By Dhanya Skariachan
(Reuters) - Lowe's Cos Inc
The results came just days after Home Depot Inc
Lowe's shares fell 4.3 percent to $26.67 in early trading. The North Carolina-based company has cut jobs, curbed store expansion plans and streamlined its supply chain to cut costs and compete more effectively, but it has yet to see results.
"Lowe's is a turnaround story and it's not turning," said Colin McGranahan, analyst at Sanford C. Bernstein & Co.
It recently decided to offer fewer discounts on expensive items like appliances, in sync with its bigger plan to offer "everyday low prices" rather than promotions. The move has driven some shoppers away.
Analysts also said other initiatives, such as a credit card discount program, have hurt margins more than they have helped sales.
"The biggest disappointment was the margins. They lowered some prices, they offered a 5 percent discount on their credit cards, and it doesn't look like they got any traction yet," McGranahan said.
Gross margin fell to 33.9 percent in the latest quarter from 34.5 percent a year earlier.
Sales suffered in the traditionally strong second quarter, which ended on August 3, as unseasonably warm weather early in the year pulled some demand into the first quarter.
Sales at Lowe's stores open at least a year fell 0.4 percent, including a 0.2 percent decrease for the U.S. business, the 13th straight quarter that the company trailed Home Depot in same-store sales.
"Lowe's inability to drive sales despite discounting remains a concern," Janney analyst David Strasser said in a research note.
Net earnings fell to $747 million, or 64 cents a share, from $830 million, or 64 cents a share, a year earlier.
Analysts on average had expected 70 cents a share, according to Thomson Reuters I/B/E/S.
Sales fell 2 percent to $14.25 billion, while analysts had expected $14.46 billion.
Lowe's, which has stores in the United States, Canada and Mexico, now expects flat sales for the fiscal year ending February 1. It forecast earnings of $1.64 a share, down from a May forecast of $1.73 to $1.83.
(Reporting by Dhanya Skariachan in New York and Nivedita Bhattacharjee in Chicago; Editing by Lisa Von Ahn and John Wallace)
