Earnings and sales from clothing and department stores have been merely okay, and management is reluctant to look ahead with much positive feeling about the consumer spending. This morning’s earnings report from Lowe’s Companies, Inc. (NYSE:LOW) follows that pattern. Tomorrow we’ll get earnings from Home Depot Inc. (NYSE:HD) and Wal-Mart Stores, Inc. (NYSE:WMT), the industry leaders in home improvement and retailing, respectively.
Lowe’s posted second quarter earnings of $832 million, or diluted EPS of $0.58, up from $759 million in profits and diluted EPS of $0.51 in the second quarter of 2009. Sales were up 3.7%, to $14.4 billion. Analysts had been expecting EPS of $0.59 and revenue of $14.52 billion.
The company blamed everything but the kitchen sink — literally. Kitchen cabinets were a bright spot, even though sales were “not as strong as we would like to see,” according to the Lowe’s COO. Same store sales rose marginally by 1.6%. The company’s CEO said that Lowe’s “[doesn't] expect consistent improvement in core demand until the fundamentals of the labor and housing markets improve.” No kidding.
As a result of the weak outlook, Lowe’s cut its 2010 revenue guidance from growth of 5%-7% to about 4%, or from $49.58-$50.53 billion to $49.11 billion. The company raised the bottom of its expected EPS range by a penny, and lowered the top by two pennies. The forecast for full-year EPS went from $1.38-$1.45 to $1.37-$1.47.
EPS and revenue for the third quarter is mostly in line with estimates of EPS at $0.31 on revenue of $11.94 billion. Lowe’s forecast EPS for the third quarter is $0.28-$0.32 on revenue of $11.72-$11.97 billion.
Home Depot is expected to report EPS of $0.71 on revenue of $19.59 billion tomorrow. The second quarter is typically the biggest for home improvement stores, and Home Depot, like Lowe’s, should see a rise in sales and profits. But, also like Lowe’s, Home Depot is recovering slowly from nearly a three-year dip in business, so what might otherwise be regarded as a weak quarter will look good because the bar is not set very high.
Wal-Mart is expected to report EPS of $0.97 on revenue of $105.4 billion. The company raised its annual dividend to $1.21 earlier this year, nearly 20%, which may make investors more patient with the struggling behemoth. Still, there’s no reason to expect Wal-Mart earnings to provide a brighter outlook for the rest of the year than have other retailer earnings.
Lowe’s shares are up about 2% this morning, mainly because earnings weren’t as bad as traders had feared. That’s not much to build on though.
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