Lowe's Cos. reported a 10% drop in profit in its second quarter. (Ric Feld / Associated Press )
Home improvement chain Lowe's Cos. reported that profit dropped 10% in the second quarter because of weak sales and competition from rivals.
For the three months ended Aug. 3, the retailer reported net income of $747 million, or 64 cents a share, compared with $830 million, or flat earnings per share, in the same period a year ago.
Sales sank 2%, to $14.2 billion from $14.5 billion.
"Our results fell short of our overall expectations," said Lowe's Chief Executive Robert A. Niblock in a Monday statement. "We fully understand that we must improve our level of execution."
The North Carolina company said that a staff reduction at its headquarters was responsible for eating away $15 million in profit.
But analysts say a large part of its troubles have to do with a planned transformation -- with permanent low prices -- that has struggled to catch on with consumers while competitors such as Home Depot lure shoppers with improved customer service. Lowe's comparable store sales -- which includes shops open at least a year and is an important measure of health because it excludes the effect of store closings and openings -- declined 0.4%
"The team is making progress on these initiatives, but frankly the benefits are accruing at a slower rate than I expected," Niblock said in a conference call with analysts.
The poor results follow on the heels of Home Depot's report last week of a 12% jump in profit. The rival also lifted its full-year forecast after experiencing healthy sales so far this year.
Shares of Lowe's dropped $1.61, or 5.8%, to $26.26 in Monday trading.
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