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Lowe's Reports Second Quarter Sales and Earnings Results

MOORESVILLE, N.C., Aug. 18 /PRNewswire-FirstCall/ -- Lowe's Companies, Inc. (NYSE: LOW), the world's second largest home improvement retailer, today reported net earnings of $938 million for the quarter ended August 1, 2008, a 7.9 percent decline from the same period a year ago. Diluted earnings per share declined 4.5 percent to $0.64 from $0.67 in the second quarter of 2007. For the six months ended August 1, 2008, net earnings declined 12.1 percent to $1.54 billion while diluted earnings per share declined 8.7 percent to $1.05.

(Logo: http://www.newscom.com/cgi-bin/prnh/20031205/LOWLOGO )

Sales for the quarter increased 2.4 percent to $14.5 billion, up from $14.2 billion in the second quarter of 2007. For the six months ended August 1, 2008, sales increased 0.7 percent to $26.5 billion. Comparable store sales for the second quarter declined 5.3 percent and declined 6.7 percent in the first half of 2008.

"Our sales results for the quarter, while better than our forecast, reflect the realities of the continuing macro economic pressures on our industry," commented Robert A. Niblock, Lowe's chairman and CEO. "We saw relative strength in our seasonal sales as homeowners welcomed back spring and restored lawns and outdoor landscaping following the effects of last year's drought in much of the country. In addition, we believe our second quarter sales benefited from the economic impact of the fiscal stimulus tax rebates. Unfortunately, weakness in bigger ticket projects continues, particularly in markets most impacted by the housing downturn.

"Through disciplined expense controls we delivered solid earnings for the quarter," Niblock added. "We are encouraged by our results and our continued market share gains, but the macro economic factors pressuring consumers and the ongoing challenges and uncertainty of the financial markets suggest a cautious sales forecast for the balance of fiscal 2008 is prudent. We remain focused on positioning the company for long-term success while managing through the near-term challenges of the current environment."

During the quarter, Lowe's opened 23 new stores. As of August 1, 2008, Lowe's operated 1,577 stores in the United States and Canada representing 178.6 million square feet of retail selling space, a 10.5 percent increase over last year.

A conference call to discuss second quarter 2008 operating results is scheduled for today (Monday, August 18) at 9:00 am EDT. Please dial 888-817-4020 (international callers dial 706-679-8762) to participate. A webcast of the call will take place simultaneously and can be accessed by visiting Lowe's website at www.Lowes.com/investor and clicking on Lowe's Second Quarter 2008 Earnings Conference Call Webcast. A replay of the call will be archived on www.Lowes.com until November 16, 2008.

    Lowe's Business Outlook

    Third Quarter 2008 (comparisons to third quarter 2007)
    -- The company expects to open approximately 38 new stores reflecting
       square footage growth of approximately 10 percent
    -- Total sales are expected to increase 1 to 2 percent
    -- The company expects comparable store sales to decline 5 to 7 percent
    -- Earnings before interest and taxes as a percentage of sales (operating
       margin) is expected to decline approximately 290 basis points driven by
       the cycling of last year's $112 million reduction in self-insurance
       reserves for workers compensation and general liability claims in
       addition to payroll, fixed cost and depreciation deleverage
    -- Store opening costs are expected to be approximately $34 million
    -- Diluted earnings per share of $0.27 to $0.31 are expected
    -- Lowe's third quarter ends on October 31, 2008 with operating results to
       be publicly released on Monday, November 17, 2008


    Fiscal Year 2008 (comparisons to fiscal year 2007)
    -- The company expects to open approximately 120 stores in 2008 reflecting
       total square footage growth of 7 to 8 percent
    -- Total sales are expected to increase approximately 1 percent
    -- The company expects comparable store sales to decline 6 to 7 percent
    -- Earnings before interest and taxes as a percentage of sales (operating
       margin) is expected to decline approximately 180 basis points
    -- Store opening costs are expected to be approximately $97 million
    -- Diluted earnings per share of $1.48 to $1.56 are expected for the
       fiscal year ending January 30, 2009


    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, 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 interest rate and currency fluctuations, higher fuel and other energy costs, slower growth in personal income and consumer spending, declining housing turnover, the availability 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 and the level of repairs, remodeling, and additions to existing homes, as well as 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 legal and regulatory developments; and (viii) respond to unanticipated weather conditions that could adversely affect sales. For more information about these and other risks and uncertainties that we are exposed to, you should read the "Risk Factors" included in our Annual Report on Form 10-K to the United States Securities and Exchange Commission and the description of material changes, if any, in those "Risk Factors" included in our Quarterly Reports on Form 10-Q.

