the economic malaise created by high energy prices and flattening home prices is spreading to more retailers.
>>>Hmmmm. I guess everybody already heard the Lowes story. The above writing from tomorrow's WSJ. I love it when they write that way.<<<
Lowe's Net Rises, but Outlook Is Cut
Dim View for Year Suggests
Wider Toll of Energy Costs
And Home-Price Slowdown
By GARY MCWILLIAMS
August 22, 2006
Lowe's Cos. cut its outlook for the year, rattling investors and underscoring that the economic malaise created by high energy prices and flattening home prices is spreading to more retailers.
The nation's second-largest home-improvement retailer, after Home Depot Inc., said fiscal second-quarter profit rose 11%. Still, Wall Street was more focused on the bad news in Lowe's performance. The retailer said that sales at stores open at least a year -- a key retailing measure often called "same-store sales" -- rose just 3.3%, near the bottom of Lowe's 3% to 5% forecast. The 3.3% quarterly gain was the smallest since 2003. And Lowe's said the weakness could last through the first quarter of next year.
The weaker same-store sales trend "is primarily the macroeconomic" environment coupled with shifts in its quarterly calendar, which includes one less week among other changes, said Robert Niblock, Lowe's chairman and chief executive. "Consumers are taking a bit of a breather," he said.
Long a retailing standout, the warning by Lowe's of weaker-than-expected gains for the rest of the year comes as higher gasoline, electricity and consumer-borrowing costs continue to pinch spending. Last week, Wal-Mart Stores Inc. and Home Depot offered mixed outlooks as U.S. consumers held tighter to their pocketbooks.
Even retailers appealing to more-affluent customers are now reporting a damping effect on sales of everything from lattes to home décor. Although personal incomes and home values continue to rise across much of the nation, consumer sentiment fell earlier this month, according to preliminary findings of a University of Michigan survey.
Lowe's, Mooresville, N.C., reported net income of $935 million, or 60 cents a share, for the latest quarter, compared with $839 million, or 52 cents a share, in the year-earlier period. Profit for the quarter ended Aug. 4 was a penny a share shy of analysts' consensus estimate as tallied by Thomson Financial.
Sales, bolstered by store openings and a gain in average spending per customer, were $13.39 billion, up 12%. Lowe's opened 24 stores during the quarter.
The company estimated that profit for the fiscal third quarter will be 45 to 48 cents a share on an about 11% sales increase, to about $11.76 billion. It projected fiscal third-quarter comparable-store sales would be flat to up 2% from a year ago.
At 4 p.m. in New York Stock Exchange composite trading, the company's shares were off $1.17, or 4%, at $28.35 apiece. The company said its board authorized as much as $2 billion in share repurchases through January 2009.
Lowe's also reduced its outlook for the fiscal year for the second time this year. It now estimates earnings per share of $2 to $2.07, down from a past estimate of $2.07 to $2.11 a share. It projected sales would rise about 11% for the year, down from its prior estimate of a 13% sales gain.
Wall Street analysts already had lowered their estimates, and the current Thomson Financial consensus forecast is within the new range. |
