Lowe's anticipates decline in earnings

Tuesday, August 22, 2006 The home improvement sector is facing a slowdown, an analyst says. RALEIGH, N.C. (AP) — Lowe's Cos. warned Monday that a slowing housing market will hurt its earnings for the rest of the year, sending its stock tumbling despite reporting an 11 percent profit for the second quarter. Shares in the country's second-largest home-improvement chain fell $1.17, or 4 percent, to $28.35 in afternoon trading on the New York Stock Exchange, near the low end of a 52-week range of $26.90 to $34.85. "We believe the home improvement sector is facing significant headwinds as housing turnover slows and interest rates rise," Banc of America Securities analyst David Strasser wrote in a report Monday about Lowe's quarterly report. "We expect some weakness in the stock following the recent rally. We remain neutral as the first signs of a slowing housing market are beginning to take their toll on Lowe's, and we have no visibility on how deep the downturn will go." Increase Net income in the three months ended Aug. 4 rose to $935 million, or 60 cents per share, from $839 million, or 52 cents per share, in the year-ago period. Wall Street was looking for profit of 61 cents per share, according to a Thomson Financial poll of 19 analysts. Sales rose more than 12 percent to $13.39 billion from $11.93 billion last year, slightly ahead of the Wall Street estimate of $13.38 billion. Sales at stores open at least a year — a closely watched gauge of retailers' health called same-store sales — rose 3.3 percent. During the quarter it gained market share for flooring, appliances, outdoor power equipment and cabinets, Lowe's said, citing third-party estimates. But orders for new homes have slowed in recent periods, and sales of existing houses are slowing from record levels, putting pressure on sales at Lowe's and larger rival The Home Depot Inc. Increased gas prices have also affected business, Chief Executive Robert Niblock said.