3 Min Read
(Reuters) - Lowe's Cos Inc (LOW.N), the No. 2 U.S. home improvement retailer, reported quarterly profit and comparable sales that missed analysts' estimates, in contrast to the strong results reported by larger rival Home Depot Inc (HD.N) last week.
Lowe's shares were down 4 percent at $78.92 on Wednesday.
The company blamed excess marketing focus on indoor product categories, such as appliances, at the cost of outdoor products for the weaker-than-expected comparable sales in the quarter.
This led to weak sales of outdoor products such as plants and patio furniture, which typically make up about 35 percent of the company's sales in the first quarter, Chief Customer Officer Michael McDermott said on a conference call.
Colder weather compared with March last year and flooding in St. Louis, Missouri, also hurt sales of seasonal products, the company said.
Lowe's said it expects to make up for the lost sales in the next two quarters, partly through changes to its marketing strategy to include more low-price products.
The company's focus on do-it-yourself customers has led it to lag Home Depot, whose focus on high-spending professional contractors has helped it benefit more from the strength in the housing market.
Home Depot had cited higher demand for expensive items such as flooring and roofing materials amid a strong housing market for its bigger-than-expected sales for the three months ended April 30.
Home improvement has remained a bright spot in the gloomy U.S. retail industry, as a strong labor market and historically low mortgage rates drive demand for housing.
Sales at Lowe's stores open at least for a year rose 1.9 percent, below the 2.6 percent rise expected by analysts polled by research firm Consensus Metrix.
Net income fell 32 percent to $602 million, or 70 cents per share, in the first quarter ended May 5.
Lowe's recorded a $464 million pre-tax loss on extinguishment of debt in connection with its $1.6-billion cash tender offer.
Excluding items, the company earned $1.03 per share, missing the average analysts' estimate of $1.06, according to Thomson Reuters I/B/E/S.
Net sales rose 10.7 percent to $16.86 billion, slightly below the average analysts' estimate of $16.96 billion.
The company maintained its sales forecast for the year ending Feb. 2, but reduced its profit forecast to $4.30 per share from $4.64 to reflect loss on extinguishment of debt.
(This story was refiled to correct syntax in paragraph 3)
Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Sriraj Kaluvilla and Arun Koyyur