updated 8/21/2006 11:02:05 AM ET 2006-08-21T15:02:05

Lowe’s Cos., the nation’s second-largest home-improvement chain, said Monday that its second-quarter profit rose 11 percent. But its shares tumbled 4 percent as it cut its full-year earnings outlook, saying higher energy prices and a slowing housing market are crimping consumer spending.

Net income in the three months ended Aug. 4 rose to $935 million, or 60 cents per share, from $839 million, or 52 cents per share, in the year-ago period. Wall Street was looking for profit of 61 cents per share, according to a Thomson Financial poll of 19 analysts.

Sales rose more than 12 percent to $13.39 billion from $11.93 billion last year, slightly ahead of the Wall Street estimate of $13.38 billion. Sales at stores open at least a year — a closely watched gauge of retailers’ health called same-store sales — rose 3.3 percent.

During the quarter it gained market share for flooring, appliances, outdoor power equipment and cabinets, Lowe’s said, citing third-party estimates.

But orders for new homes have slowed in recent periods and sales of existing houses are slowing from record levels, putting pressure on sales at Lowe’s and larger rival, The Home Depot Inc.

“Near-term pressures on the U.S. consumer have led to a more cautions outlook for the balance of the year,” Chief Executive Robert Niblock said in a prepared statement.

In a conference call with analysts, company officials said they were encouraged by continued low home mortgage rates and improving employment rates in the Midwest and elsewhere in the country.

“We remain very optimistic about the long-term opportunities in these markets,” Niblock said.

Lowe’s forecast third-quarter earnings between 45 cents and 48 cents per share with same-store sales flat to up by 2 percent. Wall Street is looking for profit of 46 cents per share.

For the year, the company anticipates profit between $2 and $2.07 per share with same-store sales growth of 2 percent to 3 percent. That’s down from its May forecast of $2.07 to $2.11 per share and same-store sales gains of 4 percent to 5 percent. Analysts expect profit of $2.05 per share on revenue of $48.5 billion.

Separately, Lowe’s approved an increase in its share buyback program of up to $2 billion through January 2008. At about $29 per share, the authorization would buy about 69 million shares, or 4 percent of the company’s 1.54 billion shares outstanding as of Aug. 4.

Lowe’s also declared a quarterly dividend of 5 cents, payable Nov. 3 to shareholders of record on Oct. 20.

Last week, Atlanta-based Home Depot said its second-quarter profit rose 5.3 percent and said it expects earnings growth for the year to be at the low end of its previous guidance.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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