MOORESVILLE, N.C.--(BUSINESS WIRE)--Lowe’s Companies, Inc. (NYSE: LOW), the world’s second largest home improvement retailer, today reported net earnings of $225 million for the quarter ended October 28, 2011, a 44.3 percent decline from the same period a year ago. Diluted earnings per share decreased 37.9 percent to $0.18 from $0.29 in the third quarter of 2010. For the nine months ended October 28, 2011, net earnings decreased 12.1 percent from the same period a year ago to $1.52 billion while diluted earnings per share decreased 3.3 percent to $1.17.
Included in the above reported results are charges related to store closings and discontinued projects which, in the aggregate, reduced pre-tax earnings for the quarter by $336 million and diluted earnings per share by $0.17.
Sales for the quarter increased 2.3 percent to $11.9 billion, up from $11.6 billion in the third quarter of 2010. For the nine months ended October 28, 2011, sales were $38.6 billion, an increase of 0.6 percent from the same period a year ago. Comparable store sales for the third quarter increased 0.7 percent and for the first nine months of 2011 decreased 1.0 percent.
"Our performance is not at the level we expect relative to the market," commented Robert A. Niblock, Lowe’s chairman, president and CEO. "We are making the changes necessary to right size the organization, improve speed to market and enhance the shopping experience. We are keenly focused on improving our core business while also developing new capabilities and services for the future. I am confident we are moving forward on a clear path that is not dependent on an unlikely near-term economic recovery.
“I would like to thank our hard-working employees for their ongoing dedication and customer focus during a time of significant change,” Niblock added.
During the quarter, Lowe’s opened eight stores. As of October 28, 2011, Lowe’s operated 1,744 stores in the United States, Canada and Mexico representing 196.5 million square feet of retail selling space, a 0.5 percent increase over last year.
A conference call to discuss third quarter 2011 operating results is scheduled for today (Monday, November 14) at 9:00 am ET. The conference call will be available through a webcast and can be accessed by visiting Lowe’s website at www.Lowes.com/investor and clicking on Lowe’s Third Quarter 2011 Earnings Conference Call Webcast. A replay of the call will be archived on Lowes.com until February 26, 2012.
Lowe’s Business Outlook
Fourth Quarter 2011 – a 14-week Quarter (comparisons to fourth quarter 2010 – a 13-week quarter)
- Total sales are expected to increase approximately 8 percent, including the 14th week
- The 14th week is expected to increase total sales by approximately 7 percent
- The company expects comparable store sales of flat to 1 percent
- Earnings before interest and taxes as a percentage of sales (operating margin) are expected to decrease approximately 50 basis points, which includes approximately 10 basis points impact from additional expenses associated with previously announced store closings
- Depreciation expense is expected to be approximately $370 million
- Diluted earnings per share of $0.20 to $0.23 are expected
- Lowe’s fourth quarter ends on February 3, 2012 with operating results to be publicly released on Monday, February 27, 2012
Fiscal Year 2011 – a 53-week Year (comparisons to fiscal year 2010 – a 52-week year)
- Total sales are expected to increase 2 to 3 percent, including the 53rd week
- The 53rd week is expected to increase total sales by approximately 1.5 percent
- The company expects comparable store sales to decline approximately 1 percent
- The company expects to open approximately 25 stores in 2011
- Earnings before interest and taxes as a percentage of sales (operating margin) are expected to decrease 80 to 90 basis points, which includes approximately 80 basis points impact from charges associated with store closings and discontinued projects
