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(LOW) - Get Report

missed first-quarter estimates and reported a surprise sales decline and trimmed its outlook, leaving Wall Street wondering if the home improvement retailer was just hit by a case of bad weather or if this is a reflection of housing market woes.

"Lowe's encountered a three-headed beast in the first quarter: lag on consumer spending on home improvement from softening home values; unfavorable weather, which appears to have delayed purchases of patios, grills and other spring merchandise; and tough comparisons to year-ago government stimulus," Wall Street Strategies analyst Brian Sozzi wrote in a note.

The question is, which of these issues played the larger role in Lowe's disappointing results?

During the quarter, Lowe's earned $461 million, or 34 cents a share, a 5.7% drop from $489 million, or 34 cents, in the year-ago period. The number of shares outstanding decreased from the first-quarter last year.

Sales fell 1.6% to $12.19 billion, while same-store sales dipped 3.3%. Last week, Lowe's lowered its same-store sales forecast to a decline of 1% to 2%, but it still missed this reduced outlook.

Looking ahead, Lowe's now foresees full-year earnings in the range of $1.56 to $1.64 a share, from its prior outlook of $1.60 to $1.72 a share. It also reduced its sales guidance to 4% from previous estimates of up 5%. Analysts are looking for a profit of $1.70 a share on revenue of $50.9 billion.

For the current quarter, Lowe's predicts earnings between 65 cents to 69 cents a share, in-line with Wall Street's forecast of 68 cents. It's looking for a sales gain of about 4%, which would imply revenue of about $14.93 billion.

The acceleration in expected comparable sales in second-quarter expectations would indicate that Lowe's believes much of its weakness in the first quarter was weather related, said Janney Capital Markets analyst David Strasser.

But macro-economic issues are still a very real concern, as home prices dropped in three-fourths of U.S. cities, as foreclosure rates rose, according to a report released last week by the National Association of Realtors.

So what does this mean for Lowe's archrival,

Home Depot

(HD) - Get Report

, which is scheduled to report its first-quarter results on Monday?

"We think ... that Home Depot, believe it or not, continues to compete more effectively for those precious dollars devoted to home improvement, something hinted in Lowe's press release this morning," Sozzi wrote. Lowe's said in its release that it needs to drive better "customer experiences."

"While Home Depot is not exactly king daddy in terms of customer service, it has improved from a low base, and management has done a good job at articulating the low-price proposition relative to Lowe's," Sozzi continued. "The launch of a 5% rewards program by Lowe's for those that use its credit card is classic evidence that share has swung in favor of Home Depot."

Wall Street expects Home Depot to report earnings of 49 cents a share on revenue of $17.02 billion.

--Written by Jeanine Poggi in New York.

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