The Department of Commerce reported that home construction has reached a 50-year low when the construction of new homes and apartments fell 12.8% in April 2009. This is not good news for Lowe's because the company relies heavily on construction projects for revenue. The company has already slashed prices left and right in order to get consumers. In addition, the worsening foreclosure market is also making it extremely difficult for HD to sell products. The more houses that are already available mean that few new houses need to be built. In California, one of the hardest hit states by the housing bubble, 1 out of every 54 houses has been foreclosed on.
Lowe's (LOW) reported net earnings of $162 million for Q4 2008 ended Jan, 30, 2008, a 60% decline from the same period a year ago. Sales for the quarter increased 3.8 percent to $9.98 billion, down from $10.4 billion in Q4 2007. Comparable store sales for the second quarter declined 9.9 percent.
"The economic pressures on consumers intensified in the fourth quarter, resulting in a further decline in consumer confidence and dramatic reductions in consumer spending," Lowe's Chairman and Chief Executive Robert Niblock told investors during a conference call.
As the housing market continues to be weak, consumers will choose to forego or postpone home-improvement projects and opt to cut costs during the economic downturn.