Atlanta, GA, March 14, 2007--Lowe’s chairman Robert Niblock warned problems in the subprime mortgage sector may hurt its business in some areas.
"I don't think it's going to totally derail us in 2007 but I think it could have an impact in some markets on us," Niblock said at a consumer conference when asked how the U.S. mortgage market fallout was affecting business.
Lowe's shares fell $1.60, or 5 percent, to a 2007 low of $30.74 in a down market, hurt by problems in the subprime mortgage segment and weak retail sales. Rival Home Depot Inc. (HD.N) fell 2.2 percent to $37.35, its lowest since November.
Niblock said most mortgages were more conventional loans for which lending standards were not relaxed.
"If it gets to a point where you have delinquencies turning into foreclosures and people losing their homes, that will have some impact on those markets," Niblock said.
Problems in the subprime mortgage sector, which involves loans to borrowers with poor credit histories, have weighed on U.S. financial markets in recent weeks.
On Tuesday, the Mortgage Bankers Association said lenders began foreclosure against more than one of every 200 U.S. mortgage borrowers in the fourth quarter, a record level.
Deliquencies rose in 49 states and among all loan types. Subprime adjustable-rate loans logged the steepest increase, with that delinquency rate rising to 14.44 percent in the fourth quarter from 13.22 percent the prior quarter.
Niblock said although Lowe's does not expect a rapid recovery in the housing market, "we're seeing signs that the worst is behind us, which will mean easier comparisons."
Lowe's, based in Mooresville, North Carolina, said last month that sales at stores open at least a year could improve gradually this year.
Niblock said Lowe's was not seeing much change in competition as industry leader Home Depot looks to invest more in store improvements. He said data from a third-party firm showed Lowe's gained unit market share in all the product categories it sold in 2006.
As Lowe's adds stores in bigger U.S. cities, it was mulling different store formats, he said. For example, Lowe's was considering stores that had parking and garden centers on the roof as well as stores with two levels.
Niblock also said Lowe's was not inclined to buy the professional supply business that Home Depot is considering selling. Instead, he said Lowe's was focusing on expanding business with commercial customers through its retail stores.
Home Depot Supply includes businesses that sell building materials, fire hydrants and electrical products to cities and contractors.
"It's really hard to integrate (those businesses) and really hard to be able to get enough efficiencies out of them," Niblock said. "Our first intent is not to go out and buy something like that."
