The home improvement retailer Lowe's Cos. says costs related to closing stores and other restructuring pushed its net income down 44 percent, but adjusted results beat expectations.
Retailers such as Lowe's are facing tough times as consumers continue to hold back on large scale home improvement projects. Lowe's has started closing stores and cutting costs to offset weak demand.
But with the housing market moribund and consumers' continued caution on spending, CEO Robert Niblock said in an interview with The Associated Press that he does not expect a full rebound until at least 2013.
The Mooresville, N.C., company said Monday it recorded charges in the third quarter that reduced pre-tax earnings by $336 million, or 17 cents per share. Lowe's announced last month that it would close 20 underperforming stores in 15 states and cut nearly 2,000 jobs to focus on its more profitable locations.
The company also has scaled back expansion plans. Its results have been pressured as consumers continue to stick to home renovation products under $500. The company said purchases over $500 fell nearly 1 percent.
Niblock said he expects consumer demand will improve once home prices bottom out, which could occur in 2012.
"Once we get through that, and employment starts moving in the right direction, there's quite a bit of pent up demand," he said. But he doesn't expect that to be fully realized until 2013.
Lowe's executives told analysts Monday morning that, in addition to the store closings, the company was working to reduce promotions and move toward an "everyday low price" philosophy.
"Our performance is not at the level we expect relative to the market or frankly that we demand of ourselves as we define success, so we're taking action," Niblock said.
Lowe's reported net income of $225 million, or 18 cents per share, in the three months that ended Oct. 28, down from $404 million, or 29 cents per share, a year earlier.
Revenue climbed 2 percent to $11.9 billion.
Adjusted earnings amounted to 35 cents per share, not counting the charges.
Analysts surveyed by FactSet expected, on average, earnings of 33 cents per share on revenue of $11.7 billion.
Lowe's shares rose 39 cents Monday, or 1.7 percent, to close at $23.50, while the Dow Jones industrial average fell less than 1 percent.
Lowe's operates 1,744 stores in the United States, Canada and Mexico. Revenue at stores open at least a year climbed less than 1 percent in the third quarter, helped mostly by Hurricane Irene preparations and cleanup on the East Coast. This is an important metric of a retailer's health because it measures results at established stores rather than newly opened ones.
Citi analyst Kate McShane said the company's third-quarter results were "a modest disappointment," and she expects the company to continue to underperform against its main competitor, the larger Home Depot Inc. Home Depot reports its results on Tuesday.
Lowe's expects earnings per share of 20 cents to 23 cents in the fourth quarter, with revenue at stores open at least a year coming in flat or rising 1 percent. Analysts expect, on average, earnings of 23 cents per share.
For the company's full fiscal year, which ends in early February, Lowe's expects earnings of $1.37 to $1.40 per share, including charges of about 20 cents per share tied to store closings and discontinued projects.
Previously, the company forecast net income of $1.54 to $1.60, excluding one-time items, but that was prior to the store closing plan.
Analysts typically exclude one-time items from their estimates, and they expect full-year earnings of $1.59 per share from Lowe's.