NEW YORK (CNN/Money) - Lowe's Cos. reported improved fiscal first-quarter earnings Monday that beat Wall Street expectations for the period as the company said it is on track to be near second-quarter and full-year forecasts.

The No. 2 home improvement retailer behind Home Depot Inc. earned $421 million, or 53 cents a share, in the period ended May 2, up about 22 percent from the $346 million, or 44 cents a share, a year earlier. Analysts surveyed by earnings tracker First Call had forecast 52 cents.

The company said it expects EPS of 68 to 70 cents in the second quarter. First Call's EPS forecast is 69 cents, with estimates ranging from 67 to 72 cents. The company earned 59 cents a share a year ago. It also said it expects full-year EPS between $2.16 and $2.20, up from the $1.85 in the fiscal year ended in January. First Call's forecast is $2.19, with a range of $2.16 to $2.24.

But Lowe's (LOW: Research, Estimates) shares fell over 2 percent Monday morning after the company said it expects an accounting change to reduce fiscal 2004 EPS by approximately 12 cents a share. Analysts forecast earnings of $2.60 for the 2004 fiscal year, according to earnings tracker First Call.

Sales increased to $7.2 billion from $6.47 billion a year earlier, falling short of First Call's forecast of $7.4 billion. Sales at stores open at least year, a closely-watched retail measure known as same-store sales, was basically flat, up only 0.1 percent.

Plumbing, building materials, hardware, paints, cabinets and home organization items were the strongest performing categories in the quarter.

Lowe's CEO Robert Tillman said in the company's earnings call that weak sales did not reflect "a slip in consumer propensity to spend on the home but was a weather-related phenomenon," citing adverse winter weather in the early part of the year.

The company's sales outlook for the second quarter and full year also was somewhat below First Call forecasts. Lowe's said it expects a 13 percent gain in second-quarter earnings, which would bring sales to $8.5 billion, compared with a First Call Forecast of $8.7 billion. And it said it expects full-year sales to gain 14 or 15 percent, which would bring sales to between $30.2 billion and $30.5 billion. First Call's revenue forecast is for full-year sales of $30.7 billion.

"Bad weather and the war did affect Lowe's sales in the quarter. That's the logical assumption. But whether that was 100 percent of the reasons for disappointing sales remains to be seen. If Home Depot reports better earnings and the comparable sales gap between Home Depot and Lowe's narrows, that will raise questions," said Colin McGranahan, analyst with Bernstein.

Home Depot (HD: down $1.16 to $28.03, Research, Estimates) reports first-quarter earnings Tuesday. Analysts expect a profit of 37 cents a share

Lowe's forecast comparable store sales of between 2 to 4 percent for the second quarter, but said it expects sales to track the low-end of that estimate in the first 16 days of the quarter. For the year, the company estimates same-store sales to be between 3 and 4 percent.

On its expansion plans, Tillman said Lowe's is on track to open 130 stores in 2003, including 23 new stores in the second quarter.