Lowe’s lowers its expectations

Lowe’s (LOW) shares dropped in premarket trading after the home improvement retailer said it expects sales in established stores to drop at least 5 percent in 2008. The company said it made $408 million, or 28 cents a share, for the fourth quarter ended Feb. 1, down from the year-ago $613 million, or 40 cents a share. Sales fell to $10.38 billion from $10.41 billion a year earlier. Same-store sales plunged 7.6 percent for the quarter.

“Fourth quarter and fiscal year 2007 sales fell short of our plan as we faced an unprecedented decline in housing turnover, falling home prices in many areas and turbulent mortgage markets that impacted both sentiment related to home improvement purchases as well as consumers’ access to capital,” said CEO Robert A. Niblock. He said Lowe’s expects sales to remain soft for the rest of this year, though he expressed hope that the second half would be better than the first as Fed interest rate cuts start to work their way through the economy. “As a result,” he said, “many of the headwinds facing the housing market and the home improvement industry should lessen, and consumers’ confidence in investing in and improving their homes should improve.”

In the meantime, the company said it expects to make between $1.50 and $1.58 a share for the year - far short of the $1.76-a-share analyst consensus estimate. With rival Home Depot (HD) due to post its own fourth-quarter numbers Tuesday morning, investors in the housing business are bracing for more depressing news.