Lowe's sales beat on demand for appliances, outdoor equipment

By Sruthi Ramakrishnan

(Reuters) - Lowe's Cos Inc (NYSE: LOW), the No.2 U.S. home improvement chain, reported stronger-than-expected growth in quarterly same-store sales as customers bought more expensive items in categories such as appliances and outdoor power equipment.

The company's same-store sales rose 4.3 percent in the second quarter, beating the average analyst estimate of 3.9 percent, according to research firm Consensus Metrix.

Larger rival Home Depot Inc (NYSE: HD) also reported a stronger-than-expected rise in quarterly same-store sales on Tuesday, helped by increased home remodeling activity and a recovery in the housing market.

"Economists are forecasting a modest acceleration in both incomes and consumer spending this year and recovery in the housing market continues," Lowe's Chief Executive Robert Niblock said on a conference call on Wednesday.

U.S. homebuilder sentiment rose in August to its highest level in almost a decade, the National Association of Home Builders said on Monday.

Lowe's sells items such as refrigerators, dishwashers and washing machines in its kitchens and appliances category, its biggest by sales. Its outdoor power equipment category includes chainsaws, branch trimmers and generators.

The company offered more promotions on appliances to beat fierce competition. This hurt its gross margins to some extent, Chief Operating Officer Rick Damron said.

Demand was low for exterior improvement items such as paint due to heavy rain in parts of the United States, Lowe's said.

Lowe's net sales rose 4.5 percent to $17.35 billion in the quarter ended July 31, beating the average analyst estimate of $17.27 billion, according to Thomson Reuters I/B/E/S.

Net income rose 8.7 percent to $1.13 billion, or $1.20 per share, but missed analysts' expectation of $1.24 per share, mainly due to a higher tax rate and a rise in selling and general expenses.

Unlike Home Depot, which raised its full-year profit and sales forecasts, Lowe's maintained its forecast of a profit of about $3.29 per share, sales growth of 4.5-5.0 percent and same-store sales growth of 4.0-4.5 percent for the year ending January.

Lowe's shares were up slightly at $73.16 in late morning trading on the New York Stock Exchange. Up to Tuesday's close, the stock had risen about 45 percent in the past 12 months.

(Editing by Kirti Pandey)

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