Lowe's Companies Inc. today reported its sales at stores open at least a year fell 7.2% in fiscal year 2008, ended Jan. 30, and predicted same-store sales will drop another 4% to 8% over the next 12 months. The company also said it will open just over half as many stores in the coming year as in 2008.
Net earnings for the fiscal fourth quarter ended Jan. 30 sank 60.3% from the year-earlier period to $162 million on a 3.8% decline in sales to $9.98 billion. Net earnings for the fiscal year shrank 21.9% to $2.2 billion on a drop of just 0.1% in sales to $48.2 billion. Those sales numbers were boosted by the addition of 115 stores last year; as of Jan. 30, Lowe's operated 1,649 stores in the United States and Canada.
Larry Stone, Lowe's president and chief operating officer, told analysts during a conference call that one reason why sales fell was that customers were doing fewer big-ticket renovation projects, such as kitchen projects. Similarly, Lowe's revenue for installed sales projects, such as carpet and window installations, declined 14.4% in the fourth quarter from the previous year and was down 6% for the year. Discretionary expenditures accounted in 2006 for 45% of sales, he said. Now, they account for about one-third of sales. "[Customers are] hesitant to invest in large projects," he said.
On the other hand, hurricanes and storms spurred purchases of shingles and other building materials. Had those purchases not occurred, the sales totals would have been one percentage point worse.
Robert A. Niblock, Lowe's chairman and CEO, said the company is taking many actions to limit expenses. While the company had planned in September to open 115 new stores in 2009, Niblock said Lowe's now will open only 60 to 70 stores, including five in Canada and two in Mexico. The company also has frozen all pay levels for executives at the vice president and above levels.
During Lowe's fiscal first quarter, which runs from February through April, the company expects total sales to range between a 1% gain and a 3% fall, while sales at stores open in 2008's fiscal first quarter are forecast to drop 6% to 10%.
For fiscal year 2009, total sales for the Mooresville, N.C.-based company are expected to run 2% above or below the 2008 totals, helped by the opening of new stores; same-store sales are forecast to decline 4% to 8% from fiscal 2008.