WILKESBORO, N.C. – No. 2 home-improvement retailer Lowe's Cos Inc. on Monday reported an 18 percent rise in fiscal second-quarter earnings as strong appliance sales helped the company weather a difficult economic environment.
Lowe's, which ranks behind industry leader Home Depot Inc., also said it expects profits of 30 cents to 32 cents a diluted share for the third quarter ending Nov. 2. Analysts surveyed by research firm Thomson Financial/First Call have been expecting earnings of 29 cents to 32 cents, with an average estimate of 31 cents.
For the second quarter ended Aug. 3, net income was $329.1 million, or 42 cents a diluted share, compared with $279.6 million, or 36 cents a share, a year earlier. The per-share results reflect last month's 2-for-1 stock split.
The results were at the high end of analysts' projections of 40 cents to 42 cents a share and a penny above the consensus estimate of 41 cents, according to First Call.
Sales rose 16 percent to $6.1 billion from $5.3 billion a year earlier. Sales at stores open at least a year increased 1.7 percent, compared with a 3 percent decline in the first quarter.
``It's, as expected, a good quarter,'' said Jefferies & Co. analyst Donald Trott. ``From the stock market's perspective, it's further confirmation that Lowe's is executing their business very very well.''
Trott said operating earnings at Lowe's, which has been expanding to major metropolitan markets where Home Depot had been the only major home-improvement center for years, have been growing faster than its main rival's.
``In October, the consensus growth rate for Home Depot was 24 percent,'' he said. ``It's now 20 percent. In December, the consensus growth rate for Lowe's was 17 percent; it's now 21 percent.''
Last week, Home Depot reported a 10 percent rise in fiscal second-quarter profits, beating analysts' estimates, on expense controls and sales of items that boost energy efficiency.
Trott said Lowe's and Home Depot have benefited as the home-building and home-remodeling sectors held up despite a downturn in the U.S. economy. Further interest-rate cuts by the U.S. Federal Reserve could also aid the retailers, he added.
In a news release, Lowe's Chairman Robert Tillman said increases in categories such as appliances drove results. ``We also saw solid trends in sales of paint, millwork and flooring, in spite of a difficult economic environment,'' Tillman added.
The company, which has gotten credit in past quarters for cutting its costs, said it expects total expenses to remain essentially flat as a percentage of sales for the third quarter.
As of Aug. 3, Lowe's operated 700 stores in 40 states.
Lowe's stock is up about 57 percent so far this year, outperforming shares of Home Depot, which are up about 8 percent.