Lowe’s Reduces Annual Profit Forecast Following Drop in Same-Store Sales
Lowe’s Cos., the second-largest U.S. home-improvement retailer, said profit in its fiscal 2011 will be less than it previously projected as sales drop at stores open more than a year.
Per-share profit in the year through Feb. 3 will be $1.48 to $1.54, down from a previous forecast of $1.56 to $1.64, the Mooresville, North Carolina-based company said today in a statement. The average estimate of 21 analysts was $1.61.
Homeowners buffeted by unemployment, declining stock portfolios and sagging property values are delaying kitchen, bathroom and other projects. Second-quarter sales at Lowe’s stores open for more than a year declined 0.3 percent, compared with the company’s projection in May for a 2 percent increase.
“We see the potential for additional comp weakness if the economy continues to decelerate,” Colin McGranahan, an analyst at Sanford C. Bernstein in New York, said today in a note to clients. The same-store sales projection “suggests little hope for a second-half rebound,” he said. He rates the shares “market-perform.”
Lowe’s rose 17 cents to $19.68 at 4:01 p.m. in New York Stock Exchange trading. The stock has tumbled 22 percent this year.
Lowe’s said same-store sales this year will decline 1 percent, compared with a May forecast of unchanged to a drop of 1 percent. Total revenue may rise 2 percent, down from an earlier projection for a 4 percent gain.
Net income in the quarter ended July 29 fell to $830 million, or 64 cents a share, from $832 million, or 58 cents, a year earlier, the company said. Analysts projected 66 cents, the average of 20 estimates in a Bloomberg survey. Second-quarter sales rose 1.3 percent to $14.5 billion.
A worsening economic outlook and the Standard & Poor’s first-ever downgrade of the U.S. credit rating “underscore continued weakness in the U.S. economy,” Chief Executive Officer Robert Niblock told analysts today on a conference call. “The volume of negative news and the unsettling impact on equity markets is having a significant effect on an already fragile consumer mindset.”
A report last week showed that consumer sentiment plunged this month amid stock-market declines and the threat of a default on the national debt.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment for August slumped to 54.9, the lowest reading since May 1980, from 63.7 the prior month. The gauge was projected to decline to 62, according to the median forecast in a Bloomberg News survey.
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