Positive same-store sales in 12 of 14 merchandise categories at Lowe’s pushed third-quarter profits up 76%.
Lowe's reported third-quarter net income of $396 million, up 76% from earnings of $225 million a year ago on revenues that increased 2% to $12.07 billion, ahead of consensus estimates of $11.93 billion. Same-store sales increased 1.8%.
Lowe’s president and CEO Robert Niblock called the results solid and said the company is focused on improving execution, delivering value and increasing product differentiation.
"These focus areas build on Lowe's core strengths and are expected to deliver comp transaction growth and better gross margins by localizing assortments, driving excitement in our stores through better display techniques and managing an appropriate balance of product cost and retail pricing," Niblock said during a conference call. "We continue to make progress and are encouraged by early results. By mid-2013, we will have completed this work and expect these efforts to provide meaningful comp and gross margin benefits."
Benefits are already being seen across most categories as Niblock noted that 12 of 14 product categories ended the quarter with a positive comp. And nearly 2/3 of the categories generated comps above the company average, including big-ticket categories such as cabinets and appliances. Building materials was the only significant drag in the quarter, which resulted from a strong comparison to the prior.
While Lowe’s reported strong profit growth, its sales results lacked the momentum evident at Home Depot which reported third quarter results last week. Riding a gradually improving housing market around the country, Home Depot’s sales increase 4.6% to $18.1 billion and same store sales increased 4.2% overall. Despite a charge of about $165 million to close seven stores in China, the company posted net earnings of $947 million, up 1.4% from $934 million in the year-ago quarter. On an adjusted basis, the company's net earnings rose 23.3% to $1.1 billion.
"Our third-quarter results were better than we expected and reflected, in part, what we believe is the start of the path toward the healing of the housing market," said Frank Blake, Home Depot chairman and CEO.
Based on its performance through the third quarter, Home Depot updated its fiscal 2012 guidance and raised its sales growth guidance to be up approximately 5.2% for the year on a 53-week basis. The company expects fiscal 2012 diluted earnings per share to be up approximately 18% to $2.92 for the year.
At the end of the third quarter, the company had a total of 2,250 stores in all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico.