Lowe's, Target Shares Decline After Forecasts Reduced

Sept. 25 (Bloomberg) -- Lowe's Cos., the second-largest U.S. home-improvement chain, and Target Corp. dropped in New York trading after the retailers lowered earnings and sales forecasts as customers slowed spending amid a U.S. housing slump.

Earnings may miss a previous forecast, Lowe's said yesterday. The announcement sent the shares down 6.7 percent, the most in more than four years. Target Corp., the second-biggest U.S. discount chain, cut its September sales projection, citing fewer store visits by consumers. The stock fell 4.6 percent.

Higher fuel prices and slowing home sales made consumers more budget-conscious. Target forecast a same-store sales gain of as low as 1.5 percent, less than half what it had projected. Lowe's blamed a drought in parts of the U.S. that led some customers to scale back purchases of outdoor products.

``It's significant,'' said Walter Todd, a principal at Greenwood Capital Associates LLC. The firm is affiliated with WealthTrust LLC, which has holdings in nine investment firms that manage $6 billion. ``These are two of the strongest retailers out there, and both are warning on slower sales.''

Lowe's fell $2.04 to $28.51 at 4:03 p.m. in New York Stock Exchange composite trading, while Target, based in Minneapolis, declined $2.78 to $61.52, the biggest drop in more than a month.

U.S. retail sales fell 1 percent last week from the previous seven days, the second consecutive decline, the International Council of Shopping Centers and UBS Securities LLC said today in a statement. The ICSC lowered its estimate for sales growth in September to as little as 2 percent from 2.5 percent previously.

Retail Shares

Twenty-three of the 29 members of the Standard & Poor's 500 Retailing Index slumped in trading. Home Depot Inc. dropped 2.4 percent, Wal-Mart Stores Inc., the world's largest retailer, slipped 1.8 percent and Macy's Inc. decreased 3.2 percent.

``Many uncertainties remain, and it seemed prudent to further temper our sales and earnings outlook,'' Lowe's Chief Executive Officer Robert Niblock said in a statement yesterday.

Profit may come in at the low end or slightly below an Aug. 20 forecast of $1.97 to $2.01 a share, Mooresville, North Carolina-based Lowe's said. Eighteen analysts surveyed by Bloomberg estimated an average profit of $2.01.

More than 900 sites in North America have been identified for possible expansion, Greg Bridgeford, Lowe's head of business development, said today on a Webcast. The retailer operates more than 1,400 stores in the U.S. and will open its first location in Canada later this year and in Mexico in 2009.

Lowe's is considering other international markets. Bridgeford didn't say which ones.

Tighter Credit

``The average American consumer is feeling pinched by the combination of tighter credit, higher gas prices and climbing food costs,'' said Patricia Edwards, a money manager at Wentworth, Hauser & Violich in Seattle, yesterday. The firm has $9.6 billion in assets, including Target shares.

Consumer confidence fell more than forecast in September to the lowest level in almost two years, hurt by falling home values, a deteriorating labor market and stricter borrowing standards. The Conference Board's index of confidence plunged to 99.8, from a revised 105.6 in August, the New York-based group said today.

Sales at stores open at least a year will increase 1.5 percent to 2.5 percent for the five weeks through Oct. 6, Target said on a recorded call late yesterday. Target previously forecast a September gain of 4 percent to 6 percent.

Sales at Target's Northeast and Florida locations trailed those in other U.S. areas, the company said. The retailer didn't provide specifics.

Target posted a 6.7 percent comparable-store sales gain in September 2006. Most retailers will release September sales results on Oct. 11.