Lowe’s Feels The Cold
Kelsey Swanekamp, 02.22.10, 05:15 PM EST
The home improvement retailer could struggle to beat even its conservative Q1 forecast with winter weather slowing sales in February.
Lowe’s beat the Street with better sales of big-ticket items, but poor sales at the beginning of the first quarter could dampen future results.
Improved demand for bigger-ticket items and large-scale projects has Lowe‘s ( LOW – news – people ) predicting that the worst may be over in terms of the housing crisis after fourth-quarter profits jumped 27% to $205 million or 14 cents per share, ahead of the consensus estimate for 12 cents per share. (See “Lowe’s Loses on Cautious Guidance.”)
that at long last Lowe’s big-ticket category sales brightened amid momentum in carpet, flooring and kitchen cabinets,” said Brian Sozzi, an equity research analyst with Wall Street Strategies, in a note. But Lowe’s failed to increase its sales in 2009, reporting a 2.1% decline for the fiscal year, and the company’s outlook is disappointing, Sozzi added.
And due to severe winter weather throughout much of the country, the retailer started out the first quarter of 2010 with sluggish sales. “Lowe’s has ground to make up if it wants to beat its guidance that some are deeming conservative,” said Sozzi.
While the home improvement chain’s positive year-over-year results come on the heels of improved housing starts figures, the indicators don’t guarantee a housing recovery in the near future. Instead, they provide a more accurate barometer of where we are now, said Elie Hirschfeld, president of Hirschfield Properties.
“The trends are clearly showing improvements, but that doesn’t mean that improvements will continue,” he said. In New York City, Hirschfeld has already seen the housing market begin to stabilize and prices begin to return to pre-recession levels, although New York typically has less housing excess or surplus than other areas of the country.
giant might not be entirely convinced that the worst is over, as its outlook for 2010 was conservative and came up short of analyst expectations. Lowe’s estimates total sales will rise 1% to 3% for the first quarter but a flat-to-2% decline in same-store sales. The retailer expects profit to come to between 27 cents and 29 cents per share, below The Street’s forecast of 33 cents.
Lowe’s conservative forecast generated little enthusiasm among investors Monday, as its shares dipped 0.3% to close at $23.07. Shares of competitor Home Depot gained 0.5% to finish at $30.31.