Lowe's earnings drop 19%

Caution was the operative word coming from Lowe's this morning. The Mooresville, N.C.-based company said it is dealing with cautious consumers at the same time that the company is holding onto a cautious sales outlook for the second half of the year.

Lowe's posted second-quarter net income of $759 million, down 19.1% from the same period last year. Comp-store sales declined 9.5%, as total sales for the quarter declined 4.6% to $13.8 billion.

"Cautious consumers remain reluctant to take on discretionary projects until signs of economic improvement are more evident," said CEO Robert Niblock.

Other factors contributing to declines were unseasonable weather in core markets and a tough comparison to last year's fiscal-stimulus-enhanced results.

Of 21 merchandise categories, only two categories achieved positive comp-store sales in the quarter -- nursery and paint. According to president and chief operating officer Larry Stone, the company is taking steps to ensure that those departments "remain appropriately staffed." Stone added that the company's research shows that interior painting will be one of the top home improvement projects to be tackled in the coming months.

On the other hand, installed sales are down 22% on a comp-store basis.

"Once housing begins to bottom out, I think there's a big backlog on these projects," said Stone, referring to kitchen, bath and other installed-type sales. "But I just think it's going to take a while before that business comes back, probably some time in 2010 in my opinion."

For the third quarter, the company expects total sales to decline in the 2% to 5% range, and the company expects comp-store sales to decline in the 6% to 10% range.

Still, the company sees signs of a bottom to the weak economy.

"There are some indications that a bottoming process in housing and the broader economy is under way, and we have seen customer traffic levels stabilize as we benefit from the resurgence of a do-it-yourself home improvement mindset," Niblock said, in a prepared statement. "As near-term pressures on the consumer remain, we enter the back half of the year with a cautious sales outlook but have the flexibility to react to a quickly changing environment."

In response to demand, the company is lowering its 2010 store expansion plans to a range of 35 to 45.

During the second quarter, Lowe's opened 18 new stores. As of July 31, the company had 1,688 stores in the United States and Canada, representing 190.8 million sq. ft. of retail selling space, a 6.8% increase over last year.