MOORESVILLE, North Carolina
,
August 17, 2022
(press release)
–
— Consolidated Comparable Sales Decreased 0.3%; U.S. Comparable Sales Increased 0.2% — Lowe's Companies, Inc. (NYSE: LOW) today reported net earnings of $3.0 billion, in line with prior-year results, and diluted earnings per share (EPS) of $4.67 for the quarter ended July 29, 2022, compared to diluted EPS of $4.25 in the second quarter of 2021. Total sales for the second quarter were $27.5 billion compared to $27.6 billion in the second quarter of 2021, and comparable sales decreased 0.3%. Comparable sales for the U.S. home improvement business increased 0.2% for the second quarter. DIY sales were impacted by the shortened spring and lower demand in certain discretionary categories, which was partially offset by a 13% increase in Pro customer sales. "I am pleased that our team drove operating margin improvement and effectively managed inventory despite lower-than-expected sales – a clear reflection of our relentless focus on operating discipline and productivity," commented Marvin R. Ellison, Lowe's chairman, president and CEO. "Our results in the first half were disproportionately impacted by our 75% DIY customer mix, which was partially offset by our double-digit Pro growth for the ninth consecutive quarter. Despite continued macro uncertainty, we remain confident in the long-term strength of the home improvement market and our ability to take share. To help our hourly front-line associates during this period of high inflation, we are awarding an incremental bonus of $55 million. I'd like to thank our associates for their continued hard work and dedication." Capital Allocation As of July 29, 2022, Lowe's operated 1,969 home improvement and hardware stores in the U.S. and Canada representing 208 million square feet of retail selling space, and it serviced approximately 212 dealer-owned stores. Lowe's Business Outlook The company now expects full year 2022 total and comparable sales toward the bottom end of its outlook range, and expects operating income and diluted EPS toward the top end of its outlook range. This reflects first half sales performance and expectations for continued Pro strength and improving DIY trends. It also reflects the company's disciplined expense management and benefits of its productivity initiatives. Full Year 2022 Outlook -- a 53-week Year (comparisons to full year 2021 -- a 52-week year) Total sales of $97 billion to $99 billion, including the 53rd week 53rd week expected to increase total sales by approximately $1.0 billion to $1.5 billion Comparable sales expected to range from a decline of -1% to an increase of 1% Gross margin rate up slightly compared to prior year Depreciation and amortization of approximately $1.75 billion Operating income as a percentage of sales (operating margin) of 12.8% to 13.0% Interest expense of $1.1 to $1.2 billion (previously $1.0 to $1.1 billion) Effective income tax rate of approximately 25% Diluted earnings per share of $13.10 to $13.60 Total share repurchases of approximately $12 billion ROIC1 of over 36% Capital expenditures of approximately $2 billion A conference call to discuss second quarter 2022 operating results is scheduled for today, Wednesday, August 17, at 9 a.m. ET. The conference call will be available by webcast and can be accessed by visiting Lowe's website at ir.lowes.com and clicking on Lowe's Second Quarter 2022 Earnings Conference Call Webcast. Supplemental slides will be available approximately 15 minutes prior to the start of the conference call. A replay of the call will be archived at ir.lowes.com. Lowe's Companies, Inc. Lowe's Companies, Inc. (NYSE: LOW) is a FORTUNE® 50 home improvement company serving approximately 19 million customer transactions a week in the United States and Canada. With fiscal year 2021 sales of over $96 billion, Lowe's and its related businesses operate or service nearly 2,200 home improvement and hardware stores and employ over 300,000 associates. Based in Mooresville, N.C., Lowe's supports the communities it serves through programs focused on creating safe, affordable housing and helping to develop the next generation of skilled trade experts. For more information, visit Lowes.com. Disclosure Regarding Forward-Looking Statements This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements including words such as "believe", "expect", "anticipate", "plan", "desire", "project", "estimate", "intend", "will", "should", "could", "would", "may", "strategy", "potential", "opportunity", "outlook", "scenario", "guidance", and similar expressions are forward-looking statements. Forward-looking statements involve, among