Lowe’s profits rise despite spring chill
05/21/2014 7:59 AM
05/21/2014 5:45 PM
An unusually long winter dragged into the spring selling season and hurt sales at Mooresville-based Lowe’s Inc., the company said Wednesday, but profits still rose at the home improvement retailer.
The company’s results fell slightly short of analysts’ predictions. Lowe’s CEO Robert Niblock said the company’s results improved with the weather in May, and he is confident about the rest of the year.
“Weather was very difficult in the quarter, certainly very widespread,” Niblock told the Observer. “The thing that’s been encouraging is home values continue to rise.”
But Niblock also cautioned that the housing market is still choppy, with home starts sluggish and sales of exisiting homes unsteady as interest rates have risen.
“To really have that resurgence in housing turnover and those things, you probably have to have the macro environment better than it is,” with more rapidly rising wages, Niblock said.
The spring season is typically the most important for Lowe’s and other home improvement retailers, the equivalent of the winter holiday season at other stores.
During the first quarter, sales of product categories such as kitchen appliances and millwork saw sales grow better than average during the quarter. Outdoor items such as lawn and garden power equipment suffered, however, with sales falling 1.5 percent.
Despite the weather and uncertain housing market, Lowe’s profits climbed 16 percent from the same quarter a year ago, to $624 million. Sales rose 2.4 percent, to $13.4 billion. Overall, Lowe’s estimated that the wintry weather cost it about 1.5 percentage points worth of sales, which the company thinks it can make up in the second quarter.
Sales at Lowe’s stores open for a year or more – considered a key measure of a retailer’s health – rose 0.9 percent. That lagged Home Depot, Lowe’s biggest rival, which said its first quarter comparable store sales were up 2.6 percent during the quarter.
Lowe’s operates 1,836 stores in the U.S., Canada and Mexico. The company plans to open 15 more stores this year: 10 Lowe’s big-box stores and five Orchard Supply small-format hardware stores.
Home Depot reported Tuesday that its profits rose 16 percent, to $1.4 billion, for the first quarter. Sales were up 2.9 percent, to $19.7 billion in the quarter.
Home Depot’s results fell slightly short of analysts’ expectations. CEO Frank Blake blamed bad weather and said there had been a “slow start to the spring selling season.”
Lowe’s executives said Tuesday that they’re working to grow sales of goods geared to professional contractors and general consumer goods, such as patio furniture. Pro sales are growing three times faster than the company’s average, as construction and remodeling activity continues to pick up.
Lowe’s is launching “Lowe’s for Pros,” a dedicated website with new features for professional customers, during the second quarter.
Overall, the company’s online sales rose 25 percent. Sales from Lowe’s.com make up only 2.5 percent of the company’s overall sales, but Niblock said the company views its Web traffic as a valuable tool for driving customers into stores.
“A lot of consumers start online and then wind up in store,” he said.
One example of the company’s strategy to lure consumers is a new layout for outdoor goods and furniture. Lowe’s has consolidated its outdoor sections and opened up more space to display outdoor living items.
“We were selling customers isolated items, not selling them an outdoor room,” said chief customer officer Mike Jones. Now, Lowe’s has removed some display racks and created “showrooms” of different patio sets, coordinating rugs, planters and other items to drive sales.
Niblock also talked about a recent executive shuffle that’s seen several top people under him moved to new roles or retire. Niblock said his executive team is stable going forward. While he’s talked about succession planning, Niblock said he doesn’t think he’s leaving soon.
“It’s something I do discuss with the board, but I have no immediate plans to go anywhere,” said Niblock.
Lowe’s stock fell 11 cents, less than 1 percent, to $45.41 a share on Thursday.
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