- Depreciation expense is expected to be approximately $1.5 billion
- Diluted earnings per share of $1.37 to $1.40 are expected for the fiscal year ending February 3, 2012, which includes approximately $0.20 per share impact from charges associated with store closings and discontinued projects
Disclosure Regarding Forward-Looking Statements
This news release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Statements of the company's expectations for sales growth, comparable store sales, earnings and performance, capital expenditures, store openings, the housing market, the home improvement industry, demand for services, share repurchases and any statement of an assumption underlying any of the foregoing, constitute "forward-looking statements" under the Act. Although the company believes that the expectations, opinions, projections, and comments reflected in its forward-looking statements are reasonable, it can give no assurance that such statements will prove to be correct. A wide variety of potential risks, uncertainties, and other factors could materially affect our ability to achieve the results expressed or implied by our forward-looking statements including, but not limited to, changes in general economic conditions, such as continued high rates of unemployment, interest rate and currency fluctuations, higher fuel and other energy costs, slower growth in personal income, changes in consumer spending, changes in the rate of housing turnover, the availability and increasing regulation of consumer credit and of mortgage financing, inflation or deflation of commodity prices and other factors which can negatively affect our customers, as well as our ability to: (i) respond to adverse trends in the housing industry, such as the psychological effects of falling home prices, and in the level of repairs, remodeling, and additions to existing homes, as well as a general reduction in commercial building activity; (ii) secure, develop, and otherwise implement new technologies and processes designed to enhance our efficiency and competitiveness; (iii) attract, train, and retain highly-qualified associates; (iv) locate, secure, and successfully develop new sites for store development particularly in major metropolitan markets; (v) respond to fluctuations in the prices and availability of services, supplies, and products; (vi) respond to the growth and impact of competition; (vii) address changes in existing or new laws or regulations that affect consumer credit, employment/labor, trade, product safety, transportation/logistics, energy costs, health care, tax or environmental issues; and (viii) respond to unanticipated weather conditions that could adversely affect sales. In addition, we could experience additional impairment losses if the actual results of our operating stores are not consistent with the assumptions and judgments we have made in estimating future cash flows and determining asset fair values. For more information about these and other risks and uncertainties that we are exposed to, you should read the "Risk Factors" and "Critical Accounting Policies and Estimates" included in our Annual Report on Form 10-K to the United States Securities and Exchange Commission (the “SEC”) and the description of material changes therein or updated version thereof, if any, included in our Quarterly Reports on Form 10-Q.
The forward-looking statements contained in this news release are based upon data available as of the date of this release or other specified date and speak only as of such date. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf about any of the matters covered in this release are qualified by these cautionary statements and in the “Risk Factors” included in our Annual Report on Form 10-K to the SEC and the description of material changes, if any, therein included in our Quarterly Reports on Form 10-Q. We expressly disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, change in circumstances, future events, or otherwise.
