NEW YORK (CNNMoney.com) -- Home improvement retailer Lowe's Cos. Inc. reported second-quarter profits Monday that were slightly shy of analysts' estimates, although its sales were modestly better than expected.

Lowe's board also approved an increase in its current share repurchase program of up to $2 billion through fiscal 2008.

Lowe's shares dipped in early trading Monday. Lowe's stock is down 11.4 percent in the year to date.

Donald Trott, analyst with Jefferies & Co., said Lowe's stock was seeing red because investors are disappointed with the company's tempered guidance for the second half of the year.

The No. 2 home improvement retailer after Home Depot (Charts) reported earnings per share of 60 cents for the quarter, up from 52 cents a year earlier.

Analysts had forecast a profit of 61 cents a share, according to First Call.

Lowe's (Charts) said sales rose 12.2 percent to $13.4 billion from $11.9 billion a year earlier. Analysts were expecting it to post revenue of $13.3 billion for the period.

Retail analysts have cautioned that a slowing housing market coupled with gas price inflation would likely hurt home improvement retailers and consumer spending overall. Home Depot recently cited those trends as ongoing "challenges" in the coming months.

Lowe's, too, is cognizant of "pressures on the U.S. consumer," CEO Robert Niblock said during a conference call with analysts to discuss the company's results.

"Expectations for an orderly slowdown in the housing market, moderate income growth and a solid employment picture are stabilizing forces for the consumer," he said.

Given that environment, Niblock said that the retailer will "prudently manage expenses" and that he's confident consumers' focus on home repair and maintenance will continue to spur its business.

Sales at Lowe's stores open at least a year - a key retail measure known as same-store sales - rose 3.3 percent in the second quarter and increased 4.4 percent in the first half of 2006.

However, the company expects same-store sales to be essentially flat to up a slower 2 percent in the third quarter and up between 2 to 3 percent for the full year.

In a note Monday, Deutsche Bank analyst Michael Baker said that while 3.3 percent sales growth in the second quarter was "solid," the initial guidance of flat to 2 percent sales increase in the third quarter "is evidence of a weaker macro environment, even if it is on more difficult comparisons.

"With this as the backdrop, we believe a more modest outlook from Lowe's is prudent," Baker wrote in the note.

In response to an analyst's question about its tempered outlook, Niblock maintained that any cautiousness on the part of Lowe's management was driven by the current macroeconomic headwinds and not attributable to weakness in its business fundamentals.

"The consumer is challenged more in some markets than in others. Fuel prices are going up and we're anticipating a soft landing in housing," Niblock said.

Regardless, he added that continued improvements in income and job levels combined with still relatively low fixed mortgage rates would help to buoy spending in the long term.

"I am confident the longer-term drivers of our industry, including the ongoing maintenance of the 124 million existing homes in the U.S., combined with our customer-focused culture, will ensure our continued success," Niblock remarked.

Going forward, Lowe's cautioned that its fourth quarter and fiscal 2006 comparisons will be negatively affected by a calendar shift that results in a 52-week versus a 53-week period last year.

Lowe's expects to log a profit of between 45 to 48 cents a share in the third quarter and between $2.00 to $2.07 a share for the full year.

Analysts, on average, expect the company to post a profit of 46 cents a share for the third quarter and $2.05 a share for the full year.

-- Donald Trott personally owns shares of Lowe's. His firm does not have an investment banking relationship with the company.

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