Lowe's fiscal Q1 earnings rose 15.6% year-over-year to US$624M as sales increased 2.4% to US$13.4B, comparable sales rose 0.9%; company reaffirms full-year sales, operating profit outlook, citing improved May performance, strengthening execution

MOORESVILLE, North Carolina , May 21, 2014 (press release) – Lowe's Companies, Inc. (NYSE: LOW) today reported net earnings of $624 million for the quarter ended May 2, 2014, a 15.6 percent increase over the same period a year ago. Diluted earnings per share increased 24.5 percent to $0.61 from $0.49 in the first quarter of 2013.

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Included in the above reported results are charges related to long-lived asset impairments, which reduced pre-tax earnings for the first quarter by $23 million and diluted earnings per share by $0.01.  Also included in the above reported results is the impact of a lower tax rate in the first quarter.  The lower tax rate, primarily the result of a settlement of prior year tax matters, contributed $0.04 to diluted earnings per share.

Sales for the first quarter increased 2.4 percent to $13.4 billion from $13.1 billion in the first quarter of 2013, and comparable sales increased 0.9 percent. 

"We executed well during the quarter, despite an unexpectedly prolonged winter in many areas of the country," commented Robert A. Niblock, Lowe's chairman, president and CEO.  "While poor weather dampened traffic and negatively impacted performance of exterior categories, results for indoor categories were solid.  We effectively aligned inventory, staffing and marketing resources by climatic zone to best serve customers' needs.  I would like to thank our employees for their dedication to serving customers.

"Performance has improved in May which, together with our strengthening execution, gives us the confidence to reaffirm our sales and operating profit outlook for the year," Niblock added.

Delivering on the commitment to return excess cash to shareholders, the company repurchased $850 million of stock under its share repurchase program and paid $186 million in dividends in the first quarter. 

As of May 2, 2014, Lowe's operated 1,836 home improvement and hardware stores in the United States, Canada and Mexico representing 200.7 million square feet of retail selling space.

A conference call to discuss first quarter 2014 operating results is scheduled for today (Wednesday, May 21) 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 First Quarter 2014 Earnings Conference Call Webcast.  Supplemental slides will be available fifteen minutes prior to the start of the conference call. A replay of the call will be archived on Lowes.com/investor until August 19, 2014.

Lowe's Business Outlook

Fiscal Year 2014 (comparisons to fiscal year 2013; based on U.S. GAAP unless otherwise noted)

  • Total sales are expected to increase approximately 5 percent.
  • Comparable sales are expected to increase approximately 4 percent.
  • The company expects to open approximately 10 home improvement and 5 hardware stores.
  • Earnings before interest and taxes as a percentage of sales (operating margin) are expected to increase approximately 65 basis points.
  • The effective income tax rate is expected to be approximately 37.2%.
  • Diluted earnings per share of approximately $2.63 are expected for the fiscal year ending January 30, 2015.  

The company raised its diluted earnings per share outlook for the year as a result of the lower tax rate, primarily the result of a settlement of prior year tax matters, offset by charges related to long-lived asset impairments in the first quarter. 

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 sales, earnings and performance, shareholder value, capital expenditures, cash flows, the housing market, the home improvement industry, demand for services, share repurchases, the Company's strategic initiatives and any statement of an assumption underlying any of the foregoing, constitute "forward-looking statements" under the Act.   Although we believe that the expectations, opinions, projections, and comments reflected in these forward-looking statements are reasonable, we 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 either expressed or implied by our forward-looking statements including, but not limited to, changes in general economic conditions, such as the  rate 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 lower 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) manage our business effectively as we adapt our traditional operating model to meet the changing expectations of our customers; (v) maintain, improve, upgrade and protect our critical information systems; (vi) respond to fluctuations in the prices and availability of services, supplies, and products; (vii) respond to the growth and impact of competition; (viii) 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 (ix) 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 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.

