Lowe's Profits Jump as Consumers Invest in Their Homes

Lowe's Cos Inc., the No. 2 home-improvement retailer, on Monday said fiscal third-quarter earnings rose 24 percent, aided by expense controls and healthy sales as consumers invested in their homes.

Sally Wallick, an analyst at Legg Mason, said Lowe's improved its gross margin and kept down costs. ``They just seem to be doing a real good job across the board at getting improvement in different areas of the company,'' she said.

Lowe's, which cited rising customer traffic after the Sept. 11 attacks, also said it expects to meet Wall Street consensus estimates for the fiscal fourth quarter ending in February.

The company's shares gained $1.92, or 4.8 percent, to $42.27 in morning New York Stock Exchange trading. No. 1 home-improvement retailer Home Depot was up $1.32, or 2.9 percent, to $47.12.

Both Home Depot and Lowe's are benefiting as housing remains a relatively strong pocket of the challenged U.S. economy following the Sept. 11 attacks on the World Trade Center and Pentagon. Last week, Atlanta-based Home Depot posted a 20 percent jump in its third-quarter earnings, as sales rose 15 percent.

For the quarter ended Nov. 2, Lowe's, based in Wilkesboro, North Carolina, had net income of $250.5 million, or 32 cents a diluted share, up from $202 million, or 26 cents a share, a year earlier.

Analysts on average had expected profit of 31 cents a share, according to research firm Thomson Financial/First Call.

Home Depot and Lowe's appear poised for a strong holiday season. A recent poll conducted for Home Depot indicated that 62 percent of men and 48 percent of women prefer home-improvement gifts such as power tools and appliances.

Lowe's said expense controls and inventory management helped results, which it said showed that home and family had become increasingly important after the attacks.

``These results give us confidence in the resiliency of the American consumer,'' Robert Tillman, Lowe's president and chief executive, said in a statement.

Lowe's said historically low mortgage rates are spurring refinancings, which are also aiding results.

Customer count rose 19 percent in the quarter, as traffic, which fell immediately after the attacks, picked up. The average sale was $55.91, up nearly 2 percent from $54.97 a year earlier.

Sales for the quarter rose 21 percent to $5.45 billion from $4.5 billion. Strong categories included appliances, paint, flooring and building materials.


Comparable-store sales, a key measure of stores open at least a year, rose 4 percent, compared with flat sales a year ago. Lowe's said factors that had hurt comps in previous quarters, including deflation in lumber and building-materials pricing, turned around and helped results.

Lowe's also cited improvement at the former Eagle Hardware and Garden Inc. stores it acquired in 1999. It said 13 of its 14 regions had same-store sales boosts.

Dan Wewer, an analyst at Deutsche Banc Alex. Brown, said Lowe's widened its same-store sales advantage over Home Depot, which reported flat comparable-store sales for its third quarter.

Sounding an upbeat note, Lowe's said it expects diluted per-share earnings of 22 cents to 24 cents for its fiscal fourth quarter. Analysts currently see Lowe's earning 20 cents to 24 cents in its fourth quarter, with a consensus estimate of 22 cents. A year ago, Lowe's earned 18 cents a share.

For its full fiscal year ending in February 2002, Lowe's said it sees earnings of $1.24 to $1.26 a share, compared with $1.05 for the previous year. Analysts on average currently expected Lowe's to post earnings of $1.23 for the year, according to First Call.

Lowe's also said it expects total sales to increase about 14 percent in the fourth quarter, accompanied by a same-store sales rise of 3 percent to 5 percent.

Lowe's shares have outperformed Home Depot shares since Sept. 11. Since the attacks, Lowe's stock is up about 29 percent. Home Depot's has risen 16 percent during that time.