Lowe’s optimistic on US economy/Home Depot quarterly sales down 9.7% - Customers are ‘still under pressure’

Lowe’s optimistic on US economy
By Alan Rappeport in New York
Copyright The Financial Times Limited 2009
Published: May 18 2009 14:03 | Last updated: May 18 2009 16:07
http://www.ft.com/cms/s/0/bfdfd1de-43aa-11de-a9be-00144feabdc0.html


Lowe’s, the US home improvement retailer, raised its profit forecast on Monday and said it was seeing signs of renewed confidence in consumers as its first quarter earnings exceeded expectations.

The North Carolina-based company has seen its profits hit by the collapse of the US housing market and the ensuing downturn. Customers have been wary of investing in expensive home improvement projects for houses with dwindling value.

Robert Niblock, chief executive of Lowe’s, said in a statement on Monday that as spring arrived, the company saw greater strength in purchases for smaller outdoor projects. Lowe’s, which operates 1,670 stores in the US and Canada, opened 21 stores during the first quarter of the year and plans to open 18 more this quarter.

”In recent weeks we have seen consumer confidence improve, housing turnover show signs of a bottom in certain markets, and home prices slow their decline,” Niblock said.

The US economy has shown some signs of stabilisation lately. Housing starts and home prices have slowed their paces of declines in recent months and a report last week showed that consumer confidence has returned to levels not seen since before the collapse of Lehman Brothers last September.

During the first quarter, Lowe’s first quarter profit fell by 21.6 per cent to $476m, or 32 cents a share, compared with $607m, or 42 cents, in the same period of last year. Sales slid by 1.5 per cent to $11.5bn.

The results sent shares of Lowe’s surging by 6.07 per cent to $19.57 in mid morning trading on Monday.

Analysts predicted that Lowe’s would produce net income of 26 cents a share on $11.6bn of sales. Lowe’s has worked to slash costs during the last year and said that it would continue to “plan conservatively” while the housing market remains near historical lows.

The company said it expects its second quarter earnings to grow to as much as 55 cents a share and that sales could rise by as much as 1 per cent.

On Tuesday Lowe’s rival Home Depot, the world’s largest home improvement retailer, will report its first quarter results. Wall Street analysts expect its revenues to be off by 11 per cent to $15.9bn and its profits to fall to by 33 per cent to 28 cents a share.




Home Depot quarterly sales down 9.7% - Customers are ‘still under pressure’
By Jonathan Birchall and Alan Rappeport in New York
Copyright The Financial Times Limited 2009
Published: May 19 2009 13:19 | Last updated: May 19 2009 15:28
http://www.ft.com/cms/s/0/34d15472-446e-11de-82d6-00144feabdc0.html


Home Depot, the world’s largest home improvement retailer, on Tuesday said its first quarter sales fell 9.7 per cent, and warned that its customers were still facing pressures from the recession.

However, the retailer reported profits that were better than Wall Street expected, as it continued a drive to cut costs. Excluding $117m in costs from the sale of its EXPO stores, and the impact of charges taken a year ago, its adjusted earnings fell 18 per cent to $587m, or 35 cents, per diluted share. Unadjusted earnings were $514m, or 30 cents a share.

Overall revenue slipped by 9.7 per cent to $16.2bn and comparable store sales – a metric favoured by retailers – were off by 8.6 per cent in the US and down 10.2 per cent globally.

”Our markets, and the consumer in general, remain under pressure,” Frank Blake, Home Depot’s chief executive, said in a statement.

In January, Home Depot announced that it would cut 7,000 jobs, with 5,000 resulting from the decision to close about 40 loss-making home project planning stores, and 2,000 coming from administrative staff reductions. The cuts amounted to about 2 per cent of its workforce.

Home Depot reaffirmed its projections for the year that sales would be down by 9 per cent and earnings off by 7 per cent compared with 2008. It predicts that same store sales’ declines will be in the “high single digit area”.

Companies such as Home Depot have seen their profits hit by the collapse of the US housing market and the ensuing downturn. Customers have been wary of investing in expensive home improvement projects for houses with dwindling value.

On Monday, the retailer’s smaller rival Lowe’s reported a 22 per cent decline in first-quarter profits, but the home-improvement retailer’s chief executive suggested that improving consumer confidence and optimistic signs from the housing market could signal that the worst of the recession was over.

Shares of Home Depot fell by 5.23 per cent to $24.66 in early trading on Tuesday.