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UPDATE 3-Lowe's posts profit drop, cuts store openings
February 20, 2009 / 12:19 PM / 9 years ago

UPDATE 3-Lowe's posts profit drop, cuts store openings

* Q4 EPS 11 cents vs. estimate 12 cents

* Outlook for year below Wall Street estimates

* Store openings cut for ‘09

* Shares down 3 pct (Adds stock action, company and analyst comment, byline)

By Karen Jacobs

ATLANTA, Feb 20 (Reuters) - Lowe’s Cos (LOW.N) reported a sharp drop in quarterly profit on Friday as it marked down prices in the recession and it gave profit forecasts that fell short of Wall Street estimates, sending shares down 3 percent.

The second-largest home improvement retailer also cut its planned store openings for 2009.

“The (U.S.) stimulus efforts will provide some support to the consumer, but today the macro environment shows few positive signs and therefore we continue to plan conservatively,” Lowe’s Chairman Robert Niblock said during a conference call.

Earnings fell 60 percent to $162 million, or 11 cents a share, for the fourth quarter ended Jan. 30, compared with $408 million, or 28 cents a share, a year earlier.

Analysts expected profit of 12 cents a share, according to Reuters Estimates.

Sales fell 3.8 percent to $9.98 billion. Sales at stores open at least a year fell 9.9 percent.

Gross margin contracted to 33.7 percent from 34.9 percent a year earlier, hurt by the price cuts on seasonal merchandise. Lowe’s expects pressure on gross margin to ease during the first quarter, but still expects margin to be down for that period.

“We think the report reflects the challenge Lowe’s faces in continuing to reduce inventory and expenses in line with its third year of declining sales,” Sanford Bernstein analyst Colin McGranahan said in a research note.

He added that “the company’s already lean operating structure will likely limit the extent of expense reductions possible, thereby continuing to put pressure on operating margins.”

CURBING STORE GROWTH

Lowe’s and industry leader Home Depot Inc (HD.N) have curbed store expansions as the U.S. housing slump and tight credit markets curtailed demand for big-ticket home improvement projects.

On Friday, Lowe’s said it now plans to open 60 to 70 total stores this year, down from 75 to 85 stores it originally forecast.

The fourth quarter marked the sixth-straight quarterly profit fall for Lowe‘s, and Home Depot is expected to report its 10th-consecutive decline in quarterly earnings on Tuesday.

Lowe’s forecast profit of 23 cents to 27 cents a share for the first quarter and $1.04 to $1.20 a share for the full year. Analysts expected profit of 32 cents for the first quarter and $1.27 for the full year.

Lowe’s shares were down 63 cents, or 3.7 percent, to $16.35 in morning New York Stock Exchange trading, while Home Depot was down 24 cents, or 1.2 percent, to $19.92. (Reporting by Karen Jacobs; Editing by Derek Caney)

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