other things, expectations, projections, and assumptions about future financial and operating results, objectives, business outlook, priorities, sales growth, shareholder value, capital expenditures, cash flows, the housing market, the home improvement industry, demand for products and services, share repurchases, Lowe's strategic initiatives, including those relating to acquisitions and dispositions and the impact of such transactions on our strategic and operational plans and financial results. Such statements involve risks and uncertainties and we can give no assurance that they will prove to be correct. Actual results may differ materially from those expressed or implied in such statements. A wide variety of potential risks, uncertainties, and other factors could materially affect our ability to achieve the results either expressed or implied by these forward-looking statements including, but not limited to, changes in general economic conditions, such as volatility and/or lack of liquidity from time to time in U.S. and world financial markets and the consequent reduced availability and/or higher cost of borrowing to Lowe's and its customers, slower rates of growth in real disposable personal income that could affect the rate of growth in consumer spending, inflation and its impacts on discretionary spending and on our costs, shortages, and other disruptions in the labor supply, interest rate and currency fluctuations, home price appreciation or decreasing housing turnover, the availability of consumer credit and of mortgage financing, trade policy changes or additional tariffs, outbreaks of pandemics, fluctuations in fuel and energy costs, inflation or deflation of commodity prices, natural disasters, armed conflicts, acts of both domestic and international terrorism, and other factors that can negatively affect our customers. Investors and others should carefully consider the foregoing factors and other uncertainties, risks and potential events including, but not limited to, those described in "Item 1A - Risk Factors" in our most recent Annual Report on Form 10-K and as may be updated from time to time in Item 1A in our quarterly reports on Form 10-Q or other subsequent filings with the SEC. All such forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update these statements other than as required by law. LOW-IR Contacts: Shareholder/Analyst Inquiries: Media Inquiries: Kate Pearlman Steve Salazar 704-775-3856 704-881-4272 1 Return on Invested Capital (ROIC) is calculated using a non-GAAP financial measure. The Company does not provide a reconciliation for non-GAAP estimates on a forward-looking basis where it is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. Lowe's Companies, Inc. Three Months Ended Six Months Ended July 29, 2022 July 30, 2021 July 29, 2022 July 30, 2021 Current Earnings Amount % Sales Amount % Sales Amount % Sales Amount % Sales Net sales $ 27,476 100.00 $ 27,570 100.00 $ 51,135 100.00 $ 51,993 100.00 Cost of sales 18,343 66.76 18,258 66.22 33,952 66.40 34,551 66.45 Gross margin 9,133 33.24 9,312 33.78 17,183 33.60 17,442 33.55 Expenses: Selling, general and administrative 4,455 16.22 4,693 17.02 8,758 17.12 9,187 17.67 Depreciation and amortization 449 1.63 409 1.49 894 1.75 800 1.54 Operating income 4,229 15.39 4,210 15.27 7,531 14.73 7,455 14.34 Interest – net 264 0.96 216 0.78 507 0.99 427 0.82 Pre-tax earnings 3,965 14.43 3,994 14.49 7,024 13.74 7,028 13.52 Income tax provision 973 3.54 976 3.54 1,699 3.33 1,688 3.25 Net earnings $ 2,992 10.89 $ 3,018 10.95 $ 5,325 10.41 $ 5,340 10.27 Weighted average common shares outstanding – 638 705 649 711 Basic earnings per common share (1) $ 4.68 $ 4.27 $ 8.18 $ 7.48 Weighted average common shares outstanding – 639 707 651 713 Diluted earnings per common share (1) $ 4.67 $ 4.25 $ 8.16 $ 7.46 Cash dividends per share $ 1.05 $ 0.80 $ 1.85 $ 1.40 (Accumulated Deficit)/Retained Earnings Balance at beginning of period $ (7,367) $ 98 $ (5,115) $ 1,117 Net earnings 2,992 3,018 5,325 5,340 Cash dividends declared (666) (563) (1,190) (993) Share repurchases (3,854) (3,013) (7,915) (5,924) Balance at end of period $ (8,895) $ (460) $ (8,895) $ (460) (1) Under the two-class method, earnings per share is calculated using net earnings allocable to common shares, which is derived by reducing Lowe's Companies, Inc. Three Months Ended Six Months Ended July 29, 2022 July 30, 2021 July 29, 2022 July 30, 2021 Amount % Sales Amount % Sales Amount % Sales Amount % Sales Net earnings $ 2,992 10.89 $ 3,018 10.95 $ 5,325 10.41 $ 5,340 10.27 Foreign currency translation adjustments – net 12 0.05 (44) (0.17) (5) (0.02) 58 0.11 Cash