Lowe's 2Q Numbers Disappoint

Home improvement retailer Lowe's

was forced to cut its full-year earnings and revenue forecasts this week after posting a 10 percent fall in second-quarter income. On Monday,

that Lowe's had reported net earnings of $747 million for the quarter ended August 3, 2012, a 10.0 percent decrease over the same period a year ago. Diluted earnings per share of $0.64 were flat versus the second quarter of 2011. For the six months ended August 3, 2012, net earnings decreased 1.3 percent from the same period a year ago to $1.27 billion, while diluted earnings per share increased 9.2 percent to $1.07. “Our results fell short of our overall expectations,” commented Robert A. Niblock, Lowe's chairman, president and CEO. “However, I have confidence in our strategy and in our employees, and while we recognize the significant magnitude of change that we've asked the organization to absorb as we transform our business, we fully understand that we must improve our level of execution.” Niblock can have as much confidence in his company's strategy as he wants, but the fact is that Lowe's is being bossed by rival Home Depot

, which reported a 12 percent rise in second quarter earnings. So why are Lowe's sales down so much? A quick look at a seasonal item, the Snow Joe 7.5-Amp 12" electric snow blower, revealed that both stores sell it for $99. Similar comparisons on items such as washing machines and bathtubs show that the prices at the two stores are very similar. That isn't where Lowe's is falling down. Despite the fact that Lowe's returned to permanent low prices last summer, Home Depot is still the first name that most people think of when they consider home improvements and projects. It is simply a better-branded company. "We knew it would take time to see the full benefits of our actions," Lowe's chairman, president and CEO Bob Niblock told investors during a conference call. "The team is making progress on these initiatives, but frankly, the benefits are accruing at a slower rate than I had expected." Naturally, Niblock is going to make a series of positive noises, but the afct remains that his company is being left behind by Home Depot. Work needs to be done to halt that slide, and it needs to be done fast. One suspects that a well-thought-out marketing campaign could do wonders. On Tuesday, Lowe's traded at about $26.25, down roughly 5.8 percent.