Lowe's Companies, Inc. (NYSE: LOW) is a FORTUNE® 100 home improvement company serving approximately 15 million customers a week in the United States, Canada and Mexico.  With fiscal year 2013 sales of $53.4 billion, Lowe's has more than 1,830 home improvement and hardware stores and 260,000 employees.  Founded in 1946 and based in Mooresville, N.C., Lowe's supports the communities it serves through programs that focus on K-12 public education and community improvement projects. For more information, visit Lowes.com.

 

Lowe's Companies, Inc.

Consolidated Statements of Current and Retained Earnings (Unaudited)

In Millions, Except Per Share and Percentage Data

           
       

Three Months Ended

 
       

May 2, 2014

   

May 3, 2013

 

Current Earnings

     

 Amount 

Percent

   

 Amount 

Percent

 

Net sales

   

$

13,403

100.00

 

$

13,088

100.00

 
                     

Cost of sales

     

8,645

64.50

   

8,533

65.20

 
                     

Gross margin

     

4,758

35.50

   

4,555

34.80

 
                     

Expenses:

                   
                     

Selling, general and administrative

     

3,319

24.76

   

3,222

24.62

 
                     

Depreciation

     

373

2.78

   

352

2.69

 
                     

Interest - net

     

124

0.93

   

113

0.86

 
                     

Total expenses

     

3,816

28.47

   

3,687

28.17

 
                     

Pre-tax earnings 

     

942

7.03

   

868

6.63

 
                     

Income tax provision 

     

318

2.37

   

328

2.50

 
                     

Net earnings

   

$

624

4.66

 

$

540

4.13

 
                     
                     

Weighted average common shares outstanding - basic

     

1,015

     

1,088

   
                     

Basic earnings per common share (1)

   

$

0.61

   

$

0.49

   
                     

Weighted average common shares outstanding - diluted

     

1,017

     

1,090

   
                     

Diluted earnings per common share (1)

   

$

0.61

   

$

0.49

   
                     

Cash dividends per share

   

$

0.18

   

$

0.16

   
                     
                     

Retained Earnings

                   

Balance at beginning of period

   

$

11,355

   

$

13,224

   

Net earnings 

     

624

     

540

   

Cash dividends

     

(183)

     

(174)

   

Share repurchases

     

(811)

     

(972)

   

Balance at end of period

   

$

10,985

   

$

12,618

   
                     
                     

(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 $620 million for the three months ended May 2, 2014 and $537 million for the three months ended May 3, 2013. 

                     
                     

Lowe's Companies, Inc.

Consolidated Statements of Comprehensive Income (Unaudited)

In Millions, Except Percentage Data

                     
       

Three Months Ended 

 
       

May 2, 2014

   

May 3, 2013

 
       

 Amount 

Percent

   

 Amount 

Percent

 

Net earnings

   

$

624

4.66

 

$

540

4.13

 
                     

    Foreign currency translation adjustments - net of tax

     

8

0.06

   

-

-

 
                     

Other comprehensive income

     

8

0.06

   

-

-

 
                     

Comprehensive income

   

$

632

4.72

 

$

540

4.13

 

 

Lowe's Companies, Inc.

Consolidated Balance Sheets

In Millions, Except Par Value Data

                     
     

 (Unaudited) 

   

 (Unaudited) 

       
     

May 2, 2014

   

May 3, 2013

   

January 31, 2014

 

Assets

                   
                     

     Current assets:

                   

     Cash and cash equivalents

 

$

658

 

$

1,081

 

$

391

 

     Short-term investments 

   

110

   

118

   

185

 

     Merchandise inventory - net

   

10,515

   

10,274

   

9,127

 

     Deferred income taxes - net 

   

283

   

228

   

252

 

     Other current assets

   

386

   

313

   

341

 
                     

     Total current assets

   

11,952

   

12,014

   

10,296

 
                     

     Property, less accumulated depreciation  

   

20,617

   

21,257

   

20,834

 

     Long-term investments 

   

360

   

272

   

279

 

     Other assets

   

1,300

   

1,188

   

1,323

 
                     

     Total assets

 

$

34,229

 

$

34,731

 

$

32,732

 
                     

Liabilities and shareholders' equity

                   
                     

