NEW YORK (Reuters) - Lowe’s Cos Inc posted better-than-expected quarterly profit on Monday as it saw some strength in outdoor projects like gardens and lawns in the spring, even as consumers still shunned big home renovations.
The No. 2 U.S. home improvement retailer behind Home Depot Inc also raised its full-year forecast as it saw some signs that the decline in the housing market may be ebbing and consumer confidence may be improving.
California and Florida -- among the worst-hit in the U.S. housing slump -- were still facing deep declines in same-store sales, but the drop was not as bad as in prior quarters, Chief Executive Robert Niblock said in an interview.
“There have been some encouraging signs in recent weeks that suggest perhaps the worst is behind us,” Niblock told analysts on a conference call.
Shares of Lowe’s were up more than 9 percent, while Home Depot, which reports earnings on Tuesday, rose nearly 7 percent.
Though there are positive signs, Lowe’s will remain conservative with its plans since many economic indicators are still near “historic lows, Niblock said.
For instance, job losses continue to be high, Niblock said, adding that he expects unemployment to increase in the second half of the year.
For the full year ending January 29, Lowe’s now expects to earn $1.13 to $1.25 per share. It had previously expected earnings of $1.04 to $1.20 per share.
Analysts looked for Lowe’s to earn $1.11 per share.
“We are in a fragile state but there are more positive things to look toward today than we had six months or even a year ago,” said Jefferies & Co analyst Daniel Binder. “It’s still all about things being less bad.”
Lowe’s view on the economic environment “bodes well for tomorrow’s (Home Depot) results and the outlook for the remainder of 2009,” Credit Suisse analyst Gary Balter wrote in a research note.
“(Its) results should also help put to bed some investor concerns that the company was mis-executing after a (fourth-quarter) characterized by excess inventory and subsequent markdowns,” Balter said of Lowe’s.
Lowe’s net profit fell to $476 million, or 32 cents a share, for the first quarter ended May 1, from $607 million, or 41 cents a share, a year earlier.
Analysts on average had expected a profit of 25 cents per share, according to Reuters Estimates.
Sales fell 1.5 percent to $11.83 billion. Sales at stores open at least a year fell 6.6 percent in the quarter.
Outdoor products, which make up 35 percent of Lowe’s sales, reported vastly stronger same-store sales than its indoor products such as kitchen and flooring items, the company said.
Consumers also took up more “do-it-yourself” home projects such as painting, instead of paying someone else to do it, as they tried to save money in the recession, CEO Niblock said.
For the second quarter, Lowe’s said it expects to earn 51 to 55 cents per share, on a sales decline of 2 percent to an increase of 1 percent.
Analysts expect earnings of 50 cents a share.
Lowe’s also said it still expects to open 60 to 70 stores in the year.
Lowe’s also revised full-year sales plans to a range of a decline of 2 percent to an increase of 1 percent. Previously, it had expected the higher end to be an increase of 2 percent.
Same-store sales are still expected to decline 4 to 8 percent for the year.
Its shares were up $1.67 or 9.1 percent at $20.12, off an earlier high at $20.65, on the New York Stock Exchange on Monday afternoon. Shares of Home Depot were up $1.64 or 6.7 percent at $26.04.
Reporting by Aarthi Sivaraman; Editing by Gerald E. McCormick, Brian Moss and Matthew Lewis
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