With fiscal year 2010 sales of $48.8 billion, Lowe's Companies, Inc. is a FORTUNE® 50 company that serves approximately 15 million customers a week at more than 1,725 home improvement stores in the United States, Canada and Mexico. Founded in 1946 and based in Mooresville, N.C., Lowe's is the second-largest home improvement retailer in the world. For more information, visit Lowes.com.
| Lowe's Companies, Inc. | ||||||||||||||||||||||||
| Consolidated Statements of Current and Retained Earnings (Unaudited) | ||||||||||||||||||||||||
| In Millions, Except Per Share Data | ||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| October 28, 2011 | October 29, 2010 | October 28, 2011 | October 29, 2010 | |||||||||||||||||||||
| Current Earnings | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||
| Net sales | $ | 11,852 | 100.00 | $ | 11,587 | 100.00 | $ | 38,579 | 100.00 | $ | 38,335 | 100.00 | ||||||||||||
| Cost of sales | 7,815 | 65.94 | 7,526 | 64.95 | 25,208 | 65.34 | 24,909 | 64.98 | ||||||||||||||||
| Gross margin | 4,037 | 34.06 | 4,061 | 35.05 | 13,371 | 34.66 | 13,426 | 35.02 | ||||||||||||||||
| Expenses: | ||||||||||||||||||||||||
| Selling, general and administrative | 3,233 | 27.27 | 2,931 | 25.30 | 9,583 | 24.84 | 9,214 | 24.03 | ||||||||||||||||
| Depreciation | 361 | 3.05 | 399 | 3.44 | 1,098 | 2.84 | 1,194 | 3.12 | ||||||||||||||||
| Interest - net | 91 | 0.77 | 80 | 0.69 | 269 | 0.70 | 246 | 0.64 | ||||||||||||||||
| Total expenses | 3,685 | 31.09 | 3,410 | 29.43 | 10,950 | 28.38 | 10,654 | 27.79 | ||||||||||||||||
| Pre-tax earnings | 352 | 2.97 | 651 | 5.62 | 2,421 | 6.28 | 2,772 | 7.23 | ||||||||||||||||
| Income tax provision | 127 | 1.07 | 247 | 2.13 | 904 | 2.35 | 1,047 | 2.73 | ||||||||||||||||
| Net earnings | $ | 225 | 1.90 | $ | 404 | 3.49 | $ | 1,517 | 3.93 | $ | 1,725 | 4.50 | ||||||||||||
| Weighted average common shares outstanding - basic | 1,250 | 1,390 | 1,283 | 1,415 | ||||||||||||||||||||
| Basic earnings per common share (1) | $ | 0.18 | $ | 0.29 | $ | 1.17 | $ | 1.21 | ||||||||||||||||
| Weighted average common shares outstanding - diluted | 1,252 | 1,392 | 1,286 | 1,417 | ||||||||||||||||||||
| Diluted earnings per common share (1) | $ | 0.18 | $ | 0.29 | $ | 1.17 | $ | 1.21 | ||||||||||||||||
| Cash dividends per share | $ | 0.14 | $ | 0.11 | $ | 0.39 | $ | 0.31 | ||||||||||||||||
| Retained Earnings | ||||||||||||||||||||||||
| Balance at beginning of period | $ | 16,060 | $ | 18,454 | $ | 17,371 | $ | 18,307 | ||||||||||||||||
| Net earnings | 225 | 404 | 1,517 | 1,725 | ||||||||||||||||||||
| Cash dividends | (176) | (154) | (498) | (440) | ||||||||||||||||||||
| Share repurchases | - | (560) | (2,281) | (1,448) | ||||||||||||||||||||
| Balance at end of period | $ | 16,109 | $ | 18,144 | $ | 16,109 | $ | 18,144 | ||||||||||||||||
| (1) Under the two-class method, earnings per share is calculated using net earnings allocable to common shares, which is derived by reducing net earnings by the earnings allocable to participating securities. Net earnings allocable to common shares used in the basic and diluted earnings per share calculation were $223 million for the three months ended October 28, 2011 and $400 million for the three months ended October 29, 2010. Net earnings allocable to common shares used in the basic and diluted earnings per share calculation were $1,505 million for the nine months ended October 28, 2011 and $1,710 million for the nine months ended October 29, 2010. | ||||||||||||||||||||||||
| Lowe's Companies, Inc. | |||||||||||
| Consolidated Balance Sheets | |||||||||||
| In Millions, Except Par Value Data | |||||||||||
| (Unaudited) | (Unaudited) | ||||||||||
| October 28, 2011 | October 29, 2010 | January 28, 2011 | |||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 675 | $ | 1,078 | $ | 652 | |||||
| Short-term investments | 294 | 659 | 471 | ||||||||
| Merchandise inventory - net | 8,990 | 8,543 | 8,321 | ||||||||
| Deferred income taxes - net | 237 | 202 | 193 | ||||||||