The forward-looking statements contained in this news release speak only as of the date of this release and the company does not assume any obligation to update any such statements.

With fiscal year 2007 sales of $48.3 billion, Lowe's Companies, Inc. is a FORTUNE(R) 50 company that serves approximately 14 million customers a week at more than 1,575 home improvement stores in the United States and Canada. 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 www.Lowes.com .



    Lowe's Companies, Inc.
    Consolidated Statements of Current and Retained Earnings (Unaudited)
    In Millions, Except Per Share Data

                                                 Three Months Ended
                                          August 1, 2008   August 3, 2007
    Current Earnings                      Amount  Percent  Amount  Percent

    Net sales                             $14,509  100.00  $14,167  100.00

    Cost of sales                           9,527   65.66    9,284   65.53

    Gross margin                            4,982   34.34    4,883   34.47

    Expenses:

    Selling, general and administrative     3,014   20.78    2,839   20.04

    Store opening costs                        21    0.14       26    0.18

    Depreciation                              381    2.63      332    2.35

    Interest - net                             69    0.47       50    0.35

    Total expenses                          3,485   24.02    3,247   22.92

    Pre-tax earnings                        1,497   10.32    1,636   11.55

    Income tax provision                      559    3.86      617    4.36

    Net earnings                             $938    6.46   $1,019    7.19

    Weighted average shares outstanding -
     basic                                  1,455            1,490

    Basic earnings per share                $0.64            $0.68

    Weighted average shares outstanding -
     diluted                                1,473            1,518

    Diluted earnings per share              $0.64            $0.67

    Cash dividends per share               $0.085           $0.080


    Retained Earnings

    Balance at beginning of period        $15,835          $14,968
    Cumulative effect adjustment(1)           -                -
    Net earnings                              938            1,019
    Cash dividends                           (125)            (119)
    Share repurchases                         -               (658)
    Balance at end of period              $16,648          $15,210



                                                  Six Months Ended
                                          August 1, 2008   August 3, 2007
    Current Earnings                      Amount  Percent  Amount  Percent

    Net sales                             $26,519  100.00  $26,338  100.00

    Cost of sales                          17,371   65.50   17,195   65.29

    Gross margin                            9,148   34.50    9,143   34.71

    Expenses:

    Selling, general and administrative     5,738   21.65    5,524   20.97

    Store opening costs                        38    0.14       38    0.14

    Depreciation                              757    2.85      656    2.49

    Interest - net                            145    0.55       97    0.37

    Total expenses                          6,678   25.19    6,315   23.97

    Pre-tax earnings                        2,470    9.31    2,828   10.74

    Income tax provision                      925    3.49    1,070    4.07

    Net earnings                           $1,545    5.82   $1,758    6.67


    Weighted average shares outstanding -
     basic                                  1,454            1,500

    Basic earnings per share                $1.06            $1.17

    Weighted average shares outstanding -
     diluted                                1,477            1,530

    Diluted earnings per share              $1.05            $1.15

    Cash dividends per share               $0.165           $0.130

    Retained Earnings

    Balance at beginning of period        $15,345          $14,860
    Cumulative effect adjustment(1)           -                 (8)
    Net earnings                            1,545            1,758
    Cash dividends                           (242)            (194)
    Share repurchases                         -             (1,206)
    Balance at end of period              $16,648          $15,210


    (1) The Company adopted FIN 48, Accounting for Uncertainty in Income
        Taxes, effective February 3, 2007.



    Lowe's Companies, Inc.
    Consolidated Balance Sheets
    In Millions, Except Par Value Data
                                           (Unaudited) (Unaudited)
                                             August 1,  August 3,  February 1,
                                               2008        2007        2008
    Assets

      Current assets:
        Cash and cash equivalents               $477        $337        $281
        Short-term investments (includes $39
         million of trading securities
         at August 1, 2008)                      377         325         249
        Merchandise inventory - net            7,939       7,799       7,611
        Deferred income taxes - net              275         209         247
        Other current assets                     236         181         298

        Total current assets                   9,304       8,851       8,686

        Property, less accumulated
         depreciation                         22,066      19,825      21,361
        Long-term investments                    798         627         509
        Other assets                             381         341         313

