Lowe's Profit Hurt by Cooler Weather, Competition

By Dhanya Skariachan

Lowe's reported a weaker-than-expected quarterly profit on Wednesday, hurt by colder-than-usual weather at the start of the spring selling season and strong competition from larger rival Home Depot.

The results contrasted sharply with those of Home Depot and signaled that Lowe's Cos. (LOW), the world's No. 2 home improvement chain, was still struggling to narrow the performance gap with the industry leader.

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Lowe's sales fell 0.5 percent to $13.09 billion in the first quarter ended on May 3, missing the analysts' average estimate of $13.45 billion. The company's shares fell 3.3 percent to $42.45 in trading before the market opened.

Sales at stores open at least a year dipped 0.7 percent. It was the 16th straight quarter that Lowe's posted weaker same-store sales than Home Depot.

"The spread between Home Depot and Lowe's [same-store sales] expanded in the first quarter, something we had worried might happen," said Janney Capital Markets analyst David Strasser.

Lowe's stocked more lawn and garden products than Home Depot Inc. (HD) and therefore suffered more from the unfavorable weather, Strasser said. At the same time, he said, Home Depot had more of a presence in California, where housing has made a strong comeback.

While Lowe's has been working to improve product selection and customer service, it has yet to turn around its business.

As part of its makeover, the company has started offering everyday low prices and products targeted to specific geographic markets. It made its stores more appealing with improved signs, television displays that stream videos on how-to-do projects, and lower racks to make items easier to reach.

Lowe's has also increased its assortment of products available online and started mylowes.com, a site that allows shoppers to save their room dimensions, create a shopping list and set reminders to buy items such as air filters and batteries for smoke alarms.

Lowe's, which was also slower than Home Depot to cut costs in the years after the housing collapse, said its first-quarter net earnings rose to $540 million, or 49 cents a share, from $527 million, or 43 cents a share, a year earlier.

Analysts on average expected a profit of 51 cents a share, according to Thomson Reuters I/B/E/S.

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