Lowe’s reports third-quarter profit drop of 24 percent

Mooresville, N.C.-based Lowe’s Cos. reported that third-quarter profit fell 24 percent -- its fifth straight quarterly profit decline -- as consumers eschewed home improvement projects and big-ticket purchases.

"The third quarter continued what has been a very difficult period for our industry as many exterior factors weighed on home improvement sales," Lowe's chairman and CEO Robert Niblock said during a conference call Monday. "We expect continued, broad-based external pressures on our industry, as rising unemployment, falling home prices, tight credit and volatile equity markets continue to erode consumer confidence and impact sales."

Lowe’s said profit fell to $488 million in its fiscal third quarter, down 24.1 percent from $643 million in the year-ago period. Sales for the quarter increased 1.4 percent to $11.7 billion, up from $11.6 billion in the third quarter of 2007. The retailer forecast fourth-quarter profit below current Wall Street estimates and cut its full-year outlook, citing deteriorating economic conditions.

For the nine months ended Oct. 31, 2008, net earnings declined 15.3 percent to $2.03 billion while sales increased 0.9 percent to $38.2 billion. Comp-store sales for the third quarter declined 5.9 percent and 6.5 percent in the first nine months of 2008. Lowe’s had called for a decline of 5 percent to 7 percent in comp sales in the third quarter. It forecasts a comp-store sales decline of 5 percent to 10 percent in the fourth quarter, with the 10 percent figure more likely at this point.

In the third quarter, Lowe’s said eight of its 10 regions fell by double digits. The two positive regions were the Ohio Valley and Southern Texas, which were fueled by hurricane-related purchases.

Lowe’s said sales in the quarter were also up in home maintenance and outdoor projects. Larry Stone, president and COO, said consumers are willing to take on smaller projects and continue to spend on energy-efficient items like programmable thermostats.

Niblock said the positives -- housing turnover seems to be bottoming out and fuel prices continue to drop -- could not prevent a sales trend decline that began in the last week of October and has continued into November.

However, Niblock assured investors that “Now is not the time to stray from the basics of retailing. We will continue to provide great service to customers, increase market share and control expenses in a prudent manner.”

During the quarter, Lowe’s said it opened 39 new stores.

Looking ahead, the company expects sales to range from a decline of 3 percent to an increase of 2 percent in the fourth quarter. Meanwhile, 33 to 38 new stores are expected to open during the same period.