Lowe’s Profits and Sales Short of Expectations in Q1, Shares Still Print New One-Year High

Andrew Klips  |

Lowe’s Companies, Inc. (LOW) reported Wednesday a 2.5 percent improvement in net earnings during the first quarter as some costs were shaved, although revenue was essentially flat with both key figures coming up short of Wall Street expectations for the world’s second biggest home improvement retailer.

For the quarter ended May 3, Lowe’s reported $13.1 billion in revenue, down 0.5 percent from $13.2 billion in the year prior quarter. Net profits rose to $540 million, or 49 cents per share, compared to $527 million, or 43 cents per share, in the first quarter of 2012.

Wall Street was expecting earnings per share of 51 cents on revenue of $13.45 billion.

Same-store-sales were down by 0.7 percent compared to last year’s quarter. The company blamed cooler than normal spring temperatures and more rain that impacted sales in exterior categories, which declined by 7 percent compared to Q1 2012. Offsetting part of those declines was a 3 percent increase in sales of the indoor categories.

Always compared to Home Deport (HD), the biggest home improvement retailer in the world, Lowe’s quarterly comparable store sales have trailed their bigger rival for four straight years.

Gross margin was little changed at 34.8 percent in the recent quarter, versus 34.7 percent last year. The company managed to edge down spending, with input costs and expenses down 0.7 percent each.

The shift to warmer weather has the company confident going forward.

“While overall performance in the month of March was particularly soft, April improved significantly and we have maintained that positive momentum through the first few weeks of May,” said Robert Niblock, chairman, president and chief executive at Lowe’s.

During the quarter, Lowe’s repurchased $1.0 billion of stock and paid $178 million in dividends.

The company upped its guidance for the full year outlook, saying that it now sees about a 4 percent increase in total sales compared to prior guidance of a 3.5 percent increase. This equates to 2013 revenue of about $52.54 billion, topping analyst predictions of $52.38 billion. Profit outlook was not changed, though, which stands at $2.05 per share, short of analyst expectations of $2.08.

Lowe’s has regularly struggled to keep pace with larger Home Depot who adapted more rapidly to the housing decline nearly six years ago. Lowe’s is still in the midst of making broad changes ranging from how merchandise is displayed in stores, adding more “how to” videos on monitors, shifting employee schedules and tasks, changing pricing structures to lower prices rather than more sales, launching “My Lowes” where consumers can track and record purchases and information online, and more to try improve overall performance.

Home Depot reported its first-quarter results on Tuesday, showing an 18 percent rise in net income and 7 percent jump in total sales that beat the Street while also boosting its full-year earnings guidance; sending shares to new 52-week highs.

Despite some comparisons to HD that could be construed as Lowe’s being an underachiever, the company is still improving organically and that has been reflected in its share price, which is up about 72 percent in the past year, including about 23 percent in 2013 and printing its own new 52-week high in Wednesday action at $43.84. By comparison, shares of HD are up almost an identical amount in the past year and 31 percent in 2013.

One hour into the trading session following the earnings report, shares of LOW have pulled back a bit from the new high, but are still ahead more than 2 percent on the day so far.

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Symbol Name Price Change % Volume
LOW Lowe's Companies Inc. 102.50 -1.25 -1.20 4,190,920 Trade
VIPS Vipshop Holdings Limited American Depositary Shares each representing two 7.51 0.01 0.13 5,353,905 Trade



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