Lowe's Gives Cautious Earnings View For Coming Year
DOW JONES NEWSWIRES
Lowe's Co. (LOW) gave a cautious earnings outlook for next year, though it
expects same-store sales to rise after several years of declines.
The announcement, which also included a reiteration of this fiscal year's
expectations, though up to $100 million of write-downs could be recorded, came
ahead of a presentation for analysts and investors by executives.
The home-improvement industry has seen several years of falling sales,
dropping as home prices and sales have declined. Lowe's, the No. 2 retailer in
the space behind Home Depot Inc. (HD), has continued to boost store counts
despite the downturn. It plans to open up to 66 this fiscal year and as many as
45 in the year starting Jan. 30.
Meanwhile, Lowe's projected earnings for that coming year of $1.24 to $1.34 a
share, with revenue growth of 3% to 4% and same-store sales up about 1%. The
mean estimates of analysts surveyed by Thomson Reuters were for earnings of $
1.34 and a 3% revenue increase to $48.48 billion.
"Although prices have declined in recent years, the home remains many
consumers' largest asset," said Chairman and Chief Executive Robert Niblock. "
What has changed is their approach to tackling home-improvement projects.
Consumers are shifting to more do-it-yourself projects as they balance
convenience with the cost of outsourcing. Opportunity rests in our ability to
understand consumers' evolving needs and provide products and customer-valued
solutions."
Among the topics to be discussed at Tuesday's presentation is Lowe's belief it
can gain market share in the "highly fragmented industry."
Meanwhile, Lowe's announced it will close a four-year-old store in Milwaukee
which Niblock said has struggled since it opened. The company added that "the
continuing uncertainty regarding the timing and strength of the economic
recovery makes it possible" Lowe's could record up to $100 million in store
write-downs the rest of this fiscal year.
Shares were off 2.5% in premarket trading at $21.40.
-By Kevin Kingsbury, Dow Jones Newswires; 212-416-2354; kevin.kingsbury@
dowjones.com
(Adds additional detail and comments from analyst; updates share price.)
By Mary Ellen Lloyd
Of DOW JONES NEWSWIRES
Lowe's Co. (LOW) gave a cautious earnings outlook for next year, though it
expects same-store sales to rise after three years of declines.
The announcement, which came ahead of a presentation for analysts and
investors by executives, included a reiteration of this fiscal year's
expectations. But Lowe's also announced one store closing and said it may take
up to $100 million in write-downs related to closing more stores during the
balance of this year as it evaluates store performance. The home-
improvement industry is in its third straight year of declining sales as home
prices and home sales have declined. Lowe's, the No. 2 retailer in the space
behind Home Depot Inc. (HD), has continued to boost store counts despite the
downturn, while Home Depot has pulled back sharply on its expansion.
Lowe's plans to open up to 66 this fiscal year and as many as 45 in the year
starting Jan. 30, consistent with earlier announcements. The slowdown in
openings, though, should add up to $600 million in free cash flow, JPMorgan
analyst Christopher Horvers said.
Lowe's projected earnings for the coming year of $1.24 to $1.34 a share, with
revenue growth of 3% to 4% and same-store sales up about 1%. The mean estimates
of analysts surveyed by Thomson Reuters were for earnings of $1.34 and a 3%
revenue increase to $48.48 billion.
"Although prices have declined in recent years, the home remains many
consumers' largest asset," said Chairman and Chief Executive Robert Niblock. "
What has changed is their approach to tackling home-improvement projects.
Consumers are shifting to more do-it-yourself projects as they balance
convenience with the cost of outsourcing. Opportunity rests in our ability to
understand consumers' evolving needs and provide products and customer-valued
solutions."
Horvers told clients Lowe's is attempting to take a conservative outlook. But
Lowe's has been inconsistent in recent years as it provided alternately
conservative and optimistic forecasts, he said.
"Hence, investors will likely greet this forecast with some skepticism," he
added.
Shares were off 1.6% in premarket trading at $21.60.
Lowe's said it will close a four-year-old store in Milwaukee which Niblock
said has struggled since it opened. The company added that "the continuing
uncertainty regarding the timing and strength of the economic recovery makes it
possible" Lowe's could record up to $100 million in store write-downs the rest
of this fiscal year.
"Looking past the current cycle, we expect sales growth driven by market-share
gains," Chief Financial Officer Robert Hull said. That, he said, should lead to
"improved profitability, strong cash flow and significant amounts of capital
returned to shareholders."
Harvard University's Leading Indicator of Remodeling Activity points to a 12%
decline in homeowner spending on remodeling this year, to $110.2 billion,
following a 9.7% drop in 2008. Annual declines should hover around 11% for the
next several quarters, the center has said.
Lowe's executives will provide additional details in their presentations,
which begin at 10 a.m. EDT and will be broadcast on the Internet.
-By Mary Ellen Lloyd, Dow Jones Newswires, 704-948-9145; maryellen.lloyd@
dowjones.com
(Kevin Kingsbury contributed to this story.)
(END) Dow Jones Newswires
09-22-090733ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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