Lowe's reports 10 percent drop in income for second quarter
Updated: Updated 08/20/2012 10:59 AM
By: Adam Rhew
MOORESVILLE, N.C. -- Lowe's, the nation's second largest home improvement chain, said changes to its business strategy have yet to pay off.
"Frankly the benefits are accruing at a slower rate than I expected," CEO Robert Niblock said in a webcast with investors Monday.
The company's second quarter earnings were down 10 percent from the same period last year.
Lowes is in the middle of a major transformation toward online sales, lower prices and fewer big-ticket promotions.
"Individually and collectively these efforts are significant but necessary to respond to the changing demands of the consumer," Niblock said.
Lowe's also blames an underlying weakness in the housing market. Although commercial sales represent a fourth of Lowe's business, Charlotte construction firms said consumer confidence is shaky.
"I think people are just very cautious,” said Rich Guthmann, who owns Guthmann Construction. “So if they can put something off they do."
Guthmann's company is doing better today than it was three years ago. But now, customers are choosy, opting for less expensive fixtures and finishes.
"Consumer confidence isn't really a word or a concept I talked about a lot before all this," he said.
Guthmann said confidence -- or lack of it -- will affect his business now more than ever.
"It's just hard to imagine that it won't be a consideration in any move that we make business wise and individually."
Lowe's revised its earnings outlook for the year, saying sales likely will remain flat.
"We're willing to accept short term disruption for long-term gain because we believe in our strategy," Niblock said.
That strategy is focused on catching industry leader Home Depot, which last week announced a double-digit jump in earnings and a rosy outlook for the year.
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