AP Lowe's 3Q Profit Falls, Cuts Outlook Monday November 19, 1:55 pm ET By Ieva M. Augstums, AP Business Writer Lowe's Profit Falls 10 Percent in 3Q on Housing Slump, Cuts Outlook for 4th Quarter, Full Year CHARLOTTE, N.C. (AP) -- Lowe's Cos. cited a weak sales environment amid a continuing slump in the housing sector Monday as reasons for a 10.2 percent drop in third-quarter profit. The nation's second largest home improvement chain suggested an industry recovery won't occur in early 2008 either as it slashed its outlook for the fourth quarter and the full year. Its shares tumbled more than 7 percent in afternoon trading after hitting a new 52-week low earlier in the day. It's been a tough quarter for home-improvement retailers. Home Depot Inc., Lowe's bigger rival, reported a 27 percent drop in third-quarter earnings last week and cut its full-year outlook, citing the persistent housing slump. On a conference call with analysts, Lowe's Chairman and CEO Robert A. Niblock blamed slowing home sales, lower home prices and tightening of credit standards, all which hurt consumer spending on big-ticket items. "Based on our results and the significant losses and write-downs announced this quarter in the banking and mortgage industries, it's clear that the pressures on our industry and the home improvement consumer are greater than we previously anticipated and are likely to last longer than we expected," Niblock said. Mooresville, N.C.-based Lowe's said it earned $643 million, or 43 cents a share, for the three months ended Nov. 2, down from $716 million, or 46 cents a share, a year earlier. Revenue rose to $11.6 billion from $11.2 billion a year earlier. Same-store sales, or sales in stores open at least one year, a key measure of industry performance, fell 4.3 percent. Deutsche Bank Securities analyst Mike Baker said in a client note that he believed "business likely has fallen off pretty dramatically since the end of September." "Once business turns, we believe Lowe's will be an ideal stock to benefit from the recovery," Baker wrote. "But this release tells us that that is not at hand in late 2007 or early 2008." Analysts surveyed by Thomson Financial had been looking for net income of 41 cents a share on revenue of $12.4 billion. Niblock said many external factors contributed to the weak sales environment, including a continuing housing correction, drought conditions in several U.S. markets, and slower than expected sales in Gulf Coast markets. "Clearly the largest of these impacts was the unstable housing environment evidenced by an even steeper decline in housing turnover, falling home prices in many markets, and a near record inventory of homes for sale," he added. Like Home Depot, Lowe's business relied on large remodeling and do-it-yourself projects, but with home prices falling, fewer homeowners are willing or able to pay for renovations. Revenue has been sliding for most of the year as the housing slump continued. Recent government and industry data shows housing troubles spreading to the broader economy, putting even greater pressure on the retailers' business. Lowe's expects to earn 25 cents to 29 cents a share for the fourth quarter. Analysts were expecting earnings of 36 cents a share. The company expects to show sales growth of 3 percent and anticipates same-store sales decline of 3 percent to 5 percent for the period. Lowe's, which in September had predicted full-year earnings per share "at the low end" of its forecast of $1.97 to $2.01, now forecasts earnings of $1.83 to $1.87. Its shares sank $1.81, or 7.2 percent, to $23.20 in afternoon trading Monday after falling to a 52-week low of $23.07 earlier in the day. For the first nine months of the year, Lowe's reported earnings of $2.4 billion, or $1.58 per share, compared with $2.5 billion, or $1.59 per share, in 2007. Revenue rose to $37.9 billion from $36.5 billion a year earlier.