Executives at Mooresville-based Lowe's Inc. said Monday they're still seeing an economic recovery, but offered plenty of reasons to be wary as the retailer reported that sales and profits fell in the first quarter.
The home improvement retailer also lowered its revenue guidance for the full year, telling investors it expects revenues to grow 4 percent instead of 5 percent. Executives warned that consumers are worried about fuel and energy prices, and that the housing market may not bottom out until mid-2012.
For the period ending April 29, sales fell 1.6 percent compared to the same quarter a year ago, to $12.2 billion. Sales at stores open a year or more, often considered a key measure of a retailer's health, fell 3.3 percent.
Profits fell 5.7 percent, to $461 million, and earnings per diluted share were flat at 34 cents a share.
Cold, wet weather in the north and central United States hurt consumer demand this spring, executives said, keeping customers out of their yards and away from outdoor home improvement projects.
The season is traditionally home improvement's equivalent to Christmas. Stores in the affected areas saw sales about 2 percent below the company's average. Devastating storms that raked the South also hurt business.
Executives put much of the blame for the quarter's performance on those conditions. Sales in last year's first quarter were boosted by government stimulus programs such as cash-for-appliances, leading to a more difficult comparison with results this year.
"We faced tough comps in the first quarter," said Lowe's chairman and CEO Robert Niblock in a conference call with analysts Monday morning. "We knew the bar was high.
"It's really more macro things driving the impact we saw in the quarter, plus weather," Niblock said.
Sales at stores open a year or more fell most sharply in April, when they sagged more than 8 percent.
Lowe's performance was worse than analysts had expected. Consensus forecasts called for Lowe's to earn 36 cents a share.
The company said customers are still spending timidly, continuing frugal habits they started in the downturn. Executives said surveys of their customers show 84 percent of projects planned this year are small-ticket, less than $500 jobs. And the proportion of discretionary, nonmaintenance projects undertaken by homeowners has fallen to about 30 percent.
Customers surveyed listed rising fuel prices as the number one worry limiting their spending, Lowe's executives said.
Uncertainty over home prices, which continued to fall in most cities throughout the quarter, is also corrosive, Niblock told the Observer.
The thought on consumers' minds, Niblock thinks, is, "When do we really get to the bottom?"
Shares of Lowe's closed down 3.6 percent Monday, at $24.84.
Lowe's operates some 1,750 stores in North America. Its largest rival, Home Depot, is scheduled to report earnings today.
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