Following a first quarter profit decline at rival Home Depot, Lowe's Cos. said its first quarter profit fell 12.1 percent due to a sluggish home improvement market that is feeling the effects of a weak housing market. The Mooresville, NC-based retailer said it earned $739 million, or $0.48 a share, for the three months ended May 4, down from $841 million, or $0.53 a share, a year earlier. Sales rose 2.1 percent to $12.2 billion from $11.9 billion a year earlier, but same store sales fell 6.3 percent. "Multiple factors, including a difficult housing market in many areas, tough comparisons to hurricane rebuilding efforts, and significant lumber and plywood price deflation, continued to create a challenging sales environment in the first quarter," Robert A. Niblock, Lowe's chairman and CEO said. The company cut its full-year earnings forecast to $1.99 to $2.03 a share, down from the $2.02 to $2.09 a share it called for in February. Full-year sales are now expected to rise about 7 percent, down from a 10 percent gain previously forecast.
Commentary: It appears that Lowe's is suffering from the same affliction as its rival Home Depot, but not to the same extent. Factors beyond the retailers' control - a slumping housing market, high gasoline prices, etc. - will impact their results in 2007. But, all of this is happening at a time when Home Depot has more work (and spending) to do in the area of store remodeling and boosting customer service. In addition, Home Depot's greater exposure to the homebuilders side of the home improvement business (through its HD Supply unit) leaves it more vulnerable to weakness in the housing market.
