At Lowe’s, earnings outpace sales
Bad weather for retail dampened sales at Lowe’s, but earnings surged well into the double digits for the first quarter, the company announced Wednesday morning.
Lowe’s sales increased 2.4% in the first quarter, rising to $13.4 billion. Comparable-store sales increased 0.9%.
The Mooresville, North Carolina-based retail giant reported a net earnings surge of 15.6% to $624 million for the quarter ended May 2.
Lowe’s quarterly earnings report followed by one day the report from Home Depot, which outperformed Lowe’s in terms of sales. Lowe’s showed the higher percentage gain in net earnings — 15.6%, compared with Depot’s 12.5%.
Both retail giants pointed to the challenges of operating through a season hampered by a late start to spring.
"We executed well during the quarter, despite an unexpectedly prolonged winter in many areas of the country," commented Robert A. Niblock, Lowe’s chairman, president and CEO. "While poor weather dampened traffic and negatively impacted performance of exterior categories, results for indoor categories were solid. We effectively aligned inventory, staffing and marketing resources by climatic zone to best serve customers’ needs."
As of May 2, 2014, Lowe’s operated 1,836 home improvement and hardware stores in the United States, Canada and Mexico, representing 200.7 million sq. ft. of retail selling space.
For the full fiscal year, Lowe’s said total sales are expected to increase approximately 5%, while comp-store sales are expected to increase about 4%.
Early second-quarter performance suggests Lowe’s is on the right path, Niblock said.
"Performance has improved in May, which — together with our strengthening execution — gives us the confidence to reaffirm our sales and operating profit outlook for the year," he said.
Blake: Housing recovery is still kicking
Home Depot’s sales for the first quarter were below expectations, but don’t blame the housing market, blame the weather.
That’s how Atlanta, Georgia-based Home Depot CEO Frank Blake sees the events of the first quarter. The company posted sales of $19.7 billion, up 2.9%.
The colder-than-last-year temperatures of spring weighed heavily on sales, he said. But the company expects a weak first quarter to be counterbalanced by strength in the seasonal business in the second quarter. Such a counterbalancing has a name in Atlanta – “the bathtub effect.”
Meanwhile, reports of a demise of the housing recovery are highly exagerated, he said.
"There has been a fair amount of discussion about the fact that many indicators in the housing market have softened over the last several months, leading to the question of whether this indicates that the housing recovery has run out of steam,” Blake said. “As we parse the data from our own business, that is not what we see. The core categories in the store remained strong, pro sales continued to grow, our services business grew high single digits in the quarter, and we had another quarter of big ticket growth.”
Growth in stores, he added, will be fueled by home price appreciation, affordability and an aging housing stock in need of repair and investment.