Home Depot, Lowe's Post Down Q3 Results

By Alan Wolf On Nov 23 2009 - 8:00am

The weak economy and depressed housing market took its toll on both Home Depot and Lowe's during the third quarter.

Home Depot reported an 8.9 percent decline in third-quarter profits, to $689 million.

Net sales fell 8 percent to $16.4 billion for the three months, ended Nov. 1, and comp-store sales declined 6.9 percent worldwide and 7.1 percent in the U.S.

“There is still a great deal of pressure in the housing and home-improvement markets, though there are some positive signs of stabilization,” said Frank Blake, chairman/CEO of the No. 1 home-improvement chain. “Our business continues to perform well in a difficult environment. We grew market share in the quarter, continued to transform our business and improved customer service.”

Blake's comments — and his company's comp-store declines — mirrored those of chief competitor Lowe's.

Credit Suisse retail analyst Gary Balter attributed Home Depot's results to better gross margin performance, as the company benefitted from new merchandising and planning systems and improved inventory flow.

Looking ahead, Home Depot is maintaining its forecast for a 9 percent sales decline for the full year, but is projecting a 9.5 percent increase in diluted earnings per share from continuing operations.

Lowe's said profits fell 29.5 percent to $344 million and net sales slipped 3 percent to $11.4 billion for the three months ending Oct. 30. Same-store sales slid 7.5 percent during the period.

“The broad-based pressures of the macro environment are clearly evident in our sales as consumers continue to delay large purchases until they feel better about the economic outlook,” observed chairman/CEO Robert Niblock. But while consumer spending remained weak, he said the company was pleased with its sequential improvement in comp-store sales from the second quarter, and its “continued evidence of solid market share gains.”

Niblock added that the company is starting to see signs of improvement in some of the nation's hardest-hit housing markets, including California, Florida and sections of the Southwest.

Lowe's opened 12 stores and closed one during the quarter, representing a 4.9 percent increase in retail selling space year over year. The chain operated 1,699 locations in the U.S. and Canada as of Oct. 30.