     Current liabilities:

                   

     Short-term borrowings

 

$

-

 

$

-

 

$

386

 

     Current maturities of long-term debt

   

47

   

47

   

49

 

     Accounts payable

   

7,051

   

7,041

   

5,008

 

     Accrued compensation and employee benefits 

 

501

   

467

   

785

 

     Deferred revenue

   

1,055

   

1,008

   

892

 

     Other current liabilities

   

2,160

   

1,876

   

1,756

 
                     

     Total current liabilities

   

10,814

   

10,439

   

8,876

 
                     

     Long-term debt, excluding current maturities 

 

10,080

   

9,026

   

10,086

 

     Deferred income taxes - net  

   

261

   

440

   

291

 

     Deferred revenue - extended protection plans

 

730

   

717

   

730

 

     Other liabilities 

   

862

   

857

   

896

 
                     

     Total liabilities

   

22,747

   

21,479

   

20,879

 
                     

     Shareholders' equity:

                   

     Preferred stock - $5 par value, none issued

   

-

   

-

   

-

 

     Common stock - $.50 par value; 

                   

Shares issued and outstanding

                   

May 2, 2014

1,012

                 

May 3, 2013

1,088

                 

January 31, 2014

1,030

 

506

   

544

   

515

 

     Capital in excess of par value

   

-

   

38

   

-

 

     Retained earnings

   

10,985

   

12,618

   

11,355

 

     Accumulated other comprehensive (loss)/income

 

(9)

   

52

   

(17)

 
                     

     Total shareholders' equity

 

11,482

   

13,252

   

11,853

 
                     

     Total liabilities and shareholders' equity

$

34,229

 

$

34,731

 

$

32,732

 
                     

 

Lowe's Companies, Inc.

Consolidated Statements of Cash Flows (Unaudited)

In Millions

         
   

Three Months Ended

   

May 2, 2014

 

May 3, 2013

Cash flows from operating activities:

       

Net earnings 

 

$                      624

 

$                        540

Adjustments to reconcile net earnings to net cash provided by

       

operating activities:

       

Depreciation and amortization

 

398

 

376

Deferred income taxes

 

(67)

 

(26)

Loss on property and other assets - net

 

24

 

5

Loss on equity method investments

 

17

 

15

Share-based payment expense

 

28

 

18

Changes in operating assets and liabilities:

       

Merchandise inventory - net

 

(1,384)

 

(1,674)

Other operating assets

 

44

 

(5)

Accounts payable 

 

2,041

 

2,381

Other operating liabilities

 

269

 

362

Net cash provided by operating activities

 

1,994

 

1,992

         

Cash flows from investing activities:

       

Purchases of investments

 

(163)

 

(84)

Proceeds from sale/maturity of investments

 

157

 

89

Capital expenditures

 

(194)

 

(196)

Contributions to equity method investments - net

 

(91)

 

(73)

Proceeds from sale of property and other long-term assets

 

16

 

6

Other - net

 

(5)

 

(5)

Net cash used in investing activities

 

(280)

 

(263)

         

Cash flows from financing activities:

       

Net decrease in short-term borrowings

 

(386)

 

-

Repayment of long-term debt

 

(12)

 

(11)

Proceeds from issuance of common stock under
   share-based payment plans

 

24

 

40

Cash dividend payments

 

(186)

 

(178)

Repurchase of common stock

 

(910)

 

(1,046)

Other - net

 

23

 

5

Net cash used in financing activities

 

(1,447)

 

(1,190)

         

Effect of exchange rate changes on cash

 

-

 

1

         

Net increase in cash and cash equivalents

 

267

 

540

Cash and cash equivalents, beginning of period

 

391

 

541

Cash and cash equivalents, end of period

 

$                     658

 

$                    1,081

         

 

 

SOURCE Lowe's Companies, Inc.

Shareholders'/Analysts' Inquiries: Tiffany Mason, 704-758-2033, tiffany.l.mason@lowes.com or Media Inquiries: Connie Bryant, 704-758-2403, connie.m.bryantbreedlove@lowes.com

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