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Lowe's makeover bears fruit; Sandy helps sales

A specially designated parking spot for Lowes.com shoppers is pictured in the parking lot at the Lowe's Home Improvement Warehouse in Burban
A specially designated parking spot for Lowes.com shoppers is pictured in the parking lot at the Lowe's Home Improvement Warehouse in Burban

By Dhanya Skariachan

(Reuters) - Lowe's Cos Inc's quarterly results beat analysts' estimates on Monday as sales benefited from rebuilding after Hurricane Sandy and the retailer's own efforts to improve product selection and customer service.

The results prompted the world's No. 2 home improvement chain to forecast higher revenue for the current fiscal year. Lowe's said it expected total sales to rise about 4 percent from $50.52 billion in the year ended on February 1. Its shares rose 0.4 percent to $37.83 in premarket trading.

Lowe's, which has lagged behind larger rival Home Depot , is in the middle of a makeover. It has closed locations, curbed openings, cut jobs, streamlined its supply chain and invested in its stores and its online business.

Home Depot plans to report its results on Tuesday.

Lowe's has armed its store workers with Apple iPhones to help shoppers research products, check rivals' prices and make purchases. It has also given iPads to store managers so they can spend more time on the sales floor.

Lowe's has also started offering everyday low prices and products targeted to specific geographic markets. It made its stores more appealing with improved signs, television displays that stream videos to educate shoppers on how-to-do projects, and lower racks to make items easier to reach.

The company has started mylowes.com, a site that allows shoppers to save their room dimensions, create a shopping list and set reminders for recurring items such as air filters and batteries for smoke alarms. It also increased its assortment of products online.

Net income was $288 million, or 26 cents a share, in the fourth quarter, compared with $322 million, or 26 cents a share, a year earlier.

Analysts on average were expecting a profit of 23 cents a share, according to Thomson Reuters I/B/E/S.

For the current fiscal year, Lowe's forecast earnings of $2.05 a share.

Sales fell 5 percent to $11.05 billion, but exceeded the analysts' average estimate of $10.84 billion. Sandy made landfall five days before the start of Lowe's fourth quarter.

Same-store sales rose 1.9 percent both globally and in the United States. The company forecast a 3.5 percent increase in fiscal-year sales at stores open at least a year.

Citi analyst Kate McShane said the outlook could be conservative given that the company expects meaningful same-store sales and gross margin benefits from merchandise and other changes by the second half of the year.

However, she has maintained her "neutral" rating on the stock, citing Lowe's underperformance against Home Depot in same-store sales and a choppy economy.

"The lack of incremental visibility on the company's progress against key initiatives keeps us on the sidelines," McShane added.

(Reporting by Dhanya Skariachan; Editing by Lisa Von Ahn)

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