Things may be looking up for the troubled real estate market, but they are looking down at Lowe's. The Mooresville, N.C.-based retailer says its net earnings sank 19% to $759 million in the second quarter, while sales fell 4.6% to $13.8 billion -- down from $14.5 billion in the second quarter of 2008. And comparable-store sales fell 9.5%.
"Wavering consumer confidence, unseasonable weather in core markets, and restrained customer spending compared to last year's fiscal stimulus-aided results led to lower than expected sales in the second quarter," Robert A. Niblock, chairman and CEO, says in a release announcing the results. "Cautious consumers remain reluctant to take on discretionary projects until signs of economic improvement are more evident."
As a result, the company is again rethinking its expansion plans, and says that because of the "declining demand for home improvement products," it will open between 35 and 45 stores in 2010 -- fewer than originally forecast.
For retailers like Lowe's and the Home Depot, which is scheduled to release its results Tuesday, the recession is especially wearisome, since the decline in home-improvement spending began with the soft real estate environment, well before other retailers felt the downturn's effect.
The good news is that evidence is mounting that the real estate outlook may really be brightening up. The National Association of Home Builders says its builder confidence index for newly built, single-family homes rose one point in August, reaching its highest level in 18 months. (That comes on top of July's two-point gain.)
The industry association says much of that gain stems from the success of the first-time homebuyer tax credit, which expires Nov. 30. "The question is what happens after that -- whether there will be enough momentum to keep us moving toward a recovery," the association says in its report.
Lowe's executives also offer a hint of optimism: "There are some indications that a bottoming process in housing and the broader economy is underway, and we have seen customer traffic levels stabilize as we benefit from the resurgence of a do-it-yourself home improvement mindset."
Next quarter, the retailer says it expects to see a same-store sales decline of 6 to 10%, with those sales falling between 7 to 9% for the full fiscal year.