Lowe's profit tops estimates on housing recovery
Lowe's Cos., the second-largest U.S. home-improvement retailer, posted fourth-quarter profit that exceeded analysts' estimates, helped by spending on remodeling and Hurricane Sandy repairs.
Net income fell 11 percent to $288 million, or 26 cents a share, from $322 million, or 26 cents, a year earlier, the Mooresville, North Carolina-based company said Monday in a statement. Analysts projected 23 cents, the average of 24 estimates in a Bloomberg survey.
Sales at stores open at least a year increased 1.9 percent as builders started single-family housing at the fastest rate in four years and homeowners in the northeastern U.S. made repairs after Hurricane Sandy. The company also has been revamping its merchandising strategy to give prominence to faster-selling items, such as cleaning supplies.
"They are getting some help from these initiatives," John Tomlinson, an analyst at ITG Investment Research in New York, said Monday by telephone. His firm doesn't rate shares.
Profit this year will be about $2.05 a share, Lowe's said. Analysts' estimated $2.10, on average.
Spending on store improvements and hiring will weigh on profitability in 2013, chief financial officer Robert Hull told analysts Monday on a conference call.
Lowe's shares rose 6.1 percent this year through Feb. 22 compared with a 6.3 percent gain for the Standard & Poor's 500 Index.
Lowe's also said Monday it authorized a new $5 billion share buyback program that it expects to use in the next two years.
Homeowners are spending more as the value of their property increases. The median price of an existing home rose to $173,600 in January, up 12.3 percent from a year earlier, according to a report last week by the National Association of Realtors in Washington. It was the biggest advance in property values since November 2005 as improving home sales combined with dwindling inventory.
In another favorable housing report from January, builders broke ground on 613,000 single-family houses at an annualized rate, the most since July 2008 and up 0.8 percent from December, Commerce Department figures showed last week in Washington.
Meanwhile, a payroll-tax break that expired Dec. 31 is causing Americans to pay 2 percentage points more in Social Security, slowing consumer spending. Wal-Mart Stores Inc. last week forecast first-quarter profit that trailed analysts' estimates because of the increase and delayed tax returns.