Lowe's will continue to wrestle with the effects of the economic downturn for the rest of the year but remains poised to grow in the future, executives said Friday at the company's annual meeting.
“2007 was an extremely challenging year for the home improvement industry and worse than we originally expected,” chairman and CEO Robert Niblock told shareholders gathered at Ballantyne Resort in Charlotte. “We expect these challenges will continue in 2008.”
However, with the U.S. population growing and homes still in need of ongoing repairs and maintenance – about two-thirds of Lowe's' business – the company's long-term prospects look promising, he said. In addition, he said the company can gain market share in categories like nursery, flooring and outdoor furniture.
The Mooresville-based retailer reported last week that its first-quarter earnings fell 18 percent compared with a year ago, marking the third straight quarterly slump. Lowe's closed at $24 a share Friday, down 1.6 percent from Thursday and nearly 26 percent from this time last year.
Lowe's, the nation's second-largest home improvement chain, expected a housing drop-off in overheated markets like California and Nevada in 2007 but did not anticipate the credit crunch that hit midyear, Niblock said.
Rising food and gas prices, a tightening job market and rising foreclosures also are depressing sales, although some markets have performed relatively well, he said. In 2007, sales grew at about one-third of the company's 1,550 stores, including in North Carolina and Texas, he said.
Earlier this year, the company announced plans to delay the opening of 20 stores, mostly in hard-hit markets such as California. However, Chief Operating Officer Larry Stone said Friday, “We know those markets will recover, and we'll be ready to add stores when the time is right.”
Lowe's still plans to open 120 stores this year and will discuss updated store-opening projections for future years at a September meeting with analysts, Niblock said. Lowe's is also experimenting with stores smaller than its standard models, he said.
“Home's still important to the American consumer,” Niblock said. But, he noted, in light of the current economy, homeowners' mindset toward renovation and improvement projects may shift from a focus on increasing the value of their homes to simply making them more useful and enjoyable.
Friday's meeting drew a crowd of about 60, and the shareholders that showed up weren't rattled by the company's recent struggles.
“They have good management, so I'm not concerned about it, really,” said Ray Buie, 88, of Salisbury. “Long-term, I have a lot of confidence in them.”
Jerry and Retha Warren, 66, Lowe's shareholders since 1991, said they weren't expecting any good news for at least another couple of quarters, given the economy. Even so, they awoke at 4 a.m. Friday and drove from West Virginia for the meeting.
“I think Lowe's is one of the best companies, and it's going to come back,” said Retha Warren, who also owns stock in competitor Home Depot – and thinks Lowe's compares favorably.
“I'd like to see the stock go up a little bit, but I don't think that's Lowe's' (fault),” said Carole McEwen, 72, of Columbia. “I think that's a sign of the times.”