Lowe's Q3 net earnings fall to US$154M from US$1.90B last year; net sales rise to US$23.48B from US$22.92B, with US comps up 3% --driven by Pro growth of 19% and improved DIY sales trends-- as well as Lowes.com sales up 12%

Sample article from our Retail & Omnichannel

MOORESVILLE, North Carolina , November 16, 2022 (press release) –

LOWE'S REPORTS THIRD QUARTER 2022 SALES AND EARNINGS RESULTS

—U.S. Comparable Sales Increased 3.0% —
— Third Quarter Diluted EPS of $0.25 ; Adjusted Diluted EPS1 of $3 .27—
— Raises Full Year 2022 Outlook—

Lowe's Companies, Inc. (NYSE: LOW) today reported net earnings of $154 million and diluted earnings per share (EPS) of $0.25 for the quarter ended Oct. 28, 2022, which included a pre-tax non-cash asset impairment charge of $2.1 billion related to its Canadian retail business, compared to diluted EPS of $2.73 in the third quarter of 2021. Excluding the impairment charge, third quarter adjusted diluted EPS1 increased 19.8% to $3.27 compared to the prior year.

Total sales for the third quarter were $23.5 billion compared to $22.9 billion in the third quarter of 2021, and comparable sales increased 2.2%. Comparable sales for the U.S. home improvement business increased 3.0% for the third quarter.

"We delivered better-than-expected results this quarter, with U.S. comps up 3%, driven by Pro growth of 19% and improved DIY sales trends.  Sales on Lowes.com grew 12%, on top of 25% growth last year.  We also drove substantial improvement in adjusted operating margin through disciplined execution and cost management.  This enabled us to award $200 million in bonuses to our front-line hourly associates, while also announcing $170 million in permanent wage increases," commented Marvin R. Ellison, Lowe's chairman, president and CEO.  "I am pleased that we are once again able to share the success of the company with our hard-working front-line associates, and I look forward to discussing our next chapter of growth at our Analyst & Investor Conference in December." 

Capital Allocation
With a disciplined focus on its leading capital allocation program, the company continues to generate long-term shareholder value. During the quarter, the company repurchased approximately 20.5 million shares for $4.0 billion , and it paid $666 million in dividends.

As of Oct. 28, 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 is increasing its full year 2022 financial outlook reflecting stronger-than-expected operating results.

All Adjusted measures exclude asset impairment and expected transaction costs associated with the sale of our Canadian retail business, which is currently expected to close in early 2023.

Full Year 2022 Outlook -- a 53-week Year (comparisons to full year 2021 -- a 52-week year)

  • Total sales of approximately $97 $98 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 be flat to down -1% as compared to prior year
  • Gross margin rate up slightly compared to prior year
  • Depreciation and amortization of approximately $1.75 billion
  • Adjusted operating income2 as a percentage of sales (adjusted operating margin2) of 13.0%
  • Interest expense of $1.1 to $1.2 billion
  • Adjusted effective income tax rate2 of approximately 25%
  • Adjusted diluted earnings per share2 of $13.65 to $13.80 (previously $13.10 to $13.60 )
  • Total share repurchases of approximately $13 billion (previously $12 billion )
  • Adjusted ROIC2 of over 37%
  • Capital expenditures of up to $2 billion

The Canadian retail business represents less than 6% of consolidated full year 2022 sales outlook, and approximately 60 basis points of dilution on the consolidated full year 2022 operating margin outlook.

A conference call to discuss third quarter 2022 operating results is scheduled for today, Wednesday, Nov. 16, 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 Third 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, the risk that asset impairment and deal-related transaction costs on the divestiture of the Canadian retail business could ultimately be greater than what we currently expect, 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 Adjusted diluted earnings per share is a non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures Reconciliation" section of this release for additional information as well as reconciliations between the Company's GAAP and non-GAAP financial results.

2 Adjusted operating income, adjusted operating margin, adjusted diluted earnings per share, and adjusted effective income tax rate are non-GAAP financial measures. In addition, adjusted 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 without unreasonable effort, including timing of and deal-related transaction costs associated with the sale of our Canadian retail business.

