Lowe’s, like Home Depot, stumbled in erratic weather conditions and an uncertain housing market in the first quarter.
The country’s number two home channel retailer saw net earnings fall 12.1 percent to $739 million, compared with $841 million in last year’s first quarter. Comparable-store sales declined 6.3 percent.
Sales for the quarter increased 2.1 percent to $12.2 billion from $11.9 billion last year.
The company blamed poor April weather, which cut into outdoor sales, and difficult comparisons to last year’s post-hurricane revenue in the Gulf Coast region, in addition to the omnipresent poor housing market.
In terms of product categories, Lowe’s described a loss of market share in appliances. President and COO Larry Stone said Lowe’s generally did not match the marketplace’s heavy promotional environment for appliances in the first quarter.
“We lost a little bit in unit share, but in dollar share we were basically up,” Stone explained. “The whole trend in appliances seems to be going more to the high energy-efficient products.”
Energy-efficient products, particularly in laundry appliances, are in demand over low- to mid-price point items that dominated in prior years, he said.
“We feel real confident about our appliance business. We have a solid plan in place…to try to take back market share in major appliances,” Stone said, without elaborating.
|Q1 Net income|
|Down 12.1 percent|
|Up 2.1 percent|
Aside from possibly missing some promotions, appliance sales also were hit by poor weather conditions. “Those first two weeks in April, you wouldn’t have driven any business because people were just not out buying,” he said.
In fact, Lowe’s first quarter seemed to be a lesson in just how much weather can impact sales. Poor weather in one region typically is offset by good weather in another. But in the first two weeks of April, bad weather was so pervasive throughout the country that Lowe’s executives said the damage couldn’t be overcome even after the skies cleared.
“Weather deteriorated significantly in the first two weeks of April, and our sales suffered,” said CEO Robert Niblock, pointing to a comparable-store sales decline of 19 percent for the first two weeks of April.
At the end of March, comparable-store sales in outdoor categories such as live nursery and outdoor power were up in the single digits over the prior year, noted Mike Brown, executive vp-operations, at the company’s first-quarter earnings conference. But in the first two weeks of April, those comparable-store sales fell year-over-year.
Niblock said lumber and plywood prices saw major “year-over-year deflation,” partially because of a floundering housing market, but also because of harsh comparisons in the Gulf Coast region.
As for the housing market, Lowe’s executives said at the company’s annual investor conference—held May 25—that a month-over-month gain in new home sales would not affect Lowe’s projections for the second quarter.
“That doesn’t change anything and any outlook from what we said in our quarterly earnings release,” Niblock said. The company will maintain its prediction of a 7 percent sales increase for 2007—dependent on whether the housing market will hit bottom this year.
Niblock stressed the company’s position is that the housing market will neither significantly deteriorate nor see a major turnaround in the coming year, a “cautiously optimistic” position, he said.