WILKESBORO, N.C. - Lowe's Cos. said yesterday that quarterly profit rose 18 percent, more than expected, as the second-largest home-improvement chain added stores and boosted profit margins.
Net income increased to $329.1 million, or 42 cents a share, from $279.6 million, or 36 cents, a year earlier. Lowe's said it was able to demand lower prices from suppliers. The company's clout with vendors is increasing as it moves into some of the largest U.S. cities, analysts said.
Revenue in the second quarter that ended Aug. 3 rose 16 percent to $6.13 billion as Lowe's opened 21 stores. Sales at stores open at least a year rose 1.7 percent, slightly ahead of analysts' forecasts of a gain of as much as 1 percent.
Analysts' earnings estimates averaged 41 cents, according to Thomson Financial/First Call.
The strong quarter drove Lowe's shares up $2.80, or 8 percent, to $37.84, yesterday. So far this year, Lowe's shares have risen 70 percent, outpacing rival Home Depot Inc.'s 9 percent gain.
In the second half, sales and profit will benefit from rising lumber prices and falling energy costs, Chief Financial Officer Robert Niblock said in a conference call. Customers also are expected to spend at least some of their tax-rebate checks at the retailer, he said.
Third-quarter profit will be 30 cents to 32 cents, the company said. Analysts' average estimate is 31 cents, according to First Call. Total sales will rise about 20 percent, and same-store sales will gain 2 percent to 4 percent, Lowe's said.
For the year, Lowe's forecast profit of $1.23 to $1.25 a share. That's also in line with analysts' average $1.24 forecast, according to First Call.
Lowe's second-quarter gross profit, or revenue minus the cost of goods sold, increased to 28.04 percent of sales from 27.58 percent, said spokeswoman Chris Ahearn.
Lowe's trimmed the number of suppliers it uses to cut costs and widen margins, analysts said. The company said it worked with vendors to scrutinize the merchandise carried in its stores and clear out slow-moving items.
"Lowe's has performed pretty admirably," said analyst Alan Rifkin of Lehman Brothers, who rates the stock a "buy."