Retailer Lowe's Cos reported a higher-than-expected quarterly profit on Monday, helped by US consumers spending tax rebate checks, and raised its full-year forecast, sending shares up about 2 percent. Lowe's, the second-largest home-improvement chain behind Home Depot Inc, also forecast earnings for the third quarter below current Wall Street estimates.
Home-improvement retailers have posted weak results as a slumping US housing market, tightening credit and rising gas and food costs pressure consumers. The second quarter marked the fourth-straight quarterly profit decline for Lowe's.
But Lowe's profit still topped Wall Street forecasts as consumers used their tax rebates for spring projects, and its sales performance for stores open at least a year was also better than some analysts had expected.
The company's earnings fell to $938 million, or 64 cents a share, for the quarter ended August 1, from $1.02 billion, or 67 cents a share, a year earlier. Analysts on average forecast earnings of 56 cents a share, according to Reuters Estimates. Total sales rose 2.4 percent to $14.5 billion, higher than the $14.1 billion analysts expected, as consumers worked on their lawns and gardens.
Sales at stores open at least a year, an important retail measure, fell 5.3 percent, hurt by weakness in big-ticket projects such as kitchen renovations. But some analysts had predicted a drop of as much as 7 percent.
"Lowe's bucked the trend of its linkage to housing turnover, as same-store sales recovered nicely at a moment when historical trends suggested they should have been toughing," Goldman Sachs analyst Matthew Fassler said in a research note.
Lowe's also cited market share gains for its second-quarter beat, but said it felt a cautious sales forecast for the rest of the year was prudent. Lowe's, based in Mooresville, North Carolina, said it now expects a full-year profit of $1.48 to $1.56 a share, compared with the $1.45 to $1.55 a share it forecast in May.
For the third quarter, Lowe's expects profit of 27 cents to 31 cents a share. Analysts expected profit of 33 cents a share for the third quarter and $1.50 a share for the year. Walter Todd, a principal and portfolio manager with Greenwood Capital in Greenwood, South Carolina, said that Lowe's full-year outlook could actually indicate a slower second-half, given the weight of stronger second-quarter results. "They effectively lowered the guidance for the second half," he said. Home Depot is due to report quarterly results on Tuesday.
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