Lowe’s Remains Positive Even While Profit Drops
You're reading Lowe’s Remains Positive Even While Profit Drops, posted on Friday, February 23rd, 2007 at 12:07 pm in News, on BrainBloggers at the The Business World blog. More after the jump.
It was stated in the news that the home improvement retailer Lowe’s Cos. reported an increase in earnings that they did not expect, even as the weak housing market hurt results, and its shares rose as much as 6 percent to an all-time high. As it said sales could start to turn upward this year. “We believe our (same-store sales) performance has bottomed and we expect to see gradual improvement” in 2007, Lowe’s Chairman Robert Niblock told analysts during a conference call.
The No. 2 home retailer, behind Home Depot Inc., said it sees first-quarter and full-year profit about in line with Wall Street estimates. Lowe’s “was willing to put a floor on the weakness and talk about improving dynamics at the end of the year,” said Sarah Henry, an investment analyst with Sovereign Asset Management. By contrast, she said, Home Depot delivered worse-than-expected results earlier this week.
Lowe’s shares rose $1.49, or 4.5 percent, to $35.13 in morning New York Stock Exchange trading, while Home Depot fell 29 cents to $40.89. Lowe’s shares reached 34.82 in February 2006. Lowe’s fourth-quarter earnings were $613 million, or 40 cents a share, for the quarter ended February 2, down 11.5 percent from $693 million, or 43 cents, a year earlier. The year-ago quarter included an extra week. Analysts, on average, expected 37 cents a share, according to Reuters Estimates.
Total sales in the quarter fell about 4 percent, to $10.4 billion, better than analysts’ estimates, while sales at stores open at least a year declined 5.3 percent. After adjusting for the extra week in the prior year, Lowe’s said total sales rose about 5 percent for the fourth quarter. Weak home sales and construction weighed on Lowe’s and Home Depot for the past year. Existing U.S. home sales fell 8 percent in 2006, their biggest drop since 1989. Housing starts fell 13 percent last year, their biggest tumble in 15 years.
Earlier this week, Atlanta-based Home Depot posted a 28 percent drop in fourth-quarter profit and its CEO said the company does not expect a dramatic turnaround in the housing market this year. Lowe’s, based in Mooresville, North Carolina, forecast per-share profit of 49 cents to 51 cents for the current first quarter and $2.02 to $2.09 for the full year. Analysts expect profit of 51 cents a share for the first period and $2.03 a share for the year, according to Reuters Estimates.
Niblock said that sales comparisons would likely be easier for Lowe’s this year. But some analysts questioned Lowe’s more upbeat guidance, noting that the company lowered estimates more than once in the past year as the housing slump weakened. “We continue to worry about comments from builders, the subprime market and Lowe’s biggest competitor that the recovery may take longer,” Credit Suisse analyst Gary Balter said in a research note. Lowe’s is up about 10 percent this year, while Home Depot’s stock has risen nearly 1 percent.