Drought Wilts Lowe's

Updated from 4:59 p.m. EDT

SAN FRANCISCO -- Home retailer Lowe's(LOW Quote) expects fiscal-year earnings at the low end, or slightly below, its previous guidance due to regional drought conditions hurting the company's outdoor offerings.

Shares of Lowe's slumped more than 5% in recent after-hours trading to $29; rival Home Depot(HD Quote) fell 2.4% to $33.07.

The company said Monday that current sales are trending below expectations due to the dry conditions in the Mid-Atlantic, Southeast and West.

Lowe's had previously expected to earn $1.97 to $2.01 a share for the fiscal year ending January 2008.

"External pressures weigh on our near-term performance, but looking past the current cycle, we see many opportunities for continued sales and earnings growth and increasing cash flow from operations," said Chief Financial Officer Robert F. Hull Jr. previewing the company's analyst day Tuesday.

The company said it expects sales to grow 8% to 11% annually over the next three years, with earnings per share growing 12% to 15% a year.

"The current pressures will likely continue into 2008, so we expect our earnings performance to improve from mid-single digit growth in 2008 to high-teens in 2010," Hull said.

In August, the company pulled off a stronger-than-expected second-quarter profit , but it also warned of weakness ahead because of the housing slump.