Lowe’s Cos.’ said Monday shoppers are spending on smaller painting and gardening projects but still avoiding major renovations because of worries about the economy.
But the home-improvement retailer said it is focused on reining in inventory and costs, which helped its third-quarter profit improve, and gaining a bigger chunk of the market.
“Consumers are not yet willing to consistently take on larger, discretionary home improvement projects,” CEO Robert Niblock said. “They remain cautious and continue to rationalize the scope of their projects or in many cases delay projects until they have better clarity about their personal financial situations, the value of their homes and the overall macroeconomic outlook.”
That caution, coupled with unexpected heat and drought in August and September that stymied landscape projects, kept third-quarter revenue in check. It rose 2 percent to $11.59 billion, missing expectations of $11.75 billion, according to a poll by Thomson Reuters.
But third-quarter net income rose 19 percent, as the No. 2 home-improvement retailer kept a rein on costs, including lowering payroll costs and closing two regional offices.
Net income rose to $404 million, or 29 cents per share, for the three months ended Oct. 29. That’s up from $344 million, or 23 cents per share, last year.
Excluding a charge, related to the value of its assets, including two stores it closed and potential future stores, earnings totaled 31 cents per share. Analysts expected 30 cents per share.
Revenue at stores open at least one year edged up just 0.2 percent during the quarter. The measure is considered an important measure of a retailer’s health because it excludes stores that opened or closed during the year.
Stronger product categories included millwork, such as windows and doors; tools; lumber; paint; rough electrical; seasonal products; lawn and landscape products; plumbing; and appliances.
The company also said that adding specialists to increase sales to professional builders and contractors helped increase business.
Lowe’s is doing well managing amid a rocky retail picture, Janney Capital Markets analyst David Strasser wrote in a note to investors, but “the stubbornness of the macro economy will keep the stock range bound as sales are prone to disappointment.”
But Niblock said he doesn’t expect any lasting improvement in revenue until unemployment and the housing market improve, which is not likely until at least the second half of next year, and possibly not until 2012.