Lowe's (LOW) Earnings Drop 44.3 Percent in Third Quarter
Shares of Lowe's Companies, Inc. (LOW: Charts, News) stock declined by 0.30 cents or -1.28% on Tuesday after the company reported a 44.3 percent drop in third quarter earnings. The earnings decline translates to $225 million, with a 38% per share decline of 18 cents from 29 cents for the same period one year ago.
Nevertheless, the Mooresville, NC based company reported an overall increase in sales revenue of two percent or $11.9 billion in the third quarter that was an improvement compared to sales of $11.6 billion for the third quarter of 2010. The nation's number two home improvement retailer has continued lagging the nation's leader - Home Depot (HD
) - for the last nine quarters in earnings for stores open for one year or more. Atlanta GA based Home Depot, operates 2,246 stores in the United States, China and Mexico, and reported net income increased 12 percent to $934 million, or 60 cents per share for the same quarter ending October 30th. Both Lowe's Cos. and Home Depot have been hard hit due to the slower U.S. economy and the lackluster real estate market. Daily Chart
Lowe's Companies, Inc. recently closed 27 stores which it considered to be underperforming the market and effectively losing out on more than $336 million in potential earnings or 17 cents per share. The company also stated it would open only 10 or 15 stores in 2012 versus their original goal of opening 30 new stores. Lowe's Cos. Currently operates approximately 1,690 stores in the United States, with 24 stores in Canada and two in Mexico. The recent store closings are expected to cost the company between $100 million and $130 million which includes obligations on their leased properties, layoffs of employees and adjustments to inventories. Robert A. Niblock, Lowe's Cos. Chief Executive Officer, said the company was not expecting a full recovery until at least 2013 as consumers continue to use caution in spending on major renovations. The CEO stated in a phone interview to Reuters that the company would "make up some ground" in early 2012, before possibly, "closing that gap in the second half of 2012." Furthermore, CEO Niblock's strategy of "right sizing" seems to have cost the company dearly, with the company working to reduce store promotions in favor of an "everyday low price" marketing strategy. Despite Tuesday's notable earnings drop to 35 cents per share, excluding discontinued projects and store closures, the report still came in better than analysts' expectations of 33 cents per share. Also, Lowe's Cos. apparently still plans to recover customers that it lost to Home Depot Inc., although some rather pessimistic analysts seemed skeptical about whether this was probable to a substantial degree. Lowe's Cos. Now expects earnings for the fourth quarter of 2011 to be between 20 cents and 23 cents per share, with store revenues being either flat or increasing by one percent, which is below most analysts' expectations of Q4 earnings of 23 cents per share. With Lowe's Company Inc.'s stock trading at the $23 level, the hardware retailer also announced plans to buy back $5 billion worth of its own shares. Overall, due to the company's management making significant changes to improve the company's profitability, the company seems to be moving to a more efficient operating model that could see better than expected earnings results in future quarters. Other News About LOW Lowe's Companies' CEO Discusses Q3 2011 Results
Lowe's CEO's transcript of earnings statement. The Zacks Analyst Blog Highlights: Lowe's Companies and The Home Depot
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Published on Nov 16, 2011
By Jay Hawk