MOORESVILLE, N.C. (AP) — Lowe’s sales and profit rose in the first quarter as the housing market began to thaw, but the performance was far from what Wall Street had expected and shares slid 4 percent Wednesday.
The performance was a stark contrast to that of its rival, Home Depot Inc., which beat almost all projections Tuesday and raised its outlook for the year.
Investor hopes may have been buoyed even further this week after the U.S. released data that appeared to reveal a housing market on the cusp of a boom. According to the Commerce Department, housing starts last month increased to a pace that has not been seen since the start of the recession.
That growth did not lift sales as much as had been hoped at Lowe’s Cos., and a number of analysts pointed to the locations of its stores as one of the culprits. Industry watchers say Home Depot has capitalized on its strong presence in states that have had a strong rebound in housing, places like California and Nevada.
“We continue to believe they are regularly hit by less than ideal real estate they built” after 2003-2004, said David Strasser of Janney Capital Markets.
For the three months ended May 1, Lowe’s earned $673 million, or 70 cents per share. While better than the $624 million, or 61 cents per share, a year earlier, it was far from the per-share earnings of 74 cents that industry analysts were projecting.
Revenue for the Mooreseville, North Carolina, retailer climbed to $14.13 billion from $13.4 billion. That also fell short of the $14.23 billion that Wall Street had expected.
Sales at stores open at least a year rose 5.2 percent, a figure that was easily outpaced by Home Depot and also below most expectations for Lowe’s.
Lowe’s maintained its projections for earnings of about $3.29 per share for the year, with sales rising 4.5 percent to 5 percent. Analysts polled by FactSet predict full-year earnings of $3.32 per share.
“We would have anticipated a better showing in the critical first quarter,” Strasser said. “This leaves little room for error, and as retail sales appear somewhat erratic to weak, this is likely [going to] impact them going forward.”
Shares fell $2.87 to $68.96 before the market opened.
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