Lowe's profit up 46.2% in 4Q

By Don Hogsett -- Home Textiles Today, 3/3/2003 12:00:00 AM

WILKESBORO, NC —

Boosting sales and building margins, both at a rapid pace, home improvement retailer Lowe's Companies drove fourth-quarter profits up by 46.2 percent, far higher than expected, to $319.4 million from $218.4 million last year.

Breezing past Wall Street's expectations, earnings came in at 40 cents per share, substantially besting a Thomson First Call consensus analyst forecast of 33 cents. Relishing the good news, investors pushed Lowe's stock up by 5.3 percent in value, or $1.89, to $37.91 when the news came out Monday, Feb. 24, otherwise a day of deep declines for stock markets.

And the news only got better when Lowe's said earnings for the first quarter now underway will also exceed Wall Street forecasts as the retailer moves into New York and other big U.S. cities as it goes to-to-toe with rival Home Depot in many of the same markets.

Lifted by rapid expansion, Lowe's sales climbed higher by 16.5 percent, to $6.1 billion form $5.3 billion last year. Same-store sales rose by 4.1 percent for the closing quarter, and by 5.6 percent for all of last year.

Driving profits higher, in addition to stronger sales, average gross margin widened substantially, by 190 basis points, or 1.9 percentage points, to 31.7 percent from 29.8 percent the previous year. Gross margin dollars increased by 13.4 percent, to $4.2 billion from $3.7 billion. Operating costs came down slightly, dipping by 10 basis points, to 19.0 percent of sales form 19.1 percent a year ago.

Lifted by the stronger sales and wider margins, operating costs soared by 46.2 percent, to $1.2 billion from $1.0 billion, generating an unusually strong operating margin — operating profits measured as a percentage of sales — of 9.2 percent, up from 7.5 percent last year.

During the fourth quarter, Lowe's opened 37 new stores, including six relocations, and for all of last year opened 123 new stores, including 11 relocations. As of Jan. 31, Lowe's operated 854 stores in 44 states.

This year, Lowe's said it plans to open 130 new stores, and forecast sales growth of 16 percent to 17 percent, and same-store sales growth of 4 percent to 5 percent.

Lowe's Companies Inc.