Appliance Sales Boost Lowe's Earnings
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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.
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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.''
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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.
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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.
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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.