| Other current assets | 227 | 219 | 330 | ||||||||
| Total current assets | 10,423 | 10,701 | 9,967 | ||||||||
| Property, less accumulated depreciation | 21,888 | 22,180 | 22,089 | ||||||||
| Long-term investments | 705 | 865 | 1,008 | ||||||||
| Other assets | 850 | 595 | 635 | ||||||||
| Total assets | $ | 33,866 | $ | 34,341 | $ | 33,699 | |||||
| Liabilities and Shareholders' Equity | |||||||||||
| Current liabilities: | |||||||||||
| Current maturities of long-term debt | $ | 590 | $ | 36 | $ | 36 | |||||
| Accounts payable | 5,242 | 4,959 | 4,351 | ||||||||
| Accrued compensation and employee benefits | 622 | 678 | 667 | ||||||||
| Deferred revenue | 789 | 802 | 707 | ||||||||
| Other current liabilities | 1,913 | 1,533 | 1,358 | ||||||||
| Total current liabilities | 9,156 | 8,008 | 7,119 | ||||||||
| Long-term debt, excluding current maturities | 6,025 | 5,539 | 6,537 | ||||||||
| Deferred income taxes - net | 322 | 456 | 467 | ||||||||
| Deferred revenue - extended protection plans | 687 | 621 | 631 | ||||||||
| Other liabilities | 867 | 825 | 833 | ||||||||
| Total liabilities | 17,057 | 15,449 | 15,587 | ||||||||
| Shareholders' equity: | |||||||||||
| Preferred stock - $5 par value, none issued | - | - | - | ||||||||
| Common stock - $.50 par value; | |||||||||||
| Shares issued and outstanding | |||||||||||
| October 28, 2011 | 1,260 | ||||||||||
| October 29, 2010 | 1,394 | ||||||||||
| January 28, 2011 | 1,354 | 630 | 697 | 677 | |||||||
| Capital in excess of par value | 24 | 6 | 11 | ||||||||
| Retained earnings | 16,109 | 18,144 | 17,371 | ||||||||
| Accumulated other comprehensive income | 46 | 45 | 53 | ||||||||
| Total shareholders' equity | 16,809 | 18,892 | 18,112 | ||||||||
| Total liabilities and shareholders' equity | $ | 33,866 | $ | 34,341 | $ | 33,699 | |||||
| Lowe's Companies, Inc. | |||||||||
| Consolidated Statements of Cash Flows (Unaudited) | |||||||||
| In Millions | |||||||||
| Nine Months Ended | |||||||||
| October 28, 2011 | October 29, 2010 | ||||||||
| Cash flows from operating activities: | |||||||||
| Net earnings | $ | 1,517 | $ | 1,725 | |||||
|
Adjustments to reconcile net earnings to net cash provided by operating activities: |
|||||||||
| Depreciation and amortization | 1,171 | 1,272 | |||||||
| Deferred income taxes | (200 | ) | (147 | ) | |||||
| Loss on property and other assets - net | 407 | 72 | |||||||
| Share-based payment expense | 81 | 84 | |||||||
| Net changes in operating assets and liabilities: | |||||||||
| Merchandise inventory - net | (669 | ) | (288 | ) | |||||
| Other operating assets | 126 | (25 | ) | ||||||
| Accounts payable | 892 | 668 | |||||||
| Other operating liabilities | 567 | 472 | |||||||
| Net cash provided by operating activities | 3,892 | 3,833 | |||||||
| Cash flows from investing activities: | |||||||||
| Purchases of investments | (1,200 | ) | (2,033 | ) | |||||
| Proceeds from sale/maturity of investments | 1,672 | 1,206 | |||||||
| Increase in other long-term assets | (217 | ) | (53 | ) | |||||
| Property acquired | (1,264 | ) | (1,012 | ) | |||||
| Proceeds from sale of property and other long-term assets | 26 | 24 | |||||||
| Net cash used in investing activities | (983 | ) | (1,868 | ) | |||||
| Cash flows from financing activities: | |||||||||
| Net proceeds from issuance of long-term debt | - | 991 | |||||||
| Repayment of long-term debt | (28 | ) | (542 | ) | |||||
|
Proceeds from issuance of common stock under
share-based payment plans |
55 | 63 | |||||||
| Cash dividend payments | (470 | ) | (418 | ) | |||||
| Repurchase of common stock | (2,434 | ) | (1,616 | ) | |||||
| Other - net | (9 | ) | 1 | ||||||
| Net cash used in financing activities | (2,886 | ) | (1,521 | ) | |||||
| Effect of exchange rate changes on cash | - | 2 | |||||||
| Net increase in cash and cash equivalents | 23 | 446 | |||||||
| Cash and cash equivalents, beginning of period | 652 | 632 | |||||||
| Cash and cash equivalents, end of period | $ | 675 | $ | 1,078 | |||||