* Profit of 40 cents before items beats 35-cent analysts'
* Sees full-year sales up 2 percent; had seen 1 percent rise
* Still sees full-year EPS of $1.64 vs Street view $1.66
* Shares rise 6.5 percent
By Phil Wahba
Nov 19 Lowe's Cos Inc's reported a
higher-than-expected quarterly profit on Monday in a sign its
efforts to cut costs and improve its selection of home
improvement items are working.
Preparation and rebuilding efforts tied to Superstorm Sandy
and an improving housing market also boosted business at Lowe's,
the world's No. 2 home improvement chain.
Shares of Lowe's, which also raised its sales forecast for
the year, ended 6.2 percent higher at $33.96 in regular trade on
the New York Stock Exchange.
Rival Home Depot has won shoppers from Lowe's in
recent years by offering better pricing and service, while
Lowe's strategy of "everyday low prices" rather than promotions
has driven some customers away.
Lowe's has cut jobs, curbed store expansion and streamlined
its supply chain to reduce costs while reining in inventory.
"The home improvement sector is still growing, so this is a
sign that Lowe's is getting more of their fair share,"
Morningstar analyst Peter Wahlstrom said of the results.
U.S. home resales rose in October and a gauge of homebuilder
sentiment climbed to a six-year high in November, signs the
housing sector's recovery is gaining traction.
"It gives the homeowner what I call the psychological
permission to spend on their home because they feel better about
what the home's going to be worth in the future," Lowe's Chief
Executive Robert Niblock told Reuters.
Sales at Lowe's stores open at least year rose 1.8 percent
globally and in the United States, after declining in he
previous quarter. Still, it was the 14th straight quarter that
Lowe's same-store sales lagged those of Home Depot, which last
week raised its full-year outlook independently of any future
sales lift from Sandy.
Lowe's said sales rose 1.9 percent to $12.1 billion in its
fiscal third quarter, ended Nov. 2. That compared with the $11.9
billion expected on average by analysts, according to Thomson
The company said it now expects total sales for the fiscal
year to be up 2 percent, excluding the effect of an extra week,
compared with an earlier forecast of a 1 percent rise.
The retailer's third-quarter net income rose to $396
million, or 35 cents per share, from $225 million, or 18 cents
per share, a year earlier.
Excluding some items like write-downs and a charge for a
discontinued project, profit came to 40 cents a share, 5 cents
higher than analysts' estimates. Last quarter, Lowe's profit
missed Wall Street estimates.
The Mooresville, North Carolina-based company affirmed its
outlook from August that full-year profit would come to $1.64 a
TRANSFORMATION TAKING HOLD
Credit Suisse analyst Gary Balter, in a research note,
called the results "a promising inflection," a sign that efforts
by Lowe's are "beginning to take hold."
The company's current transformation phase is set to end in
Lowe's third-quarter sales received a lift from people
buying items like generators, flashlights and batteries ahead of
Sandy, which made landfall on Oct. 29, killing dozens and
leaving millions without power for days and weeks, Niblock said.
But customers remain careful in their spending.
"They perceive the path to recovery to be a bumpy one,"
In September, Lowe's withdrew a C$1.8 billion ($1.86
billion) unsolicited proposal to buy Rona Inc in the
face of opposition from the Canadian home improvement retailer,
its dealers and from politicians in Rona's home province of
Earlier this month, Rona's CEO stepped down, reigniting
speculation the Canadian chain could again be in play.
Niblock declined to speak specifically about Rona but did
say Lowe's needs more scale in Canada, where it has only 32
stores. Deals are one way to do that, he said.
"We will also continue to look at acquisitions as a
potential way for expansion," he told analysts.