Lowe's Reports Better Than Expected Results

Lowe's reported better than expected quarterly results this morning.

Lowe's Profit Soars on Lower Costs has the breaking news:

"Lowe's Cos. said third-quarter profit jumped 76%, topping Wall Street expectations, as the home-improvement retailer saw revenue edge higher and overall costs fall, while recording fewer charges for the quarter.

The company now expects same-store sale growth of about 1.0% compared with its prior view of 0.5%.

 

The No. 2 home-improvement chain by sales—after Home Depot Inc. has been reshaping its operations to compete more readily with its larger rival, with the ultimate goal of making online selling a seamless part of an improved customer experience. Lowe's—which operates 1,750 stores in the U.S., Canada and Mexico—has been shifting to an everday-low-price strategy and is reviewing all its product lines with vendors to improve assortment and reduce unit costs.

But in August, company executives admitted that they had underestimated how long it would take for customers to respond to improvements and for gross margins to fully reflect cost reductions.

Monday, Chief Executive Robert Niblock said the company is "keenly focused" on improving its core business, characterizing the latest results as "solid" and the company's level of execution as "improving."

For the quarter ended Nov. 2, Lowe's reported a profit of $396 million, or 35 cents a share, compared with $225 million, or 18 cents a share, a year ago. The most-recent period included per-share charges amounting to five cents related to long-lived asset impairments, discontinued projects, and a change in the discount rate applied to self-insurance claims. The year-earlier results included 18 cents in charges related to store closings, long-lived asset impairments, and discontinued projects.

Net sales edged up 1.9% to $12.07 billion, while same-store sales for the quarter were up 1.8%.

Analysts polled by Thomson Reuters had predicted per-share earnings of 35 cents on revenue of $11.92 billion."

Summing Up

Sales at Lowe's were somewhat better than expected.

More generally, this supports the view that we're going to avoid recession in 2013 and perhaps grow faster than most people now anticipate.

Things may be looking up for the U.S. economy, in other words, as bipartisanship is even breaking out in Washington.

While at first glance, the Lowe's earnings were great, almost doubling, let's not get carried away. That's because most of the gain was attributable to fewer one time charges this year than were recorded in last year's comparable period.

And sales remain soft, although improving.

The takeaway for me is that while Lowe's is showing improvement, it's not in the same league with its bigger and better positioned competitor Home Depot. Depot has better management and a much stronger customer franchise as well.

At least that's my take.

Thanks. Bob.