flow hedges – net of tax (38) (0.14) (9) (0.03) 181 0.36 15 0.03 Other (1) — (1) — (3) 0.01 (2) — Other comprehensive (loss)/income (27) (0.09) (54) (0.20) 173 0.35 71 0.14 Comprehensive income $ 2,965 10.80 $ 2,964 10.75 $ 5,498 10.76 $ 5,411 10.41 Lowe's Companies, Inc. July 29, 2022 July 30, 2021 January 28, 2022 Assets Current assets: Cash and cash equivalents $ 1,482 $ 4,835 $ 1,133 Short-term investments 450 1,420 271 Merchandise inventory – net 19,329 17,322 17,605 Other current assets 1,406 1,506 1,051 Total current assets 22,667 25,083 20,060 Property, less accumulated depreciation 18,713 19,031 19,071 Operating lease right-of-use assets 4,158 3,820 4,108 Long-term investments 56 225 199 Deferred income taxes – net 104 221 164 Other assets 1,027 1,024 1,038 Total assets $ 46,725 $ 49,404 $ 44,640 Liabilities and shareholders' deficit Current liabilities: Short-term borrowings $ — $ 1,000 $ — Current maturities of long-term debt 121 1,344 868 Current operating lease liabilities 652 557 636 Accounts payable 12,631 12,011 11,354 Accrued compensation and employee benefits 1,227 1,331 1,561 Deferred revenue 1,968 2,041 1,914 Other current liabilities 3,767 3,380 3,335 Total current liabilities 20,366 21,664 19,668 Long-term debt, excluding current maturities 28,763 21,967 23,859 Noncurrent operating lease liabilities 4,069 3,841 4,021 Deferred revenue – Lowe's protection plans 1,169 1,097 1,127 Other liabilities 800 1,010 781 Total liabilities 55,167 49,579 49,456 Shareholders' deficit: Preferred stock, $5 par value: Authorized – 5.0 million shares; Issued and — — — Common stock, $0.50 par value: Authorized – 5.6 billion shares; Issued 316 350 335 Capital in excess of par value — — — Accumulated deficit (8,895) (460) (5,115) Accumulated other comprehensive income/(loss) 137 (65) (36) Total shareholders' deficit (8,442) (175) (4,816) Total liabilities and shareholders' deficit $ 46,725 $ 49,404 $ 44,640 Lowe's Companies, Inc. Six Months Ended July 29, 2022 July 30, 2021 Cash flows from operating activities: Net earnings $ 5,325 $ 5,340 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,007 907 Noncash lease expense 273 252 Deferred income taxes — 110 Loss on property and other assets – net 32 1 Share-based payment expense 110 115 Changes in operating assets and liabilities: Merchandise inventory – net (1,728) (1,096) Other operating assets (120) (203) Accounts payable 1,279 1,115 Deferred revenue 97 511 Other operating liabilities (263) (139) Net cash provided by operating activities 6,012 6,913 Cash flows from investing activities: Purchases of investments (330) (1,635) Proceeds from sale/maturity of investments 290 692 Capital expenditures (687) (846) Proceeds from sale of property and other long-term assets 19 78 Other – net (1) (134) Net cash used in investing activities (709) (1,845) Cash flows from financing activities: Net proceeds from issuance of debt 4,964 2,988 Repayment of debt (799) (568) Proceeds from issuance of common stock under share-based payment plans 72 63 Cash dividend payments (1,061) (870) Repurchases of common stock (8,128) (6,174) Other – net (2) (366) Net cash used in financing activities (4,954) (4,927) Effect of exchange rate changes on cash — 4 Net increase in cash and cash equivalents 349 145 Cash and cash equivalents, beginning of period 1,133 4,690 Cash and cash equivalents, end of period $ 1,482 $ 4,835
— Second Quarter Diluted EPS of $4.67 —
With a disciplined focus on its best-in-class capital allocation program, the company continues to create sustainable value for its shareholders. During the quarter, the company repurchased approximately 21.6 million shares for $4.0 billion, and it paid $524 million in dividends.
Consolidated Statements of Current Earnings and (Accumulated Deficit)/Retained Earnings (Unaudited)
In Millions, Except Per Share and Percentage Data
basic
diluted
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 $2,983 million for the three months ended July 29, 2022, and $3,007 million for the three months ended
July 30, 2021. Net earnings allocable to common shares used in the basic and diluted earnings per share calculation were $5,308 million
for the six months ended July 29, 2022, and $5,318 million for the six months ended July 30, 2021.
Consolidated Statements of Comprehensive Income (Unaudited)
In Millions, Except Percentage Data
of tax
Consolidated Balance Sheets (Unaudited)
In Millions, Except Par Value Data
outstanding – none
and outstanding – 631 million, 699 million, and 670 million shares,
respectively
Consolidated Statements of Cash Flows (Unaudited)
In Millions
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