Lowe's warns profit could trail forecast

ATLANTA (Reuters) - Retailer Lowe's Cos Inc (LOW.N) warned on Monday that full-year profit could trail its prior forecast, saying dry conditions in some parts of the United States were hurting sales.

The company's shares fell more than 5 percent in extended trading.

Lowe's, which is holding its analyst meeting on Tuesday, said "current sales are trending below" expectations as drought conditions in the mid-Atlantic, Southeastern and Western parts of the United States hurt sales of outdoor products such as mowers and patio furniture.

"Lowe's sales trends have reversed the apparent improvement seen" in the second quarter, Sanford Bernstein analyst Colin McGranahan said in a research note.

"While part of the weakness is weather related, Lowe's cautious outlook on 2008 suggests underlying trends are weaker than the company expected against easy compares," McGranahan said, adding the forecast would likely pressure the stock.

Lowe's, the second-largest home improvement chain behind Home Depot Inc (HD.N), said it now expects profit for the year ending in February to be at the low end or below a forecast of $1.97 to $2.01 a share it gave in August.

Analysts currently expect profit of $1.99 a share for the current year, flat with earnings of $1.99 a share the year before, according to Reuters Estimates.

For the third quarter that ends November 2, analysts expect profit of 45 cents a share on sales of $12.04 billion.

Problems in the subprime-mortgage sector that caters to borrowers with spotty credit have further slowed the U.S. housing market. Lower home sales and less construction have hurt results at Lowe's and Home Depot over the past year.

FORECAST CUT IN AUGUST

In August, when it posted second-quarter results, Lowe's trimmed its full-year profit outlook from a May forecast of $1.99 to $2.03 a share, citing subprime-market concerns. But it also said at that time that sales trends were improving in some regions despite the housing woes.

"Even as we face easier prior-year sales comparisons as we progress through the year, many uncertainties remain, and it seems prudent to further temper our sales and earnings outlook," Lowe's Chairman Robert Niblock said in the statement on Monday.

Atlanta-based Home Depot, which is refocusing on its core retail stores after selling off a unit that supplies materials to contractors, said earlier this month it expects per-share profit to decline 7 percent to 9 percent this year.

Mooresville, North Carolina-based Lowe's, which is expanding to big cities such as New York and is set to open its first stores in Canada later this year, said it expects per-share profit to average 12 percent to 15 percent growth per year from 2008 through 2010, while total sales rise 8 percent to 11 percent a year during that time.

Also on Monday, retailer Target Corp (TGT.N) said its September sales at stores open at least a year would be well below its prior forecast because of weak customer traffic, particularly in Florida and the U.S. Northeast.

Lowe's shares sank 5.9 percent to $28.72 in after-hours trading from their $30.55 close on the New York Stock Exchange on Monday. Lowe's stock has fallen about 2 percent this year, while Home Depot is off about 16 percent.

(Reporting by Karen Jacobs)