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

 

Nine Months Ended

 

October 28, 2022

 

October 29, 2021

 

October 28, 2022

 

October 29, 2021

Current Earnings

Amount

 

% Sales

 

Amount

 

% Sales

 

Amount

 

% Sales

 

Amount

 

% Sales

Net sales

$  23,479

 

100.00

 

$  22,918

 

100.00

 

$  74,614

 

100.00

 

$  74,911

 

100.00

Cost of sales

15,661

 

66.70

 

15,331

 

66.90

 

49,614

 

66.49

 

49,882

 

66.59

Gross margin

7,818

 

33.30

 

7,587

 

33.10

 

25,000

 

33.51

 

25,029

 

33.41

Expenses:

                             

Selling, general and administrative

6,443

 

27.45

 

4,373

 

19.08

 

15,200

 

20.38

 

13,559

 

18.10

Depreciation and amortization

451

 

1.92

 

425

 

1.85

 

1,345

 

1.80

 

1,226

 

1.64

Operating income

924

 

3.93

 

2,789

 

12.17

 

8,455

 

11.33

 

10,244

 

13.67

Interest – net

295

 

1.25

 

223

 

0.97

 

802

 

1.07

 

650

 

0.86

Pre-tax earnings

629

 

2.68

 

2,566

 

11.20

 

7,653

 

10.26

 

9,594

 

12.81

Income tax provision

475

 

2.02

 

670

 

2.93

 

2,174

 

2.92

 

2,359

 

3.15

Net earnings

$       154

 

0.66

 

$    1,896

 

8.27

 

$    5,479

 

7.34

 

$    7,235

 

9.66

                               
                               

Weighted average common shares outstanding –
     basic

618

     

690

     

638

     

704

   

Basic earnings per common share (1)

$      0.25

     

$      2.74

     

$      8.56

     

$    10.23

   

Weighted average common shares outstanding –
     diluted

620

     

692

     

640

     

706

   

Diluted earnings per common share (1)

$      0.25

     

$      2.73

     

$      8.53

     

$    10.21

   

Cash dividends per share

$      1.05

     

$      0.80

     

$      2.90

     

$      2.20

   
                               

(Accumulated Deficit)/Retained Earnings

                             

Balance at beginning of period

$   (8,895)

     

$      (460)

     

$   (5,115)

     

$    1,117

   

Net earnings

154

     

1,896

     

5,479

     

7,235

   

Cash dividends declared

(643)

     

(551)

     

(1,833)

     

(1,544)

   

Share repurchases

(3,929)

     

(2,798)

     

(11,844)

     

(8,721)

   

Balance at end of period

$  (13,313)

     

$  (1,913)

     

$  (13,313)

     

$  (1,913)

   
                               

(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 $152 million for the three months ended October 28, 2022, and $1,889 million for the three months ended October 29, 2021.  Net earnings allocable to common shares used in the basic and diluted earnings per share calculation were $5,462 million for the nine months ended October 28, 2022, and $7,207 million for the nine months ended October 29, 2021.

 

Lowe's Companies, Inc.

Consolidated Statements of Comprehensive Income (Unaudited)

In Millions, Except Percentage Data

 
 

Three Months Ended

 

Nine Months Ended

 

October 28, 2022

 

October 29, 2021

 

October 28, 2022

 

October 29, 2021

 

Amount

 

% Sales

 

Amount

 

% Sales

 

Amount

 

% Sales

 

Amount

 

% Sales

Net earnings

$       154

 

0.66

 

$    1,896

 

8.27

 

$    5,479

 

7.34

 

$    7,235

 

9.66

Foreign currency translation adjustments – net
of tax

(168)

 

(0.72)

 

19

 

0.08

 

(173)

 

(0.23)

 

78

 

0.10

Cash flow hedges – net of tax

170

 

0.72

 

41

 

0.18

 

352

 

0.47

 

56

 

0.07

Other

1

 

 

(1)

 

 

(3)

 

 

(4)

 

Other comprehensive income

3

 

 

59

 

0.26

 

176

 

0.24

 

130

 

0.17

Comprehensive income

$       157

 

0.66

 

$    1,955

 

8.53

 

$    5,655

 

7.58

 

$    7,365

 

9.83

                               

 

Lowe's Companies, Inc.

