Lowe’s Cos. Inc. said shoppers buying paints, plants and replacement parts in the first quarter helped the home-improvement chain beat Wall Street forecasts and prompted it to boost its full-year outlook.
The results sent the company’s shares higher Monday as the company said business was “less bad” in all regions of the country and that economic conditions may — slowly — be improving.
“In recent weeks we have seen consumer confidence improve, housing turnover show signs of a bottom in certain markets, and home prices slow their decline,” Chairman and Chief Executive Niblock said in a statement.
Lowe’s, like much of the rest of the housing and home-improvement industry, has been battered by falling home prices, rising foreclosures and unemployment rates, and worsening consumer confidence.
Lowe’s results helped buoy the broader market and also raised expectations for rival The Home Depot Inc., set to report first-quarter results early Tuesday.
Niblock said sales in the hardest-hit states — among them California, Nevada and Florida — were still faring poorly but were beginning to show signs of improvement as more foreclosed properties are purchased. Areas of the Ohio Valley and Texas continued to show sales growth.
“It’s moving in the right direction,” he said during an interview with The Associated Press.
For the three months that ended May 1, Lowe’s said it earned $476 million, or 32 cents per share. That’s down nearly 22 percent from the previous year’s profit of $607 million, or 41 cents per share, but was well ahead of forecasts.
Sales dipped 2 percent to $11.83 billion from $12.01 billion.
Analysts surveyed by Thomson Reuters expected the retailer to earn 25 cents per share on revenue of $11.63 billion.
Unlike the fourth quarter, Lowe’s was able to avoid marking down as many items.
The nation’s second-biggest home-improvement chain said consumers continued to stay away from bigger-ticket housing items as they tried to shore up their savings amid the recession. But shoppers did welcome spring with smaller, outdoor purchases and also bought supplies for easy do-it-yourself projects such as painting.
The volume of shoppers who spent about $50 during a visit to the retailer at stores open at least a year held steady, while shoppers who spent more than $500 fell 14 percent.
Janney analyst David Strasser told investors in a research note that sales of the high-priced items should recover eventually, ultimately boosting the company’s performance.
Lowe’s will monitor its expenses and will “continue to plan conservatively” because many of factors affecting the housing market are still at or near historic lows.
“We hope there continues to be a gradual improvement out there,” Niblock said. “Overall it will be a challenging environment with unemployment. But until we get a bottom in housing prices, it’s still going to be a challenging housing environment — it will just be less bad if we continue to have those signs moving in the right direction.”
Deutsche Bank analyst Mike Baker told investors in a research note that the results showed “improving confidence in the last few weeks and (that) spring (is) off to a good start.”
For the full year, Lowe’s forecast earnings of $1.13 to $1.15 per share. The retailer’s second-quarter guidance anticipates profit of 51 cents to 55 cents per share.
Lowe’s expects a sales decline of 2 percent to an increase of 1 percent for both the full year and the second quarter.
Analysts predict 2009 net income of $1.11 per share on revenue of $47.16 billion. Second-quarter profit was expected to be 50 cents per share on sales of $14.12 billion.
Lowe’s forecast a same-store sales decline of 4 percent to 8 percent for both the second quarter and the year. That figure fell 6.6 percent in the first quarter, less than expected.
Same-store sales, or sales at stores open at least a year, are a key indicator of retailer performance because they measure growth at existing stores rather than newly opened ones.