Lowe's Reports 20 Percent Rise in Profit

Lowe's Cos. Inc. (LOW), the No. 2 home improvement retailer, reported a 20 percent rise in quarterly profit on Monday, topping estimates, as a strong housing market drove sales of appliances and services.

But the company also said sales at stores open at least a year were running at the low end of its expected range.

"August sales momentum slowed," said Eric Bosshard, an analyst with FTN Midwest Securities, who also noted concerns about rising operating expenses.

Second-quarter earnings rose to $838 million, or $1.05 a share, from $700 million, or 87 cents a share, a year earlier. Sales at stores open at least a year, an important retail gauge, advanced 6.5 percent.

Analysts, on average, expected profit of $1.02 a share, according to Reuters Estimates.

Sales rose 17 percent to $11.9 billion as better weather led consumers to take on delayed home improvements. Lowe's said its average purchase rose 5.6 percent to $67.40, while customer count rose 11 percent. Its so-called Big 3 — installations, special orders and commercial products — drove the higher-than-expected same-store sales.

"The housing strength is showing through, and there's really no end in sight to the expansion into urban areas, which is helping Lowe's same-store sales," said Keith Davis, an analyst with Farr Miller Washington. He expects similar results from industry leader Home Depot Inc. (HD), which is due to report quarterly earnings on Tuesday.

Lowe's said second-quarter sales rose in all categories except lumber, which was hurt by lower pricing. Appliance sales were up in the double digits as consumers bought energy-saving washers, and Lowe's said its appliance market share in units rose to 16.1 percent during the quarter. A heat wave in some regions fueled air conditioner sales, it said.

Lowe's, the No. 2 U.S. appliance retailer behind Sears Holdings, said it would be pleased to see appliance maker Whirlpool Corp. (WHR) acquire its smaller rival Maytag Corp. (MYG).

"We think that the way Whirlpool invests in innovation, it can certainly help Maytag keep the brand recognition that it deserves," Lowe's Chairman and Chief Executive Robert Niblock (search) told Reuters.

Lowe's, which is expanding beyond its Mooresville, North Carolina, base to large U.S. cities such as New York and Chicago, opened 27 stores in the second quarter, including its first New Hampshire store, to bring its total to 1,138.

The retailer said it expects profit of 76 cents to 78 cents a share for the third quarter, and $3.31 to $3.37 a share for the full year. Analysts currently expect 76 cents a share for the third quarter and $3.29 a share for the year, according to Reuters Estimates.

Lowe's said sales at stores open at least a year were currently trending at the lower end of its growth forecast of 4 percent to 6 percent for the third quarter.

Lowe's shares were up 4 cents to $65.23 near midday on the New York Stock Exchange, while Home Depot was up 27 cents to $41.55. So far this year, Lowe's stock is up 13 percent, while Home Depot has fallen 3 percent.