Lowe's sees return to sales growth in 2010

Lowe's Cos. executives said Tuesday that they expect sales to begin rising again in fiscal 2010 as the housing market stabilizes, even as consumers have changed the way they approach home-improvement projects amid the recession.

Still, the nation's second-largest home improvement chain 2010 earnings outlook disappointed investors and shares fell 88 cents, or 4 percent, to close at $21.07 Tuesday.

Lowe's has suffered slumping sales for the past year as consumers cut back on home improvement. During a meeting with analysts, CEO Robert A. Niblock said consumers' approach to home improvement has changed.

They are spreading out time to complete a project, doing more work themselves and reducing the scope of projects. But the home remains many consumers' largest asset, and people are still tackling home-improvement projects, he said.

"Consumers are being deliberate," he sad. "But the home is still an integral part of the family."

He said spending will likely improve only after the housing market reaches the bottom and unemployment begins to improve, which will likely not be until the middle of next year.

Lowe's on Tuesday reiterated guidance for fiscal 2009 of $1.13 to $1.21 per share, with sales down about 3 percent. Based on year-ago sales of $48.2 billion, that implies revenue of about $46.78 billion for the year ending Jan. 29, 2010.

Analysts expect 2009 net income of $1.20 per share on higher revenue of $46.86 billion.

Sales at stores open at least one year, considered a key measure of a retailer's fiscal health, are expected to decline 7 percent to 9 percent, Lowe's said.

Lowe's also said it is evaluating the cash flow of its stores, and although it did not take any operating store impairment charges during the first half of the fiscal year, it may take up to $100 million in charges related to the declining value of some stores amid the recession. That might include closing stores, but not necessarily, the company said. However, its 2009 outlook excludes the potential charges because they are uncertain.

The retailer expects 2010 earnings between $1.24 and $1.34 a share for the fiscal year ending Jan 28, 2011. Sales are expected to rise between 3 percent and 4 percent, and sales at stores open at least one year will rise around 1 percent, Lowe's said.

Analysts expect 2010 earnings of $1.34 a share and revenue of $48.5 billion.

Lowe's also said it is closing one unprofitable store in Milwaukee, but opening between 62 stores and 66 stores in 2009. In fiscal 2010, Lowe's plans to open between 35 stores and 45 stores.

It also plans to open two stores in Mexico during the current fiscal year. It also recently entered into a joint venture to open stores in Australia, and its first store there will likely be in 2011, with the potential for 150 large-format stores potential in the market, the company said.

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Associated Press writers Betsy Vereckey and Michelle Chapman in New York contributed to this report.