Lowes Cites Weather as Cause for Lower Earnings

Lowe’s (NYSE:LOW) reported weak earnings yesterday. Plus, the company’s guidance for current quarter earnings was weaker than expected. Needless to say, worrisome headlines about consumer spending sprang up, and stock prices went down.

At Daily Profit, we’ve been discussing how high unemployment necessarily means that consumer spending will be weak. And that with little chance of any improvement in unemployment in the foreseeable future, there’s not likely to be more money spent. This is a major condition of my "Managed America" economic scenario.

Too bad Lowe’s CEO Robert A. Niblock isn’t a reader. He said "Wavering consumer confidence, unseasonable weather in core markets, and restrained customer spending compared to last year’s fiscal stimulus-aided results led to lower than expected sales in the second quarter…"

Yeah. It’s the weather. That’s it.

And Lowe’s COO Larry Stone ran with it, saying that the mild summer has led to declines in air conditioner sales. But Stone said the heat wave in August has air conditioners selling at a "…pretty good clip."

Apparently better air conditioner sales couldn’t keep Lowe’s from lowering future guidance and scaling back its expansion plans.

*****The Fed is phasing out several economic rescue programs. Treasury bond purchases and a money market lending program will expire, while a program for loans to commercial banks is being scaled back.

One program that isn’t in danger of getting cancelled is the Term Asset-Backed Securities Loan Facility, or TALF. That’s because TALF was expanded to allow commercial real estate assets to qualify under the program. And with $165 billion in commercial real estate loans due this year, and values down 35%, TALF could come in handy.

Again, despite the fact that it’s essentially taxpayers at risk, this is a good thing for the economy. And we expected the Fed would do something to help commercial real estate.

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Best Regards,
Ian Wyatt

Editor

Daily Profit