Housing slump hits Lowe's
The slowing housing market is also hitting the home-improvement chains, as Lowe's today announced earnings that missed analyst projections and cut its profit outlook for the year. The news followed a similar report from Home Depot, which last week said profit and sales would be at the low end of its earlier projections.
Lowe's is still having a pretty good year, Chairman and CEO Robert Niblock told analysts in a conference call today. Compared with last year, the company reported an 11 percent rise in profits for the second quarter, to $935 million, or 60 cents a share. But the remainder of the year looks to be tougher, with higher fuel costs and interest rates hitting consumers.
"We will be prudent with our expectations," Niblock told analysts.
The slowdown can be seen in comparable-store sales, which factors out increased sales due to new store openings. Those sales slowed in June compared with May, and again in July compared with June. The company also benefited last fall from a spike in spending from hurricane-damaged areas, which will make it harder yet to keep comparable-store sales growing.
Analysts said there weren't big surprises in the Lowe's report. The home-improvement business typically begins to slow about six or 12 months after the housing market itself, said Michael Cox, an analyst at Piper Jaffray & Co. "Much of that slowdown is already fairly priced into the stock," he said. A hopeful sign, he added, is that the Federal Reserve has stopped raising interest rates, he added.
Lowe's stock price has slumped since March, falling nearly 20 percent to $29.52 at Friday's close. The stock fell further in early trading today to below $28.50. Home Depot's stock has seen a similar decline since March.
In a report today, Morgan Stanley & Co. analyst Gregory Melich agreed that the performance at Lowe's reflected the slowing housing market. "The question," he said, "continues to be how much of a slowdown and for how long."