WILKESBORO, N.C. - Lowe's Cos. Inc.'s fiscal first-quarter profit rose 20 percent, more than expected, as the second-largest home-improvement retailer controlled costs and increased sales.
Shares of Lowe's rose $4.10 yesterday to close at $72.50. The stock has risen 63 percent this year.
Net income rose to $225.3 million, or 58 cents a share, from $187.1 million, or 49 cents, a year earlier, Lowe's said. Sales in the quarter that ended May 4 rose 18 percent to $5.28 billion, helped by new stores and an extra week in the quarter.
The company sold more flooring, plumbing fixtures and electrical supplies, which generate higher profit than other products, analysts said. Lowe's distribution centers shipped goods to stores as needed, helping the retailer avoid having too much inventory as consumers reduced spending amid a slowing economy.
Sales at stores open at least a year, however, fell 3 percent after unusually cool March weather and a slowing economy curbed demand for lawn mowers, patio furniture and other outdoor products. Profit was also hurt by low lumber prices.
Lowe's said it expects its annual profit to be bolstered by the Federal Reserve's five interest rate cuts this year and by inventory control.
Earnings in the second quarter, which ends Aug. 3, will be 80 cents to 82 cents a share, Lowe's said. Analysts forecast a profit of 81 cents a share. Profit for the year ending Feb. 1 will be $2.45 to $2.48 a share, exceeding analysts' average estimate of $2.43.
Same-store sales will be unchanged in the second quarter, the company said, while gross margin will widen by 0.4 percent to 0.5 percent. Same-store sales are a key retail measure because they exclude new and closed locations.
The first quarter was a week longer than a year earlier, adding about 5 cents a share to profit and about $200 million to revenue, said analyst Dan Wewer of Deutsche Banc Alex. Brown. Lowe's was forecast to earn 54 cents a share.
Selling, general and administrative expenses in the first quarter fell to 17.8 percent of sales from 18.1 percent a year earlier. Gross margin, or the amount of profit made on each item, widened to 28.3 percent from 27.9 percent a year earlier.