Monday, May 18, 2009

Lowes Still Has Its Problems

Lowes (NYSE:LOW) reported news that was framed as encouraging and the stock popped up some. It even brought Home Depot (NYSE:HD) up with it for the ride. They claim improved margins primarily as a result of small outdoor projects; which essentially means a lot of people are buying purple petunias and potting soil. Nice but this will not create a long term wealth effect.

The level of inventories is higher than comparables from last year. When your comparable store sales are dropping by 6.6% you cannot keep your inventories up high.

Not out of the woods as yet. Management did not speak to real issues in the press release.

Listen to Robert A. Niblock, Lowe's chairman and CEO. "In addition, solid gross margin growth combined with appropriate expense management allowed us to deliver earnings per share above our guidance for the quarter.”

SG&A is up in both percentage terms and absolute terms. So what is the CEO talking about? Their SG&A is still not in line with historical levels. They still have not cut overheads to where they need to be