Lowe's Q2 net earnings fall to US$2.99B from US$3.02B last year, net sales fall to US$27.48B from US$27.57B; company says lower-than-expected sales were disproportionately impacted by 75% DIY customer mix, partially offset by 13% rise in Pro sales

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MOORESVILLE, North Carolina , August 17, 2022 (press release) –

— Consolidated Comparable Sales Decreased 0.3%; U.S. Comparable Sales Increased 0.2% —
— Second Quarter Diluted EPS of $4.67 —

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
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.

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

 

kate.pearlman@lowes.com

 

steve.j.salazar@lowes.com

 

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.
Consolidated Statements of Current Earnings and (Accumulated Deficit)/Retained Earnings (Unaudited)
In Millions, Except Per Share and Percentage Data

 

 

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 –
     basic

638

 

 

 

705

 

 

 

649

 

 

 

711

 

 

Basic earnings per common share (1)

$      4.68

 

 

 

$      4.27

 

 

 

$      8.18

 

 

 

$      7.48

 

 

Weighted average common shares outstanding –
     diluted

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
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.

 

Lowe's Companies, Inc.
Consolidated Statements of Comprehensive Income (Unaudited)
In Millions, Except Percentage Data

 

 

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
of tax

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.
Consolidated Balance Sheets (Unaudited)
In Millions, Except Par Value Data

 

 

 

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
     outstanding – none

 

 

 

Common stock, $0.50 par value: Authorized – 5.6 billion shares; Issued
     and outstanding – 631 million, 699 million, and 670 million shares,
     respectively

 

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.
Consolidated Statements of Cash Flows (Unaudited)
In Millions

 

 

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

 

 

 

 

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