Lowe's misses estimates

No. 2 home improvement retailer posts profit a penny shy of estimates; sales top forecasts.
NEW YORK -- Home improvement retailer Lowe's Cos. Inc. reported second-quarter profit Monday that were slightly shy of analysts' estimates, although its sales were modestly better than expected.
Lowe's shares dipped 3.5 percent in before-hours trading Monday on Inet. Lowe's stock is down 11.4 percent year-to-date.
The No. 2 home improvement retailer after Home Depot (Charts) reported earnings per share of 60 cents for the quarter, up from 52 cents a year earlier.
Analysts had forecast a profit of 61 cents a share, according to First Call.
Lowe's (Charts) said sales rose 12.2 percent to $13.4 billion from $11.9 billion a year earlier. Analysts were expecting it to post revenue of $13.3 billion for the period.
Retail analysts have cautioned that a slowing housing market coupled with gas price inflation would likely hurt home improvement retailers and consumer spending overall. Home Depot recently cited those factors as ongoing "challenges" in the months.
Lowe's, too, is cognizant of "pressures on the U.S. consumer," CEO Robert Niblock said in a statement.
"Expectations for an orderly slowdown in the housing market, moderate income growth and a solid employment picture are stabilizing forces for the consumer," he said.
Given that environment, Niblock said the retailer will "prudently manage expenses" and said he's confident that consumers' focus on home repair and maintenance will continue to spur its business.
Sales at Lowe's stores open at least a year - a key retail measure known as same-store sales - rose 3.3 percent in the second quarter and increased 4.4 percent in the first half of 2006.
However, the company expects same-store sales to be essentially flat to up a slower 2 percent in the third quarter and up between 2 to 3 percent for the full year.
Donald Trott, analyst with Jefferies & Co., said Lowe's stock was seeing red because investors are disappointed with sales guidance.
"Lowe's flat to modestly higher same-store sales forecast reflects the business impact from a general slowdown in the economy," Trott said. "This forecast implies Lowe's is seeing softness since the beginning of the third quarter."
Going forward, Lowe's cautioned that its fourth quarter and fiscal 2006 comparisons will be negatively impacted by a calendar shift that results in a 52-week versus a 53-week period last year.
Lowe's expects to log a profit of between 45 to 48 cents a share in the third quarter and between $2.00 to $2.07 a share for the full year.
Analysts, on average, expect the company to post a profit of 46 cents a share for the third quarter and $2.05 a share for the full year.