NEW YORK (Reuters) - Lowe’s Cos Inc, the second-largest U.S. home improvement chain, posted a 30 percent drop in quarterly profit on Monday as consumers put off big renovations while the U.S. housing market remained sluggish.
Lowe‘s, like bigger rival Home Depot Inc, has suffered badly in the U.S. housing slump. It has also taken longer to implement cost controls to weather the downturn.
Chief Executive Robert Niblock said he anticipated the housing market would start to recover by the middle of 2010, though the company has begun to see improvements in some of the hardest-hit regions such as California and Florida.
The company’s shares were down about 4 cents, while Home Depot’s rose 1.4 percent. Home Depot is due to report earnings on Tuesday.
“Over the past few months, Lowe’s has put a greater focus on controlling operating expenses without impacting its stores,” Brian Sozzi, an analyst with Wall Street Strategies said, adding that Lowe’s had gotten off to a slower start than Home Depot in reining in costs.
“The thinking is that Home Depot will deliver third- quarter results above consensus, because it has cut costs deeper (than Lowe), and its fourth-quarter outlook is likely to be even more encouraging,” Sozzi said.
Lowe’s profits fell to $344 million, or 23 cents per share, in the third quarter that ended on October 30, from $488 million, or 33 cents per share, a year earlier.
Those results fell just short of analyst expectations of 24 cents per share, according to Thomson Reuters I/B/E/S.
Sales during the quarter fell 3 percent to $11.37 billion, slightly above expectations of $11.28 billion. Same store sales, or sales at stores open for at least a year, fell 7.5 percent.
Lowe’s margins rose and the retailer forecast its operating margin would increase 0.1 percent in the final quarter, mitigating the chain’s larger-than-expected quarterly losses.
Lowe’s also took an optimistic view of the fourth quarter and forecast that profits would range between 9 cents and 13 cents per share, which could beat analysts’ expectations of a 10 cent profit per share.
Lowe’s said it expects total sales in the last quarter to be flat, while same-store sales, or sales at stores open for at least one year, would fall between 2 percent and 6 percent.
It plans to open 13 new stores in the fourth quarter. Lowe’s opened 12 stores and closed one during the third quarter.
In September, Lowe’s disappointed investors with a cautious forecast for its next fiscal year and said future growth would be fueled by expansion in underserved markets and overseas.
Lowe’s shares slipped 4 cents to $21.81 in late-morning trading, while Home Depot shares were up 1.4 percent at $27.73. (Reporting by Phil Wahba; additional reporting by Franklin Paul; Editing by Dave Zimmerman and Maureen Bavdek)