February 26, 2020 / 11:34 AM / a month ago

UPDATE 2-Lowe's sales fall short of estimates as Home Depot extends lead

(Adds background details, analyst comment, shares)

Feb 26 (Reuters) - Lowe's Cos Inc reported lower-than-expected quarterly sales on Wednesday as it failed to make the most of the strongest U.S. home building market since 2006 unlike larger rival Home Depot Inc.

The company's disappointing sales come as it focuses more on shoring up its profit margins by shutting underperforming stores. In contrast, Home Depot has been investing heavily in its online operations to boost market share in an expanding U.S. economy.

U.S. homebuilding fell less than expected in January, following three straight monthly increases and was still at levels last seen in December 2006. Building permits soared to a near 13-year high pointing to sustained housing market strength.

Lowe's same-store sales rose 2.5% in the fourth quarter ended Jan. 31, below expectations of a 3.6% increase, according to IBES data from Refinitiv.

Same-store sales at Home Depot jumped 5.2% in the same period.

Wedbush analyst Seth Basham said Home Depot's sales figures raised expectations for Lowe's, which was likely still facing issues in pulling traffic to its stores.

Lowe's net sales rose 2.4% to $16.03 billion in the quarter, but missed analysts' estimates of $16.15 billion.

Still, a more than 26% fall in total expenses helped Lowe's beat profit expectations and temper a dour annual earnings outlook.

Net earnings came in at $509 million, compared with a loss of $824 million a year earlier, when the company wrote down the value of its Canadian operations.

The company reported an adjusted profit of 94 cents per share, above estimates of 91 cents.

Lowe's said it expects adjusted fiscal 2020 earnings of $6.45 to $6.65 per share, compared with analysts' average estimate of $6.67 per share.

The company also forecast 2020 total sales growth of 2.5% to 3%, largely below estimates of a 2.9% increase.

Shares of the Mooresville, North Carolina-based home improvement chain were largely flat in trading before the bell. (Reporting by Uday Sampath in Bengaluru; Editing by Shinjini Ganguli and Anil D'Silva)

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