Lowe’s Q1 sales top Street, but profit misses as costs rise
Lowe’s Companies reported mixed results for its first quarter and cut its full-year profit forecast as higher costs took a toll on its earnings.
Net income rose to $1.05 billion, or $1.31 per share, in the quarter ended May 3, from $988 million, or $1.19 a share, in the year ago. On an adjusted basis, Lowe’s earned $1.22 per share, missing analysts’ estimates of $1.33 per share.
Sales increased 2.2% to $17.74 billion, topping Street estimates. Same-store sales rose 3.5%, higher than expected. Same-store sales for the company’s U.S. business rose 4.2%.
“Our first quarter comparable sales performance is a clear indication that the consumer is healthy and our focus on retail fundamentals is gaining traction,” said Marvin Ellison, Lowe’s president and CEO. “However, the unanticipated impact of the convergence of cost pressure, significant transition in our merchandising organization, and ineffective legacy pricing tools and processes led to gross margin contraction in the quarter which impacted earnings. We are taking the necessary actions to more systematically analyze and implement retail price changes to mitigate cost pressure.”
Earlier this week, Lowe’s announced that it had acquired the retail analytics platform from Boomerang Commerce. Ellison Lowe’s said the technology will be integrated into the company’s core retail business and would assist “in modernizing and digitizing our approach to pricing.”
Lowe’s said it sold the assets of Mexico retail operations, which resulted in an $82 million tax benefit for the quarter.
The company previously announced it would exit Mexico and it planned to sell the operating business. But after an extensive market evaluation, the decision was made to instead sell the assets of the business. The tax benefit of the sale offset $12 million of pre-tax operating costs for the Mexico retail operations in the quarter.
Lowe’s now expects 2019 earnings of $5.54 to $5.74 per share, down from a prior forecast of $6 to $6.10 per share. On an adjusted basis, the retailer expects earnings of $5.45 to $5.65 per share, below analysts’ expectations of $6.05.
As of May 3, Lowe’s operated 2,002 stores in the United States and Canada.
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