Lowe's Cos posted a 19 percent drop in quarterly profit on Monday and forecast current-quarter earnings below Wall Street estimates as consumers put off big home projects, sending its shares down more than 8 percent.
The second-largest home improvement retailer behind Home Depot also said weak demand for its products in the recession led it to curb its North American store expansion plans.
The company expects to open 62 to 66 stores in 2009, down from its prior plan for 60 to 70. It expects to open only 35 to 45 stores in 2010, fewer than it had anticipated.
Lowe's also said it had decided to abandon several projects, but provided no further details.
Sales at home-improvement chains have tumbled as U.S. consumers tighten their purse strings and avoid nonessential purchases.
The housing market and broader economy are showing signs of bottoming out, Lowe's Chief Executive Officer Robert Niblock said in a statement, but consumers remain under pressure in the near term.
Cautious consumers remain reluctant to take on discretionary projects until signs of economic improvement are more evident, Niblock said.
Earlier this year, Lowe's raised its full-year forecast after seeing signs that the worst of the U.S. housing slump might have passed. Home Depot followed suit in June, citing economic indicators.
New U.S. housing starts and permits jumped in June, propelled by a rise in ground-breaking for single-family homes and suggesting the battered housing sector was beginning to stabilize, a government report showed in July.
While sales of expensive goods continue to suffer, both chains have seen strength in products for outdoor projects like landscaping and painting as more consumers adopt a do-it-yourself approach.
BAD WEATHER, WEAK ECONOMY
In the second quarter ended on July 31, Lowe's said it earned $759 million, or 51 cents a share, down from $938 million, or 63 cents a share, a year earlier.
Excluding a charge of $48 million related mainly to the projects Lowe's no longer plans to pursue, profit was 54 cents a share, in line with the analysts' average forecast, according to Reuters Estimates.
Besides wavering consumer confidence and unseasonable weather in key markets, restrained customer spending compared with last year's fiscal stimulus-aided results hurt sales, Niblock said.
May started out the quarter strong, but June was especially cold and wet, while July was simply cool, JPMorgan analyst Christopher Horvers said in a note.
Sales at Lowe's fell 4.6 percent to $13.8 billion. Sales at stores open at least a year, an important retail measure, fell 9.5 percent.
For the third quarter, Lowe's forecast earnings of 21 cents to 25 cents a share, while analysts had expected 27 cents.
The Mooresville, North Carolina, company said it expected total sales to fall 2 percent to 5 percent, with a same-store sales decline of 6 percent to 10 percent.
Lowe's shares were down 8.5 percent at $20.89 in morning trading, while Home Depot fell 4.7 percent to $25.86.
(Reporting by Dhanya Skariachan in Bangalore; Editing by Lisa Von Ahn)