LOW Lowes Companies Inc

By Austen Hufford and Paul Ziobro 

Lowe's Cos. faced a slowdown in shopper visits in the recent quarter, leading the home improvement retailer to cut its financial forecast for the year.

Lowe's Chief Executive Robert Niblock said housing turnover and home price appreciation haven't been as strong as they were a year ago, and disposable income levels are also down as well. While homeowners are still confident about upgrading and repairing their homes, their willingness to spend isn't as robust as last year.

"It's still a very healthy industry but not to the extent that we would've seen the numbers supporting a year ago," Mr. Niblock said on Wednesday's earnings call.

During the quarter, sales at stores open at least a year grew 2.7%, with the number of transactions up just 0.5% while the average order rose 2.2%. U.S. same-store sales rose 2.6%, compared with 5% growth in the same period last year. Shares of the company were down 3.5% to $66.60 in early afternoon trading.

The sales performance fell short of rival Home Depot Inc., which reported on Tuesday a 5.7% increase at existing stores for the quarter, including a 5.5% jump in the U.S. Home Depot executives said they didn't see a slowdown in housing, pointing to macroeconomic trends and industry surveys that still showed a strong desire for customers to upgrade and remodel their homes.

The dip in traffic during the first two months of the quarter dragged on profits. Lowe's said it was slow to cut back on staffing levels to accommodate the slack demand. By October, however, sales got a bump after it ramped up promotional levels and shifted more marketing online, which helped draw more shoppers to stores in some areas, including the Northeast.

In an interview, Mr. Niblock said Lowe's continues to adjust its staffing model, to accommodate more shoppers who only go into stores to pick up their online orders, instead of coming in and browsing shelves of inventory in their stores. "We've got to make sure that as the consumer is changing the ways they engage with us, we continue to be nimble," he said.

Generally, Lowe's quarterly profit was hurt by write-downs, including $290 million related to the winding down of an Australian joint venture and a $76 million goodwill write-down related to its 2013 purchase of the Orchard Supply hardware chain out of bankruptcy, which has required more work than expected. Profit fell to $379 million from $736 million while revenue climbed 9.6% to $15.74 billion.

The company also logged a $96 million charge related to technology. Lowe's scrapped custom-built systems in favor of off-the-shelf products that are cheaper and quicker to adapt. Mr. Niblock declined to say what the systems were, but said the retailer is focusing improving its ability to accurately present stores' inventory to online shoppers and the ability to schedule in-home visits by design specialists online.

For 2016, Lowe's lowered its guidance to about $3.52 a share, below the $4.06 previously forecast. Same-store sales expectations were also lowered to between 3% and 4%, versus a prior 4%.

Write to Austen Hufford at austen.hufford@wsj.com and Paul Ziobro at Paul.Ziobro@wsj.com

(END) Dow Jones Newswires

November 17, 2016 02:48 ET (07:48 GMT)

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