Pushing Depot, Lowe's grows quickly in Q2

By Don Hogsett -- Home Textiles Today, 9/1/2003 12:00:00 AM

WILKESBORO, NC —

Building on stronger sales, wider margins and lower costs, Lowe's Companies Inc., the home improvement retailer, drove second-quarter profits by 27.8 percent, to $597.0 million from $467.0 million a year ago.

Giving larger arch-rival Home Depot an unexpected run for its money, driving sales and profit growth at a sharply faster pace, Lowe's pushed sales during the period up by 17.2 percent, to $8.8 billion from $7.5 billion last year. Importantly, the crucial gauge of same-store sales shot up by 6.9 percent as better weather across much of the nation let consumers take on fix-up projects delayed by cold, wet weather earlier during the year.

"As we had expected, Americans' passion for home improvement projects surged as the weather improved across most of the U.S.," said Robert Tillman, chairman and ceo. In a sudden ramp-up of sales following a turn in the weather, Lowe's, said Tillman, experienced "sales strength in every product category, including big-ticket items, and in every region of the country." Lowe's is the nation's 38th largest retailer of home fashions products, generating an estimated $110 million in sales of home textiles during 2002.

"A strategic investment in inventory and an effective marketing program allowed Lowe's to capitalize on a compressed spring selling season," he said.

In another big lift to the bottom line, Lowe's built up its margins by 80 basis points, or eight-tenths of a percentage point, to 30.2 percent from 29.4 percent in the year-ago period. Helped by stronger sales as well as wider margins, gross margin dollars grew by 20.2 percent, to $2.6 billion from $2.2 billion.

In a further big lift to profits, the retailer pared its costs by 20 basis points, to 16.3 percent of sales from 16.5 percent a year ago.

Looking ahead, Lowe's said it expects sales in the current third quarter to grow by 16 percent to 17 percent, helped by the opening of 38 new stores and a gain of 5 percent to 6 percent in same-store sales.

For all of 2003, sales are forecast to grow by 16 percent, fueled by same-store sales growth of 4 percent to 5 percent and the opening of 130 new stores this year. Earnings are expected to grow by 21 percent to 23 percent, to $2.24 to $2.27 per share, from $1.85 during 2002.

Lowe's Companies Inc.