Lowe’s says 2nd-quarter profit grew 10 percent but says economy is still taking a toll

Lowe’s 2Q profit rises 10 pct; cuts sales outlook

NEW YORK — People bought more air conditioners and grills at Lowe’s Cos. in early summer, boosting second-quarter net income 10 percent, but overall spending was hurt by hot weather and the weak economy, the home-improvement retailer said Monday.

The No. 2 home improvement retailer joined a long line of companies in sounding a cautious note about consumer spending and cut its yearly revenue guidance as worries grow about a stalling economy.

Lowe’s CEO Robert Niblock said in an interview Monday with The Associated Press that Americans are responding to programs such as the federal cash-for-appliances rebates and sales but says 2010 is a “bouncing along the bottom” year.

“We view 2010 as a year of transition for the home improvement industry and we don’t expect consistent improvement in core demand until the fundamentals of the labor and housing markets improve,” said Lowe’s CEO Robert Niblock in a call with analysts.

Spending remained marginally positive overall. Revenue from stores open at least a year rose 1.6 percent.

Revenue at stores open at least a year is a key indicator of a retailer’s performance because it excludes growth at stores that open or close during the year.

But Americans remain cautious, spending on carpets or kitchen cabinets, but not as much as they would have a few years ago, COO Larry Stone said.

“We do see some movement in kitchen cabinet sales, albeit not as strong as we would like to see it,” Stone said in a call with analysts.

Carpet sales were strong, but not as strong as in prior years, he said.

“We’re seeing good lift, but just not as bigger-ticket as we would have three or four years in go in product like that, so the carpet jobs are just doing smaller rooms or, (smaller) in terms of square footage versus what we did several years ago.”

Home sales have declined recently after getting a boost early in the year from tax credits, which expired at the end of April. Home buyers tend to spend on items such as new appliances or paint soon after moving in.

Lowe’s net income rose to $832 million, or 58 cents per share, in the quarter ended July 30. That’s up from $759 million, or 51 cents per share.

Revenue grew 4 percent to $14.36 billion, which fell short of the company’s expectations.

Analysts were expecting a profit of 59 cents per share and $14.52 billion in revenue, according to Thomson Reuters.

The company runs 1,724 stores in the U.S., Canada and Mexico.

Lowe’s said it now expects a profit of $1.38 to $1.45 per share this year, up from a previous estimate of $1.37 to $1.47 per share. But it now expects its revenue to rise about 4 percent, rather than 5 to 7 percent. That suggests a total of about $49.11 billion in revenue, down from $49.58 billion to $50.53 billion.

Analysts expect a profit of $1.42 per share and revenue of $49.57 billion on average. Lowe’s fiscal year ends Jan. 28.

Revenue from stores open at least a year is expected to grow about 2 percent instead of 2 to 4 percent.

The company forecast a profit of 28 cents to 32 cents per share in the third quarter, with revenue up 3 to 5 percent, to a range of $11.72 billion to $11.97 billion.

Analysts expect a profit of 31 cents per share and $11.94 billion in revenue.

Lowe’s chief rival Home Depot reports second-quarter earnings on Tuesday.

Janney Capital Markets analyst David Strasser said he believed Lowe’s stock should benefit from “a sigh of relief” that the results weren’t worse. “But risk still remains as the macro recovery remains elusive,” he added.

Shares rose 11 cents to close at $19.70 Monday.

Associated Press Writer Marley Seaman contributed to this report.