MOORESVILLE, N.C. — No. 2 home-improvement retailer Lowe's Cos. said Monday poor weather and cautious consumer spending caused sales to fall below expectations and earnings to fall 19 percent in the second quarter.
The company also plans to scale back new store openings in its next fiscal year in response to the poor economy and consumer pullback.
The weak earnings combined with a narrowed full-year profit outlook to knock shares down $2.61, or 11.4 percent, to $20.22 in premarket trading.
"Wavering consumer confidence, unseasonable weather in core markets, and restrained customer spending compared to last year's fiscal stimulus-aided results led to lower than expected sales in the second quarter," Robert A. Niblock, Lowe's chairman and CEO, said in a statement.
The No. 2 home-improvement retailer says profit fell to $759 million, or 51 cents per share, from $938 million, or 64 cents per share last year.
Revenue fell 5 percent to $13.84 billion from $14.51 billion last year.
Analysts predicted a profit of 54 cents per share on revenue of $14.35 billion. Lowe's had forecast earnings of 51 cents to 55 cents per share.
Sales in stores open at least one year, a key retail metric known as same-store sales, fell 9.5 percent during the quarter.
The company said it is scaling back on expansion plans in 2010. The company now expects to open 35 to 45 stores during the year. It said it is also taking a $48 million charge for canceling plans for several new stores.
The company did not immediately respond to a query about where the stores were to be located.
Janney Montgomery Scott analyst David Strasser, who rates the company "Buy" said the scaleback was positive.
"We had modeled 60 to 65 stores versus Lowe's new guidance of 35 to 45 stores," he wrote. "This is good for the overall industry."
Niblock said despite near-term pressure there are signs of a "bottoming process" in housing and the broader economy.
The real estate market nationally has shown some signs of stabilizing after months of falling housing values and transactions but remains historically weak. Buyers and would-be sellers tend to spend more on home improvement when a house is marketed and sold.
"We have seen customer traffic levels stabilize as we benefit from the resurgence of a do-it-yourself home improvement mindset," Niblock added.
For the third quarter, the company predicts earnings of 21 cents to 25 cents per share. It expects sales to fall 2 percent to 5 percent, implying sales of $11.49 billion to $11.14 billion.
Analysts expect a third-quarter profit of 27 cents per share on revenue of $11.62 billion.
It expects yearly sales to fall about 3 percent, implying revenue of $46.75 billion. Previously the company said it expected sales to be somewhere in the range of down 2 percent to up 1 percent.
The Mooresville, N.C.-based company says it expects yearly earnings of $1.13 to $1.21 per share, from previous guidance of $1.13 to $1.25 per share. Analysts predict a profit of $1.23 per share on revenue of $47.83 billion. Lowe's had raised its guidance in May.
Lowe's rival Home Depot Inc. is set to report second-quarter earnings on Tuesday. Following Lowe's earnings report, Home Depot shares fell $1.14 to $26 in premarket trading.
Copyright © 2009 The Associated Press. All rights reserved.
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