Lowe’s Cos. (LOW:US), the second-largest U.S. home-improvement retailer, fell the most in almost three months after reporting second-quarter profit that trailed analysts’ estimates as comparable-store sales fell.
Lowe’s declined 5.8 percent to $26.26 at the close in New York, after reporting profit excluding some items of 65 cents a share. That missed the average estimate of 70 cents from analysts in a Bloomberg survey. The shares, down 3.5 percent this year, tumbled the most since May 21.
Chief Executive Officer Robert Niblock, who said the results fell short of expectations, has cut more than 500 corporate jobs this year after the retailer closed 27 U.S. stores. In May, he promoted two executives to new roles to improve operations, which includes eliminating slow-selling items and shifting to everyday low prices with fewer promotions.
“Business fundamentals are being hindered by substantial organizational changes and yet-to-emerge turnaround benefits,” Peter Keith, an analyst at Piper Jaffray Cos. in New York, wrote today in a note. He rates Best Buy neutral.
Net income dropped 10 percent to $747 million, or 64 cents a share, from $830 million, or 64 cents, a year earlier, the Mooresville, North Carolina-based company said today in a statement.
Sales by stores open at least a year fell 0.4 percent in the quarter. Last week, larger rival Home Depot Inc. (HD:US) reported a same-store sales gain of 2.1 percent in the second quarter, and raised its earnings forecast for the year as customers spent more on remodeling projects.
Lowe’s cut its full-year profit forecast to $1.64 a share from a projection of $1.83 a share in May. It said it expects sales to be little changed, down from an expectation of a 1 percent to 2 percent increase.
Gross margin, or the percentage of sales remaining after subtracting the cost of goods sold, narrowed to 33.9 percent from 34.5 percent a year earlier.
Gregory Bridgeford, executive vice president of business development, became chief customer officer in May, while Rick Damron, executive vice president of store operations, assumed the post of chief operating officer. Both report to Niblock in the newly created positions.
In an interview, Niblock, 49, said he’d prefer a friendly acquisition of Canada’s Rona Inc. (RON) after its board last month rejected Lowe’s unsolicited takeover offer of C$1.76 billion ($1.78 billion). It would be the U.S. retailer’s largest acquisition aimed at accelerating expansion and operating profitably in Canada, where it has opened 31 stores since 2007.
“We need more scale to be able to cover the costs and the overhead,” Niblock said by telephone today. Exiting Canada “is not on the radar screen at this point,” he said.
Lowe’s is seeking permission from Rona’s board to conduct due diligence to determine whether its offer is reasonable, Niblock said.
“In all likelihood for us to move forward, that would be required,” he said.
To contact the reporter on this story: Chris Burritt in Greensboro at email@example.com
To contact the editor responsible for this story: Robin Ajello at firstname.lastname@example.org