Home improvement retailer Lowe's (NYSE:
) was forced to cut its full-year earnings and revenue forecasts
this week after posting a 10 percent fall in second-quarter
that Lowe's net earnings were $747 million for the quarter that
ended August 3, 2012, a 10.0 percent decrease over the same period
a year ago. Diluted earnings per share of $0.64 were flat versus
the second quarter of 2011. For the six months ended August 3,
2012, net earnings decreased 1.3 percent from the same period a
year ago to $1.27 billion, while diluted earnings per share
increased 9.2 percent to $1.07.
"Our results fell short of our overall expectations," commented
Robert A. Niblock, Lowe's chairman, president and CEO. "However, I
have confidence in our strategy and in our employees, and while we
recognize the significant magnitude of change that we've asked the
organization to absorb as we transform our business, we fully
understand that we must improve our level of execution."
Niblock can have as much confidence in his company's strategy as
he wants, but the fact is that Lowe's is being intimidated by rival
Home Depot (NYSE:
), which reported a 12 percent rise in second quarter earnings.
So why are Lowe's sales down so much?
A quick look at a seasonal item, the Snow Joe 7.5-Amp 12"
electric snow blower, revealed that both stores sell it for $99.
Similar comparisons on items such as washing machines and bathtubs
show that the prices at the two stores are close, but that isn't
where Lowe's is falling short.
Despite the fact that Lowe's returned to permanent low prices in
summer of 2011, Home Depot is still the first name that most people
think of when considering home improvements and projects. Home
Depot is simply a better-branded company.
"We knew it would take time to see the full benefits of our
actions," Niblock told investors during a conference call. "The
team is making progress on these initiatives, but frankly, the
benefits are accruing at a slower rate than I had expected."
Naturally, Niblock is going to make a series of positive notes,
but the fact remains that his company is being left behind by Home
On Tuesday, Lowe's traded at about $26.25, down roughly 5.8
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