No.2 US home-improvement retailer Lowe's reports 60 per cent declin in quarterly profit
21 Feb 2009
Lowe's Cos., the No. 2 US home-improvement retailer, said Friday that its fourth-quarter profit plunged 60 per cent, hurt by declining demand amid the collapse of the housing markets and increased discounts in the face of intense competition.
Net income declined to $162 million, or 11 cents a share, from $408 million, or 28 cents, a year earlier, the company said today in a statement. It was the biggest profit drop in at least a decade. Sales declined 3.8 per cent to $9.98 billion in the quarter that ended 30 January, Mooresville, North Carolina-based Lowe's said. Fourth-quarter gross margin, or percentage of sales left after taking out the cost of goods sold, narrowed to 33.73 per cent from 34.88 per cent.
First-quarter sales are expected to range from a decline of 3 per cent to an increase of 1 per cent with comparable-store sales estimated to decline as much as 10 per cent. Per-share profit is forecast to be 23 cents to 27 cents a share, Lowe's said. For the year ending Jan 29, 2010, profit is expected to be $1.04 to $1.20 a share with sales at stores open at least a year expected to fall as much as 8 per cent.
Lowe's was expected to earn 12 cents a share in the fourth quarter, 32 cents a share in the first quarter and $1.29 for the new year. The company said it's looking critically at all expenses and will further reduce them should sales fall short of its expectations. It's already controlled costs through the three-year downturn in the industry and managed its staffing level to match the slowing sales.
Economic pressures led to ''dramatic reductions'' in consumer spending during the quarter, CEO Robert Niblock said in the statement. The company is competing with larger Home Depot Inc. for market share as housing slumps and shoppers take on fewer projects.
Like retailers across the board, Lowe's has been hurt by consumers curtailing big-ticket purchases and other discretionary spending. The sharp decline in consumer spending and confidence led the company to be "more aggressive" than it had planned with discounts on its seasonal merchandise to clear inventory, hurting gross margins, Lowe's said.
The company said, however, many of the pressures were unique to promotional activity during the holiday season and said it expects those pressures to abate in the first quarter. It also said it continues to gain market share despite declines in sales.
Lowe's declined $1.12, or 6.6 per cent, to $15.86 at 4 p.m. in New York Stock Exchange composite trading, the most since 1 December. Before today, the shares had dropped 21 per cent this year after falling in each of the past three years.