Retailer Lowe’s will sharply scale back its inventory expansion in the second half of this year after seeing inventories grow ahead of sales in the second quarter, company officials said.

Lowe’s expects to end 2010 with inventories up only 1 to 2 percent, suggesting shipping and distribution will pull back after inventories expanded 5.7 percent in the second quarter and 9.8 percent in the first quarter. That was partly the result of the addition of new stores.

 “As the year progresses we will continue to reduce the rate of inventory growth versus last year,” Lowe’s Chief Financial Officer Robert Hull told investment analysts in a conference call this week.

 “We’re going to … take a hard look at what we buy as we head into the third and fourth quarter,” said Larry Stone, president and chief operating officer. “I still feel good about our inventory. I still think we made the right decisions, and quite frankly we hope to get it worked down … and be basically flat year-over-year.”

The home improvement retailer is launching a supply chain management effort this fall, an effort it calls its Integrated Planning and Execution, or IP&E, initiative. The company will test the plan at seven of its merchandise divisions in hopes of optimizing inventory and improving sales by better aligning product availability with geographic demand.

Lowe’s saw overall sales grow 3.7 percent in the fiscal second quarter ending July 30 and same-store sales expand 1.6 percent over the same quarter a year ago.

The company’s inventory turns fell from 4.5 percent last year to 3.6 percent in the most recent quarter, a sign that goods were sitting on shelves longer before sales.

Source:JOC