NOVEMBER 15, 2010, 12:44 P.M. ET.

Lowe's Profit Rises 17%

By MAXWELL MURPHY

Lowe's Cos. warned it sales and earnings for the year might miss its previous estimate, following earlier reports from suppliers to home-improvement chains that the holiday quarter could be weaker than expected.

Fiscal third-quarter earnings rose 17% as revenue and margins improved, but sales nonetheless lagged analysts' views. Lowe's, the nation's second-largest home-improvement retailer after Home Depot Inc., also tempered its earnings forecast for the year, now expecting per-share profit of $1.37 to $1.40 on revenue growth of 3% to 4% and same-store sales growth of 1% to 2%. The company had previously forecast earnings of $1.38 to $1.45 a share, revenue rising 4% and same-store sales climbing about 2%.

During the third quarter, Lowe's opened 10 stores, below the 12 it had said it planned to open, and it took a $50 million charge to reduce the carrying value of certain long-lived assets, including two stores it closed earlier this month and its pipeline of potential new stores.

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."Ongoing uncertainty in employment and housing continues to pressure our industry, but we are prepared to operate effectively in a slow-growth environment," Chairman and Chief Executive Robert Niblock said.

Demand at home-improvement retailers has perked up after years of declines, though concerns still remain as unemployment remains high and consumers are still reluctant to spend. Various paint, building materials and appliance manufacturers have already reported their most recent quarters, with many indicating they won't deliver the volume of goods they had previously hoped for the current quarter.

In August, Mr. Niblock said Lowe's would need an upturn in the labor and housing markets to support higher demand for home-improvement products, and on an conference call Monday he said the economic recovery remains sluggish. Consumers aren't yet willing to take on larger discretionary home-improvement projects as they fret over where home values are headed absent meaningful economic growth, though he said the North Carolina company is seeing some signs of "gradual improvement in the fundamentals of the housing market."

Extreme heat in August and September throughout much of the U.S. put a crimp on spending on lawn and garden products, Mr. Niblock said, though October showed strength as people moved to restore their lawns when the heat wave broke.

The results give perspective to those awaiting word on quarterly performance and business outlook from Home Depot, which is slated to report its fiscal third-quarter results Tuesday. The average estimate of analysts polled by Thomson Reuters sees per-share earnings rising 17% to 48 cents for the period on a 1% revenue increase to about $16.6 billion. Observers will be watching for any annual forecast changes, as Home Depot said previously that it expects full-year earnings to rise 22.6% to $1.90 a share on revenue growth of 2.6%.

—Nathan Becker contributed to this article.
Write to Maxwell Murphy at maxwell.murphy@dowjones.com

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