Lowe’s net income jumps 76%

Lower costs, fewer charges boost retailer’s 3rd quarter

A customer pushes her Lowe’s purchases to her car in New York in this file photo. Lowe’s on Monday reported a third-quarter profit of $396 million.

A customer pushes her Lowe’s purchases to her car in New York in this file photo. Lowe’s on Monday reported a third-quarter profit of $396 million.

Tuesday, November 20, 2012

— Lowe’s Cos.’ said Monday that its third-quarter net income surged 76 percent, helped by lower costs and higher revenue, as the company’s efforts to revamp its merchandise and prices appeared to be gaining traction.

Its adjusted earnings without charges and its revenue both beat Wall Street forecasts. Its shares rose $1.98, or 6.2 percent, to close at $33.96.

Lowe’s has been retooling its pricing strategy, and last summer returned to offering permanent low prices on many items across the store, instead of offering fleeting discounts. But the changes have been slow to catch on, and last quarter Lowe’s said it could take until the middle of next year to reap the benefits of the strategy.

“In the third quarter we furthered our efforts to strike the right promotional cadence, drove more items per ticket, and made tough decisions in order to manage capacity and further our progress on value improvement,” Chief Executive Officer Robert Niblock said in a call with analysts.

The results are also the latest indication that home-improvement retailers and other housing-market related companies are benefiting from the beginning of a rebound in the housing market, with home prices and home sales growth both improving. Last week rival Home Depot Inc. reported slightly higher third-quarter net income and the company raised its full-year forecast.

In a phone interview, Niblock said the bottoming out of home values is starting to make people feel better about their homes, but said there is a long way to go.

“We’re certainly moving in right direction,” he said. “But there’s some concern with regard to the looming fiscal cliff and when and how that will be resolved that is on consumers minds as well.”

The “fiscal cliff” refers to a combination of automatic spending cuts and tax increases that are scheduled to go into effect at year’s end.

Home Depot also said last week that it benefited from a surge in sales late in the quarter from Hurricane Sandy preparations. Lowe’s said, so far, the benefit from Sandy is about even with last year’s benefit from Hurricane Irene, but the recovery from the storm is continuing.

Lowe’s earned $396 million, or 35 cents per share, for the three months ended Nov. 2. That compares with $225 million, or 18 cents per share, a year ago.

The current quarter includes charges that lowered earnings by 5 cents per share. In the prior-year period, charges reduced earnings by 18 cents per share.

The adjusted earnings of 40 cents per share beat the 36 cents per share that analysts polled by FactSet predicted.

Revenue rose 2 percent to $12.07 billion from $11.85 billion. That also beat Wall Street’s estimate of $11.93 billion.

Transactions below $50 were up about 1.3 percent, and transactions above $500 were up about 2.5 percent. Strong categories included lumber and cabinets and countertops.

Revenue at stores open at least a year, a key gauge of a retailer’s health, increased 1.8 percent. At its U.S. stores, the metric climbed by the same percentage rate. This figure excludes results from stores recently opened or closed.

For fiscal 2012, Lowe’s still expected earnings of about $1.64 per share and revenue to be approximately the same as 2011’s $50.21 billion. Analysts forecast earnings of $1.66 per share on revenue of $50.1 billion.

Shares of Lowe’s rose as high as $34.50 earlier in the session. That is its highest level since February 2007, according to FactSet.

S&P analyst Michael Souers kept his “Sell” rating on the stock, saying it remains overvalued.

“We see Hurricane Sandy providing a modest boost to results near-term, but remain cautious on consumer spending,” he wrote in a client note.

Lowe’s Cos., which is based in Mooresville, N.C., has 1,750 stores in the U.S., Canada and Mexico.

Information for this article was contributed by Michelle Chapman of The Associated Press.

Business, Pages 23 on 11/20/2012