Poorly performing housing markets in Florida and California put a damper on Lowe’s overall sales in its second fiscal quarter, but the company still managed to boost revenues to $14.2 billion, a 5.8 percent rise from $13.4 billion during the same quarter last year. Earnings for the industry’s second largest home improvement retailer were $1.02 billion, up 9.0 percent from $935 million in the second quarter of 2006—a record, according to the company.
Comparable-store sales were down, however, by 2.6 percent. Lowe’s two regions in California experienced double digit declines in sales comps, according to chairman and CEO Robert Niblock. The Gulf Coast region, which includes Florida, showed some improvement from the first quarter, but comp-sales were still a negative 15 percent.
The central part of the country, including Texas and Oklahoma up through the Ohio Valley, delivered positive comp sales, as did some Mid-Atlantic states that weren’t part of the earlier home-building frenzy.
|Q2 Net income|
|Up 9.0 percent|
|Up 5.8 percent|
“If we go back a year ago, no one was aware of how deep the subprime market would go, how much the lending standards had been relaxed, and the impact [those events] would have through the marketplace,” Niblock told analysts during an Aug. 20 conference call. While these macroeconomic factors don’t have a direct impact on Lowe’s business, Niblock said the company was prepared for “[some] fallout that may occur” due to tightened lending standards.
Consumers are already showing a reluctance to take on big ticket projects, according to Lowe’s, which reported a slowdown in its installed sales and special order programs. Commercial business outperformed the company average, however, with positive sales comps in many of the commercial merchandise divisions.
Overall, only six of 20 product categories achieved positive comps during Lowe’s second quarter, which ended on Aug. 3, 2007. Lawn and garden sales were strong, especially live plants. Other solid performers were paint, rough plumbing, fashion plumbing, hardware, lighting, flooring (except carpeting) and appliances.
Lowe’s opened 26 new stores in the United States during the last quarter, bringing its total to 1,424 locations. The company expects to open 40 new stores in the third quarter. Comp-store sales are expected to remain flat next quarter, according to Lowe’s.