Lowe's beats profit forecasts but warns of weak Canadian market

(Reuters) - U.S. home improvement chain Lowe’s beat Wall Street earnings forecasts on Wednesday, but reported disappointing sales growth as it predicted more weakness in Canada following the closure of dozens of unprofitable stores.

Shares in the company rose 4 percent to $109.21 in early trade, a day after larger rival Home Depot disappointed Wall Street with weak sales it blamed on a cold and wet winter.

Lowe’s Chief Executive Officer Marvin Ellison said restructuring efforts were paying off, with its U.S. business growing 5.8 percent in January.

Since taking over in July, Ellison has shuttered stores across North America to boost profits and hired thousands of software workers to improve online sales.

“Most of the intense work over the past six months to transform our company has been in preparation for an improved spring season and fiscal 2019,” Ellison said in a statement.

But a weak housing market in Canada, where Lowe’s runs some 300 stores following the closure of 31 largely unprofitable ones, remained a worry, the company said.

“We anticipate continued weakness in the Canadian housing market in the near-term,” Ellison said, while adding the company was confident of its long-term potential in the country.

Sales at Lowe’s stores open for at least 13 months rose 1.7 percent in the fourth quarter ended Feb. 1, below analysts’ average estimate of a 2.03 percent increase, according to IBES data from Refinitiv.

“I didn’t think the quarter was bad,” said Walter Todd, the chief investment officer at Greenwood Capital, which owns shares in both Lowe’s and Home Depot. “It seems like they ended the quarter very strongly and that’s encouraging.”

Lowe’s reported a net loss of $824 million, compared with a profit of $554 million a year earlier. It recorded pre-tax charges of $1.6 billion, reflecting the impact from store closures across North America.

Excluding one-time items, Lowe’s earned 80 cents per share, 1 cent above Wall Street estimates.

Net sales overall rose about 1 percent to $15.65 billion.

Reporting by Nivedita Balu in Bengaluru; Editing by Sai Sachin Ravikumar