        Total assets                         $32,549     $29,644     $30,869


    Liabilities and shareholders' equity


      Current liabilities:
        Short-term borrowings                   $189        $555      $1,064
        Current maturities of long-term debt      31          85          40
        Accounts payable                       4,786       4,167       3,713
        Accrued compensation and employee
         benefits                                492         414         467
        Self-insurance liabilities               736         726         671
        Deferred revenue                         816         819         717
        Other current liabilities              1,478       1,274       1,079

        Total current liabilities              8,528       8,040       7,751

        Long-term debt, excluding current
         maturities                            5,050       4,301       5,576
        Deferred income taxes - net              641         628         670
        Other liabilities                        824         706         774

        Total liabilities                     15,043      13,675      14,771

      Shareholders' equity:
        Preferred stock - $5 par value,
         none issued                               -           -           -
        Common stock - $.50 par value;
          Shares issued and outstanding
          August 1, 2008              1,464
          August 3, 2007              1,485
          February 1, 2008            1,458      732         742         729
        Capital in excess of par value           118          11          16
        Retained earnings                     16,648      15,210      15,345
        Accumulated other comprehensive
         income                                    8           6           8

        Total shareholders' equity            17,506      15,969      16,098

        Total liabilities and shareholders'
         equity                              $32,549     $29,644     $30,869



    Lowe's Companies, Inc.
    Consolidated Statements of Cash Flows (Unaudited)
    In Millions
                                                   Six Months Ended
                                           August 1, 2008    August 3, 2007
    Cash flows from operating activities:
      Net earnings                              $1,545           $1,758
        Adjustments to reconcile net earnings
         to net cash provided by
         operating activities:
           Depreciation and amortization           816               701
           Deferred income taxes                   (57)                3
           Loss on property and other assets        30                17
           Loss on redemption of long-term debt      8                 -
           Share-based payment expense              54                45
           Changes in operating assets and
            liabilities:
              Merchandise inventory - net         (328)             (655)
              Other operating assets                52                56
              Accounts payable                   1,073               643
              Other operating liabilities          675               510
      Net cash provided by operating activities  3,868             3,078

    Cash flows from investing activities:
      Purchases of short-term investments         (467)             (368)
      Proceeds from sale/maturity of short-
       term investments                            245               524
      Purchases of long-term investments          (723)           (1,102)
      Proceeds from sale/maturity of long-
       term investments                            520               589
      Increase in other long-term assets           (37)              (23)
      Property acquired                         (1,620)           (1,698)
      Proceeds from the sale of property
       and other long-term assets                   20                26
      Net cash used in investing activities     (2,062)           (2,052)

    Cash flows from financing activities:
      Net (decrease) increase in short-term
       borrowings                                 (873)              532
      Proceeds from issuance of long-term debt      11                 4
      Repayment of long-term debt                 (555)              (31)
      Proceeds from issuance of common
       stock under employee stock purchase plan     39                40
      Proceeds from issuance of common
       stock from stock options exercised           11                43
      Cash dividend payments                      (242)             (194)
      Repurchase of common stock                    (2)           (1,450)
      Excess tax benefits of share-based payments    1                 3
      Net cash used in financing activities     (1,610)           (1,053)

    Net increase (decrease) in cash and
     cash equivalents                              196               (27)
    Cash and cash equivalents,
     beginning of period                           281               364
    Cash and cash equivalents, end of period      $477              $337

SOURCE  Lowe's Companies, Inc.
    -0-                             08/18/2008
    /CONTACT:  Shareholders'-Analysts' Inquiries: Robbin Moore-Randolph,
+1-704-758-3579, Media: Chris Ahearn, +1-704-758-2304, both of Lowe's
Companies, Inc./
    /Photo:  NewsCom:  http://www.newscom.com/cgi-bin/prnh/20031205/LOWLOGO
              AP Archive:  http://photoarchive.ap.org
              PRN Photo Desk, photodesk@prnewswire.com/
    /Web site:  http://www.lowes.com
                http://www.Lowes.com/investor /
    (LOW)

CO:  Lowe's Companies, Inc.
ST:  North Carolina
IN:  REA HOU
SU:  ERN ERP CCA

EG-JT
-- CLM013 --
0361 08/18/2008 07:00 EDT http://www.prnewswire.com