weeks, the stock has traded between $18.28 and $32.29.

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Monday, 20 August 2012 07:16 AM
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