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Weak Housing Market Hurts Lowe's, Home Depot

2/23/2007 01:49:00 PM Eastern

Mooresville, N.C. —The nation's home improvement leviathans, Lowe's and The Home Depot, reported sharply lower earnings for their fiscal fourth quarters due to the stalled housing market and tough comparisons to the year-ago period, when sales soared in the aftermath of Hurricanes Katrina and Rita.

Lowe's said today that net earnings fell 11.5 percent to $613 million for the 13 weeks ended Feb. 2 vs. the comparable 14-week period last year. Net sales slipped 3.7 percent to $10.4 billion for the quarter and comp-store sales fell 5.3 percent.

For the full 52-week year, net earnings grew 12.3 percent to $3.1 billion on net sales of $46.9 billion, representing an 8.5 percent increase in volume over the 53 weeks of fiscal 2005. Comp-store sales for the year were flat.

Adjusting for the extra week and the corresponding calendar shift, total sales increased approximately 5 percent in the fourth quarter and 10 percent for the fiscal year, the company said.

"Our continued focus on executing the fundamentals and providing customer-valued solutions drove solid results in a challenging operating environment," said Lowe's chairman/CEO Robert Niblock. "Sales continued to be pressured by a slowing housing market, tough comparisons to last year's hurricane recovery and rebuilding efforts and significant deflation in lumber and plywood prices."

Earlier this week The Home Depot, the world's largest home-improvement chain and second largest retailer after Wal-Mart, reported a record 28 percent decline in net earnings to $925 million for the three months ended Jan. 28, while net sales within its retail segment slipped 2 percent to $17.4 billion. Comp-store sales fell 6.6 percent for the quarter.

For the full fiscal year, net earnings declined 1.3 percent to $5.8 billion, and net sales within the retail segment grew 2.6 percent to $79 billion, driven by new store openings. Full-year comp-store sales fell 2.8 percent.

"Reflecting the challenging housing market, our 2006 retail results were disappointing," said Frank Blake, who succeeded former chairman/CEO Bob Nardelli in Janaury. "We may not be able to impact the housing market or general economic conditions, but we know that we can improve our performance relative to our overall market share. That will be a central point of emphasis for us in 2007 and beyond."

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