Lowe's: The 'Do-It' Is Back In Do-It-Yourself

by Sarah Mahoney, May 17, 2010, 2:04 PM

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After four years of declining sales, Lowe's says people are finally feeling ready to spruce up their homes, with comparable-store sales up 2.4% for its first quarter. The company beat its own forecasts and says that in some regions -- including the Northeast and North Central -- comparable-store sales even posted gains in the double digits. Even the Western region has positive results, the company says, for the first time since 2005.

The company attributed the positive results to a stronger demand for seasonal products, such as patio furniture and garden, as well as appliances, driven by government stimulus packages.

"Consumers are more willing to engage in discretionary home improvement projects," Robert A. Niblock, Lowe's chairman/CEO, said in a conference call announcing the results. And while they continued to spend on the most essential repair and maintenance projects during the depth of the recession, "we now see more spending on discretionary purchases, including riding mowers and gas grills. Unemployment does remain a concern, but consumers seem to feel that the worst of the economic cycle is behind us, and they are planning and executing discretionary projects and purchases."

Net earnings rose 2.7% to $489 million for the quarter, while sales gained 4.7% to $12.4 billion, up from $11.8 billion in the first quarter of 2009.

Lowe's results fit in with the increasingly optimistic view that some experts have about the coming quarters for many retailers. "While April may have pulled back a bit from March due to calendar issues and weather, we believe the underlying demand trend remains positive and should continue to improve now that the economy is creating jobs," writes Mike Baker, an analyst who covers Lowe's and other retailers for Deutsche Bank.

Sales of air conditioners and fans should improve results further, as the weather warms up.

Still, the company remains somewhat cautious, noting that its strongest sales gains have been in smaller transactions -- purchases of $50 or less. "We're optimistic that we will see solid sales throughout the year, but still view this as a year of transition for our industry," Niblock says, predicting a comparable-store sales gain of 2 to 4% for both the second quarter, and the full fiscal year. "And it will be 2011 before we see significant growth."

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