Nov. 14 (Bloomberg) -- Wal-Mart Stores Inc. reported the smallest profit gain in four years after hurricanes shut stores and soaring energy prices crimped consumer spending. Lowe's Cos. said profit surged on a rise in home renovations.

Third-quarter net income at Wal-Mart, the world's largest retailer, rose 3.8 percent to $2.37 billion, or 57 cents a share. Sales rose 10 percent. Lowe's, the world's second-biggest home-improvement retailer, said third-quarter net income climbed to $649 million, or 81 cents a share. Sales increased 17 percent.

Profit at Wal-Mart was cut by $40 million in expenses after Hurricanes Katrina, Rita and Wilma closed 10 stores. Shoppers also bought more low-margin, essential items such as groceries, boosting sales. At Lowe's, sales at stores open at least a year rose 6.2 percent and the company benefited by opening locations in urban areas such as New York and Pittsburgh.

``There's been a lot of noise made about the economy and rising interest rates and energy prices, but it looks to us that the consumer is grumbling and spending anyway,'' said Dan Poole, who helps manage about $34 billion at Cleveland-based National City Corp., including Wal-Mart and Lowe's shares.

Shares of Bentonville, Arkansas-based Wal-Mart rose 27 cents to $49.27 at 4 p.m. in New York Stock Exchange composite trading. The shares have fallen 6.7 percent this year. Lowe's rose $2.92, or 4.7 percent, to $64.89. They have gained 13 percent this year.

Earnings Estimates

A.G. Edwards & Sons Inc. analyst Robert Buchanan expected 58 cents in profit at Wal-Mart for the quarter. He is top-rated by StarMine Professional. The average of 23 analysts surveyed by Thomson Financial was 57 cents a share.

Lowe's was expected to earn 76 cents a share by Sanford C. Bernstein & Co.'s Colin McGranahan, who is the top-ranked analyst for hardline retailing by Institutional Investor magazine. McGranahan's estimate was 1 cent less than the consensus of 22 analysts surveyed by Thomson.

Thomson declined to disclose the parameters for the estimates in its survey for either Wal-Mart or Lowe's.

Wal-Mart's net income in the third quarter was cut by an $80 million tax expense and $69 million of costs for product warranty programs, the company said in a statement today.

Wal-Mart's Results

Freight costs in the quarter increased up to 15 percent from the previous quarter, while payroll costs as a percentage of sales fell, Chief Financial Officer Thomas Schoewe said in an interview today. Falling gas prices should boost disposable incomes during the holidays, he said.

U.S. same-store sales rose 3.8 percent. Gross margin, or the percentage of sales left after the cost of goods sold, narrowed to 23.1 percent from 23.3 percent. Selling, general and administrative expenses were little changed at 18.85 percent of sales from 18.89 percent.

Wal-Mart forecast same-store sales of 3 percent to 5 percent for this month. Target today said November comparable sales may fall short of its forecast of 4 percent to 6 percent. Target spokeswoman Cathy Wright declined to provide further details.

Sales at Wal-Mart stores rose 9.5 percent to $50.2 billion. Sam's Club increased revenue 10 percent to $10 billion, helped by gasoline sales. Wal-Mart's international revenue rose 12 percent to $15.2 billion.

Comparable sales at Wal-Mart's main chain of discount stores and supercenters climbed 2.9 percent. Sam's Club's sales at stores open at a least a year rose 8.1 percent. The company said that without gasoline sales at Sam's Club increased 5.3 percent.

Scott's Strategy

Chief Executive H. Lee Scott said today ``in the face of numerous obstacles we actually performed'' and that he's optimistic about the holiday season.

``Even with the lingering impact of the hurricanes and the impact of the higher energy prices, I believe we will have a good holiday season,'' Scott said in a recorded call.

Scott, 56, is adding more fashionable apparel and upgrading stores as Wal-Mart loses customers to Target Corp. Wal-Mart has posted average annual profit growth of 16 percent over the last three years. By contrast, Target's exclusive brands by designers including Isaac Mizrahi have helped spur an average gain of 36 percent.

Lowe's Results

Scott debuted the Metro 7 line of clothing in the quarter for fashion-conscious 25- to-40-year-old women. Prices for items including embellished jeans and silk camisoles range from about $10 to $30.

Wal-Mart expects fourth-quarter comparable store sales to rise 3 percent to 5 percent. The company forecast fourth-quarter earnings of 82 cents to 86 cents a share and full year profit of $2.64 to $2.68. Thomson estimates fourth-quarter profit of 84 cents and annual profit of $2.64.

Lowe's, based in Mooresville, North Carolina, said gross margin, or the percentage of sales left after subtracting the cost of goods sold, widened to 33.9 percent from 33.7 percent. Selling, general and administrative costs fell to 20.9 percent of sales from 21 percent.

Chief Executive Robert Niblock is opening locations in urban areas such as New York and Pittsburgh, helping Lowe's boost sales an average of 16 percent the past four quarters compared with Home Depot Inc.'s 11 percent average gain.

New Stores

The average ticket price at Lowe's rose 8 percent to $68.81 in the quarter, helped by sales of hurricane-related products in the U.S. Gulf Coast. Lowe's sold more riding mowers, appliances and programmable thermostats in the quarter, Niblock said.

Sixty percent of Lowe's new stores were opened in the top 100 U.S. markets, Niblock said on a call with analysts and investors. ``Consumers are still shopping for home improvement projects in addition to ongoing home maintenance and repairs,'' he said.

Lowe's increased its fourth-quarter profit forecast to 77 cents to 80 cents a share from 76 cents to 78 cents. It also raised its full-year forecast to $3.37 to $3.40 from a range of $3.31 to $3.37. The fiscal year ends Feb. 3.

McGranahan expects the company to earn 79 cents in the fourth quarter and $3.34 for the year. The company made $2.71 last year.

To contact the reporters on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net; Mark Clothier in Atlanta at mclothier@bloomberg.net.

Last Updated: November 14, 2005 17:24 EST