* Analyst calls fiscal-year operating margin outlook "ho-hum"
* Earnings per share 26 cents versus analysts' estimate 23 cents
* Sales fall to $11.05 billion, but beat $10.84 billion estimate
* Lowe's sees higher sales in current fiscal year
* Lowe's shares down 1.8 percent; Home Depot dips 0.2 percent
By Dhanya Skariachan
Feb 25 Lowe's Cos Inc's forecast a fiscal-year operating
margin on Monday that analysts said did little to boost confidence in the U.S.
housing market or the retailer's own turnaround.
The news overshadowed stronger-than-expected quarterly results and caused
some on Wall Street to worry that investors in the second-largest home
improvement chain might have to wait longer than they had anticipated to see
Lowe's catch up with larger rival Home Depot Inc.
Morningstar analyst Peter Wahlstrom said Lowe's outlook for an operating
margin rise of about 60 basis points in the current fiscal year was "ho-hum."
"That basically means that investors need to wait another year for maybe the
Lowe's outperformance story to take hold," he said. "People were hoping for that
to come in 2013."
Home Depot plans to report results on Tuesday, and most analysts expect the
industry leader's same-store sales to outpace those from Lowe's for the 15th
Lowe's shares were down 1.8 percent at $37 in afternoon trading, while Home
Depot fell 0.2 percent to $65.46.
Citi analyst Kate McShane said Lowe's outlook might be conservative, given
that the company expects meaningful same-store sales and gross margin benefits
by the second half. Still, she maintained her "neutral" rating on the stock,
citing Lowe's underperformance against Home Depot and a choppy economy.
"The lack of incremental visibility on the company's progress against key
initiatives keeps us on the sidelines," McShane added.
Lowe's said it expected its fiscal-year sales to rise about 4 percent from
$50.52 billion in the year ended on Feb. 1.
While "home value perception" ratings are the strongest they have been in
four years, tight credit conditions and high mortgage delinquencies will
restrain the speed at which housing and, therefore, the home improvement
industry can grow, Lowe's Chief Executive Officer Robert Niblock told investors.
The housing market has shown some signs of recovery from a collapse that
helped push the economy into its worst recession since the Great Depression.
Homebuilding added to national economic growth in 2012 for the first time since
2005 and is expected to provide more support this year.
"While we see a modest recovery in housing, we see rising interest rates as
a threat to home refinancing, a key driver of remodeling," S&P Capital IQ
analyst Michael Souers said.
In its fourth quarter, Lowe's benefited from rebuilding after Hurricane
Sandy and the retailer's efforts to improve product selection and customer
As part of its makeover, the company has started offering everyday low
prices and products targeted to specific geographic markets. It made its stores
more appealing with improved signs, television displays that stream videos on
how-to-do projects, and lower racks to make items easier to reach.
Lowe's has also increased its assortment of products available online and
started mylowes.com, a site that allows shoppers to save their room dimensions,
create a shopping list and set reminders to buy items such as air filters and
batteries for smoke alarms.
Net income was $288 million, or 26 cents a share, in the fourth quarter,
compared with $322 million, or 26 cents a share, a year earlier. Analysts on
average were expecting a profit of 23 cents a share, according to Thomson
Sales fell 5 percent to $11.05 billion, but exceeded the analysts' average
estimate of $10.84 billion.
Sales at stores open at least a year rose 1.9 percent both globally and in
the United States. Sandy made landfall five days before the start of Lowe's
fourth quarter and boosted same-store sales by about 70 basis points.
The company forecast a 3.5 percent increase in fiscal-year same-store sales.
It expects earnings of $2.05 a share for the period.