* Quarterly earnings 64 cents a share; analysts' view 70
* Sales fall 2 percent to $14.25 billion, missing estimates
* Lowe's cuts full-year earnings view
* Shares down 5.3 percent
(Adds comments from conference call, updates share movement)
By Dhanya Skariachan and Nivedita Bhattacharjee
Aug 20 Lowe's Cos Inc reported
weaker-than-expected quarterly sales and earnings and cut its
profit outlook for the year as the world's No. 2 home
improvement chain lost market share to larger rival Home Depot.
The results on Monday came just days after Home Depot Inc
beat Wall Street profit estimates with the help of cost
controls and market share gains, and raised its earnings
Shares of Lowe's fell 5.3 percent to $26.40 in morning
trading, while Home Depot dipped 1 percent to $56.17.
"Lowe's is a turnaround story, and it's not turning," said
Sanford C. Bernstein & Co analyst Colin McGranahan.
The company has cut jobs, curbed store expansion plans and
streamlined its supply chain to cut costs and compete more
effectively, but it has yet to see results.
It recently decided to provide fewer discounts on expensive
items like appliances, in sync with its bigger plan to offer
"everyday low prices" rather than promotions. The move has
driven some shoppers away.
"The team is making progress on these initiatives but,
frankly, the benefits are accruing at a slower rate than I had
expected," Chief Executive Robert Niblock said on a conference
call with analysts. "It will likely be mid-2013 before we fully
complete this phase of our transformation."
Analysts said other efforts, such as a credit card discount
program, had hurt margins more than they had helped sales.
"The biggest disappointment was the margins," McGranahan
said. "They lowered some prices, they offered a 5 percent
discount on their credit cards, and it doesn't look like they
got any traction yet."
Gross margin fell to 33.9 percent in the latest quarter from
34.5 percent a year earlier.
Sales suffered in the traditionally strong second quarter,
which ended on Aug. 3, as unseasonably warm weather early in the
year pulled some demand into the first quarter.
Sales at Lowe's stores open at least a year fell 0.4
percent, including a 0.2 percent decrease for the U.S. business,
the 13th straight quarter that the company trailed Home Depot in
"Lowe's inability to drive sales despite discounting remains
a concern," Janney analyst David Strasser said in a research
Net earnings fell to $747 million, or 64 cents a share, from
$830 million, or 64 cents a share, a year earlier.
Analysts on average had expected 70 cents a share, according
to Thomson Reuters I/B/E/S.
Sales fell 2 percent to $14.25 billion, while analysts had
expected $14.46 billion.
Mooresville, North Carolina-based Lowe's, which has stores
in the United States, Canada and Mexico, now expects flat sales
for the fiscal year ending Feb. 1. It forecast earnings of $1.64
a share, down from a May outlook of $1.73 to $1.83.
Last month, the company offered to buy Rona Inc,
but the struggling Canadian retailer rejected the proposal.
"First and foremost, an acquisition is not imminent," CEO
Niblock said on Monday. "We are evaluating our options ...
whether or not we can complete confirmatory due diligence and
ensure a fair price and an adequate return on our investment."
(Reporting by Dhanya Skariachan in New York and Nivedita
Bhattacharjee in Chicago; Editing by Lisa Von Ahn and John