After a slowdown in customer traffic in the late summer months, Mooresville-based Lowe’s Cos. started reducing store employees’ hours in the U.S. as a way to improve profitability.
But Lowe’s still reported third-quarter earnings and sales Wednesday that fell below Wall Street expectations, and the slowdown prompted the retailer to lower its full-year expectations.
Lowe’s disappointing report came a day after rival Home Depot, the nation’s largest home-improvement retailer, said its third-quarter earnings were better than expected thanks to still-low mortgage rates and continued improvement in the housing market.
Home improvement retailers are often considered a proxy for the health of the housing market. In a call with the Observer following the report, CEO Robert Niblock said he expects housing will continue to be a “bright spot in the economy,” especially in Charlotte, where property values are rising faster than they are in the rest of the nation.
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For the three months that ended Oct. 28, Lowe’s reported earnings of $379 million. That included $462 million in one-time charges, including the winding down of its Hydrox joint venture, writing off canceled projects and goodwill and impairment charges.
Stripping out these charges, earnings were 88 cents a share, below the average estimate of analysts surveyed by Zacks Investment Research, who called for 96 cents a share.
The retailer said sales for the quarter totaled $15.74 billion, up 9 percent from the same quarter last year but below the Wall Street estimate of $15.8 billion. Comparable sales, an industry term for sales at stores open at least one year, rose 2.7 percent over the quarter.
Lowe’s said it expects earnings per share for the year will be $3.52. That forecast is down from its previous forecast, which was $4.06 a share.
RBC Capital Markets analyst Scot Ciccarelli in a report called Lowe’s quarterly results “poor and messy,” a “bad combo” that will likely stifle excitement in the sector.
In afternoon trading, Lowe’s shares were down nearly 3 percent to $67.04.
In a call with analysts, Lowe’s executives said slower sales in August and September put pressure on the company’s profitability for the quarter. Niblock said one of the way the company’s sought to improve shareholder value is to “better match labor to demand.”
“It was a slow start to the quarter, but I was really proud of the way the team responded. Whether it’s payroll leverage, whether it’s the investment in digital ... To go from a slow start of the quarter to a really nice performance in the month of October, we’ve seen that carry over to the first part of the fourth quarter, and we’re excited about what that means for the holiday season,” Niblock said.
Most of the “labor adjustments,” Niblock said, was in stores rather than at the corporate office. But earlier this fall, the retailer laid off 95 employees in its information technology department in an effort to “streamline” some processes, executives have said.
Lowe’s operated 2,119 home improvement and hardware stores in the U.S., Canada and Mexico as of Oct. 28. The Associated Press contributed.