Adds executive comments in paragraphs 11, 12, investor comment in paragraph 5

By Savyata Mishra

Feb 26 (Reuters) - Lowe's Cos LOW.N echoed rival Home Depot HD.N by predicting subdued annual sales and profits on Wednesday, indicating that the downturn in the home improvement sector may persist due to rising interest rates.

Shares of the Mooresville, North Carolina-based retailer briefly reversed course after company executives warned of a weaker start to the year, with demand in the crucial spring season pushed to the second quarter. Shares were last up about 3%.

The home improvement sector has witnessed a sharp slowdown over the last two years as high mortgage rates, rising home prices as well as refinancing costs stifled demand.

Lowe's forecast follows conservative projections from TJX Cos TJX.N, Walmart WMT.N and Home Depot in recent days, which analysts said is a signal to keep expectations intact, given how early in the year it is.

"Clearly, management teams are adjusting for the impacts of tariffs and taxes... but the more likely and larger impact is that interest rates remain higher for longer than expected due to the slowing of disinflation," said Brian Mulberry, client portfolio manager at Zacks Investment Management.

U.S. consumer confidence deteriorated at its sharpest pace in three-and-a-half years in February, data on Tuesday showed, with Americans becoming more worried about the potential economic impact of President Donald Trump's policies.

Since taking office in January, Trump has promised tax cuts as well as broad tariffs on imports and is cracking down on illegal immigration, which could worsen the shortage of skilled labor in the U.S.

The retailer cited near-term pressure on do-it-yourself interior projects such as flooring as well as kitchen and bath remodeling, which make up about 70% of its annual revenue.

Despite diversifying their supply chains, home improvement retailers are exposed to tariffs on lumber and metal product imports from Canada. Imports of hardware, tools and other durable products such as appliances and home-related goods from China also affect them.

Lowe's has said it sources 40% of its goods, including its own private brands, internationally. Home Depot, which sources about half its goods from outside North America, said a day earlier that it was well placed to manage any impact from tariffs.

The forecast did not explicitly include the impact from tariffs and they were also watching for other potential policy changes, Lowe's executives said in a post-earnings call.

"We are prepared for everything and we're prepared for anything," Lowe's CEO Marvin Ellison said.

The company expects full-year 2025 comparable sales to be flat to up 1% compared to analysts' estimate of a 1.13% rise, according to data compiled by LSEG.

It forecast earnings per share in the range of $12.15 to $12.40, compared to analysts' estimate of $12.49 per share.

Lowe's reported a 0.2% rise in same-store sales for the quarter ended January 31, compared to analysts' average estimate of a 1.9% decline. The surprise rise was driven by demand for water cans, generators and cleaning supplies after Hurricanes Helene and Milton last year.

It earned $1.93 per share on an adjusted basis, above an estimate of $1.84 in profit.

(Reporting by Savyata Mishra in Bengaluru; Editing by Pooja Desai)

((Savyata.Mishra@thomsonreuters.com;))