Lowe’s says housing slip will hurt

RALEIGH, N.C. – Lowe’s Cos. warned Monday that a slowing housing market will hurt its earnings for the rest of the year, sending its stock tumbling despite an 11 percent profit increase for the second quarter.

Shares in the country’s second-largest home-improvement chain fell $1.17, or 4 percent, to $28.35 on the New York Stock Exchange, near the low end of a 52-week range of $26.90 to $34.85.

“We believe the home-improvement sector is facing significant headwinds as housing turnover slows and interest rates rise,” Banc of America Securities analyst David Strasser wrote in a report Monday about Lowe’s quarterly report. “We expect some weakness in the stock following the recent rally. We remain neutral as the first signs of a slowing housing market are beginning to take their toll on Lowe’s, and we have no visibility on how deep the downturn will go.”

Net income in the three months ended Aug. 4 rose to $935 million, or 60 cents a share, from $839 million, or 52 cents a share, in the year-ago period. Wall Street was looking for profit of 61 cents per share, according to a Thomson Financial poll of 19 analysts.

During the quarter, Lowe’s gained market share for flooring, appliances, outdoor power equipment and cabinets, the company said, citing third-party estimates. But orders for new homes have slowed and sales of existing houses are slowing from record levels, putting pressure on sales at Lowe’s and larger rival, Home Depot Inc. Increased gas prices also have affected business, Chief Executive Robert Niblock said.

“Near-term pressures on the U.S. consumer have led to a more cautious outlook for the balance of the year,” Niblock said in a prepared statement.