Lowe’s 4th-quarter profit rises 27 percent on cost cuts, sales gain

Cost cuts, higher sales boost Lowe’s 4Q results

NEW YORK — Quarterly earnings at Lowe’s Cos. rose for the first time since 2007, a 27 percent fourth-quarter increase fueled by rising demand for appliances and cost cutting.

The No. 2 home-improvement retailer also said Monday that it expects sales to rise this year as the long-suffering housing market and broader economy recover. Still, a snowy February kept Lowe’s cautious about the first-quarter outlook.

At Lowe’s, sales at stores open at least one year fell 1.6 percent, the smallest drop in 3 1/2 years. The measure is considered a key gauge of a retailer’s financial health because it measures sales at existing stores rather than newly opened ones.

“During the quarter, we saw sequential improvement in bigger ticket projects and above average (sales in stores open at least one year) in our specialty sales area of installed and special order sales,” said CEO Robert A. Niblock in a call with investors. “We view this as an encouraging sign regarding consumer’s willingness to take on larger, more discretionary products.

There is still a “psychological impact” of consumers’ worries about falling home prices and unemployment, he said, but overall, “the economic outlook is much better than a year ago.”

Quarterly profit rose 27 percent to $205 million, or 14 cents per share, from $162 million, or 11 cents per share last year, ahead of the 12 cents per share analysts polled by Thomson Reuters, on average, expected.

It was the first year-over-year increase in earnings since the second quarter of 2007.

Revenue edged up nearly 2 percent to $10.17 million, from $9.98 billion last year, while analysts expected revenue of $10 billion

Shares fell 3 cents to $23.10 in morning trading.

Receipts greater than $500 fell 1 percent, a smaller drop than the third quarter, while receipts for $50 or less were flat.

“This is encouraging sign that some consumers are beginning to tackle the big-ticket projects on their to do list,” said COO Larry Stone.

Popular sellers included appliances, seasonal products, paint, flooring and cabinets and countertops.

Niblock said the federal cash-for-appliances rebate program, which offers mail-in rebates on energy-efficient appliances, varies by state and there are currently only a few states with active cash-for-appliance programs, with more are expected to roll out over the next month or two, which should help Lowe’s results beginning more in the first quarter.

Lowe’s also authorized a $5 billion share buyback program. It has no expiration date but the company said it expects to use the full amount over the next three years.

For the year, profit fell 19 percent to $1.78 billion, or $1.21 per share. Revenue fell 2 percent to $47.22 billion.

For the fiscal year ending next January, the company expects earnings of $1.30 to $1.42 per share on a 4 percent to 6 percent revenue increase, implying revenue of $49.11 billion to $50.05 billion.

Analysts expect a profit of $1.37 per share on revenue of $48.61 billion.

Lowe’s forecast first-quarter earnings of 27 to 29 cents per share, short of analyst expectations of 33 cents per share. It expects sales to rise 1 percent to 3 percent in the first quarter, implying sales of $11.94 billion to $12.18 billion, while analysts expect revenue of $11.97 billion.

Snowstorms in February caused Lowe’s to temper its first-quarter outlook by about 1 percent, Niblock said.

“Hopefully we’re getting most of that behind us, spring will come eventually and 2010 will be a better year,” Niblock said.