MOORESVILE, N.C. (AP) — Lowe's third-quarter net income increased 26 percent and the home-improvement retailer raised its outlook for the year as it gets a lift from the housing market's ongoing recovery.
But its third quarter earnings and the new earnings outlook both came in short of Wall Street's expectations. Its shares fell almost 5 percent in midday trading.
Home improvement companies have been benefiting from record-low interest rates and rising home prices, spurring customers to spend more to renovate their homes.
One encouraging sign for Lowe's is that customers are spending more for larger projects, said CEO Robert Niblock in a phone interview with The Associated Press.
"Consumers have the willingness to tackle projects that have been on their to-do list," he said. That includes flooring projects and upgrading kitchen appliances. "We're seeing a nice trend there as long as housing continues to move in the right direction."
But Mooresville, N.C.-based Lowe's has not been benefiting as much as its larger rival, Home Depot, which reported third-quarter results Wednesday that topped analysts' estimates and it lifted its outlook.
To boost results, Lowe's has adjusted its pricing strategy, returning to offering what it says are permanent low prices on many items, instead of fleeting discounts.
The company also recently acquired Orchard Supply Hardware Stores for $205 million, a deal which was completed during the quarter, in order to expand in California.
Lowe's Cos. earned $499 million, or 47 cents per share, for the period ended Nov. 1. That's up from $396 million, or 35 cents per share, a year ago. Analysts polled by FactSet expected earnings of 48 cents per share.
Revenue rose 7 percent to $12.96 billion from $12.07 billion. Wall Street forecast $12.73 billion in revenue. Sales at stores open at least a year, a key retail metric, rose 6.2 percent
Lowe's now expects full-year earnings of about $2.15 per share, up from prior guidance of $2.10 per share. Revenue is predicted to climb approximately 6 percent, from an earlier estimate of 5 percent. Based on 2012's revenue of $50.52 billion, the new forecast implies approximately $53.53 billion.
Analysts predict fiscal 2013 earnings of $2.20 per share on revenue of $53.09 billion.
Its shares fell $2.47, or 4.9 percent, to $47.97 in midday trading. The stock is up 41 percent since the beginning of the year.