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Lowe’s sales, profits rise in fourth quarter

LowesEarns0226
MARK HAMES - mhames@charlotteobserver.com
Mooresville-based home improvement store Lowe's reported fourth quarter results Wednesday, 02.27.14. This is the Lowe's store in Gastonia.

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The states hit hardest by the recession and housing crisis are now powering growth at Mooresville-based Lowe’s Inc., the home improvement retailer said Wednesday.

Sales and profits were up in Lowe’s fourth quarter as the home improvement retailer coped with – and benefited from – harsh winter weather.

“We continued to see strength in recovery markets, with particular strength in California, Arizona and Florida, where the recovery is well underway,” chief executive Robert Niblock told investors during a conference call.

Purchases of more than $500 – big-ticket sales that had suffered in the aftermath of the recession – increased by almost 9 percent. Appliances and snow throwers helped boost that number.

And though executives said they’re optimistic about the company’s prospects in 2014, they also cautioned that the slowing job growth and housing market of the last few months could be a drag on results.

“There has been a recent slowdown in both housing activity and jobs growth which makes us cautious,” the company warned investors.

Lowe’s said Wednesday that sales for the quarter that ended Jan. 31 totaled $11.7 billion, up almost 6 percent from the same quarter last year, Lowe’s said. And the company recorded a profit of $306 million, which is up more than 6 percent.

While sales of seasonal merchandise were lower than expected and some customers were kept away from stores by the weather, Lowe’s saw strong sales of winter items such as ice melting chemicals and replacements for burst pipes.

Sales at stores open for a year or more, considered a core measure of a retailer’s health because it excludes store openings and closings, were up almost 4 percent.

And Lowe’s said it has been using more sophisticated technology to measure its “close rate,” or the percentage of customers who visit a store and actually make a purchase. The company uses satellite pictures of store parking lots and compares those with the number of transactions. Lowe’s is also using traffic counters in stores to track the close rate hour by hour.

That’s led the company to more efficiently distribute workers, Lowe’s executives said. The company added 150 hours of employee time per week at two thirds of its stores, with the workers focused on working the sales floor. Sales per hour increased an average of 2 percent.

The average value of a sale at Lowe’s increased about 1 percent, to $63, during the quarter.

The company is projecting sales at stores open at least a year to rise approximately 4 percent in 2014. In an interview Wednesday, Niblock said Lowe’s projects it will add staff or give existing employees more hours to meet demand.

During the housing downturn, average sales per store dropped as consumers pulled back on discretionary spending in their homes, Niblock said. Now, rising home values are driving sales at Lowe’s as homeowners spend on projects to improve and customize their homes, he said. Despite some economists projecting a slowdown in the housing market, Niblock said he expects such spending to continue this year.

Lowe’s has pulled back on the number of stores it opens per year, focusing on boosting sales at existing stores. Niblock said Lowe’s expects to open 15 stores this year: six in the U.S., four in Canada and five in Mexico.

“We are still opening stores, just not as many as we were in the past,” he said.

As it tries to increase sales, Lowe’s is experimenting with different ways to let its customers shop. Under a pilot program, Lowe’s is allowing customers at some stores to purchase an item that is in stock in another store. The item can then be shipped to the customer’s home. The option will be rolled out across Lowe’s network of stores in 2015.

Lowe’s said Wednesday it will repurchase an additional $5 billion of its own stock, bringing the total amount of stock Lowe’s is authorized to repurchase up to $6.3 billion. Companies typically buy back their shares to reduce the number of shares outstanding and boost their results.

Atlanta-based Home Depot, Lowe’s biggest rival, said Tuesday that its sales were down about 3 percent in the fourth quarter, to $17.7 billion. And profits at Home Depot dipped less than 1 percent, to just over $1 billion.

Lowe’s operates 1,832 stores in North America, and its annual sales in fiscal 2013 totaled $53.4 billion. The company’s stock closed up $2.61, or more than 5 percent, at $50.72 a share. Staff writer Deon Roberts contributed.

Portillo: 704-358-5041; Twitter: @ESPortillo
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