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Retailers: Home Owners Spending More on Renovation

Wednesday, 23 Feb 2011 02:35 PM

 

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Home owners are starting to spend more on home-improvement projects despite the weak housing market, quarterly results from Lowe's Cos. and Home Depot show.

Lowe's said Wednesday its fourth-quarter profit rose 39 percent as its shoppers spent slightly more per visit.

The results beat Wall Street estimates, but Lowe's cautioned that consumers are still holding back and gave a first-quarter forecast that could miss analyst expectations. Its shares fell nearly 3 percent in midday trading.

"Consumers continued repair and maintenance projects," CEO Robert Niblock said in an interview with The Associated Press. "They're pursuing great value and great deals."

He said he expects Americans to remain somewhat cautious throughout 2011, as home prices are expected to bottom near the end of the year, according to economic forecasts.

The results come as The National Association of Retailers said rising number of distressed sales forced home prices down to their lowest level in nearly nine years, a troubling sign for the struggling housing sector.

On Tuesday, Home Depot reported strong earnings and revenue growth on Tuesday and raised its earnings outlook.

However muted, the positive results show home-improvement retailers are seeing signs of life from shoppers as they take on projects around the house that were delayed during the consumer spending slowdown and recession.

"While the housing market remains uncertain, we believe Lowe's will continue to gain market share and benefit from a more stabilized environment," said Bank of America Merrill Lynch analyst Alan Rifkin, who kept his "Buy" rating on the stock.

Lowe's, No. 2 home-improvement retailer, said its net income rose to $285 million, or 21 cents per share, for the three months ended Jan. 28 from $205 million, or 14 cents per share, a year ago. Analysts surveyed by FactSet expected 18 cents per share.

The Mooresville, N.C. company said revenue rose 3 percent to $10.48 billion from $10.17 billion. Analysts expected $10.44 billion.

Revenue in stores open at least a year rose 1.1 percent, falling short of Home Depot's 3.7 percent gain. The measure is considered a key gauge of a retailer's financial health because it excludes stores that open or close during the year.

Lowe's, like many companies, said it is increasing prices as rising commodity prices push up the costs of some products, including electrical, plumbing, lumber and millwork.

For the year, Lowe's net income rose 13 percent to $2.01 billion, or $1.42 per share, from $1.78 billion, or $1.21 per share a year ago.

Annual revenue rose 3 percent to $48.82 billion from $47.22 billion.

Lowe's expects first-quarter net income of 34 cents to 38 cents per share while analysts expect net income of 38 cents per share. The company predicts revenue will rise 2 percent and revenue in stores open at least a year will be flat.

For the year, the company expects net income of $1.60 to $1.72 per share on a 5 percent revenue increase. Revenue in stores open at least a year is expected to rise 5 percent. Analysts expected earnings of $1.66 per share.

Shares fell 69 cents, or 2.7 percent, to $25.30 during midday trading. The stock has traded between $19.35 and $28.54 over the past 52 weeks.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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