Lowe’s Companies, Inc. (LOW), the world’s second largest home improvement retailer, recently reported better-than-expected fourth-quarter 2009 results, showing signs of improvement with consumers now willing to spend on remodeling projects.
The shares of Lowe’s rose in pre-market trading, but has since fallen 9 cents per share to $23.04 by mid-day.
The quarterly earnings of 14 cents a share came ahead of the Zacks Consensus Estimate of 12 cents, and climbed 27.3% from 11 cents posted in the prior-year quarter. Lowe’s said that it expects first-quarter 2010 earnings in the range of 27 cents to 29 cents a share, and fiscal year 2010 earnings between $1.30 and $1.42 per share.
The company’s first-quarter 2010 guidance fell short of the current Zacks Consensus Estimate of 33 cents a share. Over the last 30 days, the Zacks Consensus Estimate has shown a marginal improvement of 3.1% with 4 out of 27 analysts covering the stock raising their estimates.
Net sales for the quarter rose 1.8% to $10,168 million, after dipping 3% in third-quarter 2009. Management expects sales to increase between 1% and 3% in first-quarter 2010 and between 4% and 6% in fiscal year 2010. Gross margin also expanded 130 basis points to 35% during the quarter.
Comparable-store sales also revived during the quarter. The rate of decline in comps decelerated in fourth-quarter 2009. After falling 7.5% in third-quarter 2009, comps dropped 1.6% in the quarter under review. Lowe’s expects comps to be flat to down 2% in first-quarter 2010, and to climb 1% to 3% in fiscal year 2010.
Home improvement retailers have long been grappling with the housing slump and economic downturn, but now things appear to be stabilizing.
During the quarter, Lowe’s opened 11 stores. The company expects to open 11 new stores in first-quarter 2010, besides 40 to 45 stores in fiscal year 2010.
Lowe’s ended the quarter with cash and cash equivalents of $632 million, total long-term debt of $5,080 million and shareholders’ equity of $19,069 million. During the quarter, the company repurchased $500 million worth of shares. Recently, Lowe’s Board authorized another share repurchase program worth $5 billion after the $1.7 billion share buy back program announced in 2007 got exhausted at the end of fiscal year 2009.
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