Profits and sales rose in the first quarter at Mooresville-based Lowe’s Inc., as the home improvement retailer cashed in on unseasonably warm temperatures across much of the country.
But CEO Robert Niblock remained cautious about the rest of the year, warning that lingering problems in the housing market, unemployment and political uncertainty could weigh on the rest of the year.
“It is still volatile, especially when you think about the uncertainty that will be around the election,” Niblock told the Observer on Monday. He also said that more than 520 corporate employees decided to take a buyout program offered earlier this year and leave the company. That would be roughly 10 percent of the 5,200 or so employees at Lowe’s Mooresville headquarters and its Wilkesboro offices.
“We’re making tough decisions to improve profitability,” said Niblock. “We’re willing to accept short-term disruptions for long-term gain.”
Lowe’s stock fell more than 10 percent Monday, losing $2.88 a share to close at $25.60.
Sales rose to $13.2 billion for the quarter, up 7.9 percent compared to the same period last year. A calendar shift led to the addition of an extra week in fiscal 2012, adding $514 million, or 4.2 percent, to this quarter’s sales.
Profits climbed 14.3 percent, to $527 million for the quarter. The retailer posted earnings per diluted share of 43 cents, ahead of analysts’ average estimate of 42 cents. A reduction in Lowe’s Mooresville headquarters staff done through buyouts cost the retailer $17 million and shaved 1 cent of the company’s earnings per share.
Sales at stores open for a year or more increased 2.6 percent. That’s considered a crucial measure of a retailer’s health, because it excludes newly opened stores from sales growth figures. Wayne Hood, an analyst with BMO Capital Markets, said that modest growth was “disappointing” compared to Home Depot, where sales at stores open a year or more grew 5.8 percent.
Lowe’s operates 1,747 stores, and expects to open 10 additional stores this year. For the full year, on a 52-week comparable basis, Lowe’s is forecasting sales to rise by 3 percent.
The warm weather across most of the country helped Lowe’s, especially in its northern markets, the company said. The northern stores saw sales rise 4.5 percent above the company average, Lowe’s executives said, as more people ventured outside to tackle home improvement projects.
Tools, outdoor equipment, lumber and exterior paint all sold extremely well, with sales rising at more than twice the company’s average rate, executives said. Appliances, cabinets, and millwork all suffered, however, with falling sales. And sales of big-ticket items, those costing $500 or more, fell about 1 percent. Executives attributed the drop to offering fewer and less-deep discounts compared to last year.
The retailer is transitioning to an “everyday low price” strategy and trying to get away from promotions. Last quarter, Lowe’s offered about 30 percent fewer sales compared to the previous year, executives said. Niblock said big-ticket sales aren’t likely to improve much “until we bottom out and see sustained recovery in the housing market.”