updated 5/19/2008 3:59:26 PM ET 2008-05-19T19:59:26

If you are looking for a sign the economy is still in need of repair, you can find it at Lowe’s Cos.

A struggling economy and continued turmoil in the housing market drove the nation’s second-biggest home improvement retailer to report a nearly 18 percent drop in first-quarter earnings from a year earlier and lower its guidance for the year on Monday.

Its shares fell more than 2 percent in afternoon trading.

Investors may see similar results from larger rival Home Depot Inc., who is expected to post lower first-quarter profit on Tuesday, pressured by declining sales and costs tied to store closures and a scale-back of future openings.

“It’s been a challenging sales environment,” said Lowe’s Chairman and Chief Executive Robert A. Niblock in an interview with The Associated Press. “As we continue on in a tough environment, with rising other costs for the consumer, be it food or fuel or whatever, what happens on the employment front has yet to be seen and can certainly be more tough on more consumers.”

Mooresville, N.C.-based Lowe’s said net profit in the period ended May 2 fell 17.9 percent to $607 million, or 41 cents per share, from a year earlier. Sales slipped to $12.0 billion from $12.2 billion a year ago.

Analysts surveyed by Thomson Financial had been looking for net income of 40 cents a share on revenue of $12.4 billion. Estimates usually exclude one-time items.

“These results should not prove terribly surprising,” wrote Goldman Sachs analyst Matthew J. Fassler in a client note.

The home improvement sector has been hurt as consumers pulled back on renovation spending in the face of falling home values, tighter credit requirements and higher prices for basic items such as food and gasoline.

Lowe’s shares fell 60 cents, or 2.4 percent, to $24.29 in afternoon trading Monday. Shares of Home Depot rose 10 cents to $29.20.

Lowe’s said comparable store sales — a closely watched gauge of retail health that measures sales at stores open at least a year — declined 8.4 percent. The company predicted that number would drop at least 6 percent in the current quarter and the year.

Nearly 80 percent of the company’s comparable stores are located in markets experiencing housing price declines, Niblock said. As a result, many consumers remain hesitant to begin big ticket projects, he said.

In March, company officials said they plan to delay the opening of about 20 new stores this year in several hard-hit markets, including California and Florida. The company remains on track to open 120 stores in this year, Lowe’s President Larry Stone said Monday.

The company expects second-quarter total sales to rise about 1 percent on earnings of about 54 cents to 59 cents a share. Analysts have forecast earnings of 56 cents per share.

Lowe’s said it now expects full-year profit per share of $1.45 to $1.55, down from its forecast of $1.50 to $1.58 a share in February. Total annual sales are now expected to rise about 1 percent, down from a previous forecast of a rise of about 3 percent.

“While not a terrible report, we do not necessarily see this result as a positive catalyst,” wrote Deutsche Bank analyst Mike Baker in a client note. “We do not believe investors were looking for much improvement, but we have yet to see trends get less worse.”

Lowe’s and Home Depot have seen profits slide over the past year as a slump in the housing industry continues.

But the sentiment on Wall Street has been positive recently, and many expect home improvement retailers to benefit from an eventual recovery in the housing market.

Niblock said he was hopeful to see some dollars from consumers using their economic stimulus checks to do minor repairs and improvements to their homes.

“We don’t know what the full impact of the economic stimulus will be,” Niblock said. “It will be a benefit. How much is hard to determine.”

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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