Consolidated Balance Sheets (Unaudited)

In Millions, Except Par Value Data

 
   

October 28, 2022

 

October 29, 2021

 

January 28, 2022

Assets

           

Current assets:

           

Cash and cash equivalents

 

$                    3,192

 

$                    6,121

 

$                    1,133

Short-term investments

 

464

 

552

 

271

Merchandise inventory – net

 

19,817

 

16,685

 

17,605

Other current assets

 

1,518

 

1,491

 

1,051

Total current assets

 

24,991

 

24,849

 

20,060

Property, less accumulated depreciation

 

17,275

 

18,925

 

19,071

Operating lease right-of-use assets

 

3,512

 

4,161

 

4,108

Long-term investments

 

63

 

213

 

199

Deferred income taxes – net

 

301

 

220

 

164

Other assets

 

831

 

1,032

 

1,038

Total assets

 

$                  46,973

 

$                  49,400

 

$                  44,640

             

Liabilities and shareholders' deficit

           

Current liabilities:

           

Short-term borrowings

 

$                         —

 

$                    1,000

 

$                         —

Current maturities of long-term debt

 

609

 

1,352

 

868

Current operating lease liabilities

 

651

 

573

 

636

Accounts payable

 

12,249

 

11,334

 

11,354

Accrued compensation and employee benefits

 

1,405

 

1,353

 

1,561

Deferred revenue

 

1,736

 

1,954

 

1,914

Other current liabilities

 

4,226

 

3,268

 

3,335

Total current liabilities

 

20,876

 

20,834

 

19,668

Long-term debt, excluding current maturities

 

32,904

 

23,881

 

23,859

Noncurrent operating lease liabilities

 

4,048

 

4,136

 

4,021

Deferred revenue – Lowe's protection plans

 

1,184

 

1,119

 

1,127

Other liabilities

 

829

 

1,006

 

781

Total liabilities

 

59,841

 

50,976

 

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 – 611 million, 686 million, and 670 million shares,
respectively

 

305

 

343

 

335

Capital in excess of par value

 

 

 

Accumulated deficit

 

(13,313)

 

(1,913)

 

(5,115)

Accumulated other comprehensive income/(loss)

 

140

 

(6)

 

(36)

Total shareholders' deficit

 

(12,868)

 

(1,576)

 

(4,816)

Total liabilities and shareholders' deficit

 

$                  46,973

 

$                  49,400

 

$                  44,640

             

 

Lowe's Companies, Inc.

Consolidated Statements of Cash Flows (Unaudited)

In Millions

 
 

Nine Months Ended

 

October 28, 2022

 

October 29, 2021

Cash flows from operating activities:

     

Net earnings

$                        5,479

 

$                        7,235

Adjustments to reconcile net earnings to net cash provided by operating activities:

     

Depreciation and amortization

1,509

 

1,388

Noncash lease expense

403

 

383

Deferred income taxes

(252)

 

96

Asset impairment and loss on property – net

2,113

 

25

Share-based payment expense

165

 

169

Changes in operating assets and liabilities:

     

Merchandise inventory – net

(2,308)

 

(446)

Other operating assets

20

 

(130)

Accounts payable

921

 

436

Deferred revenue

(117)

 

444

Other operating liabilities

205

 

(421)

Net cash provided by operating activities

8,138

 

9,179

       

Cash flows from investing activities:

     

Purchases of investments

(659)

 

(2,325)

Proceeds from sale/maturity of investments

597

 

2,261

Capital expenditures

(1,090)

 

(1,256)

Proceeds from sale of property and other long-term assets

37

 

94

Other – net

 

(134)

Net cash used in investing activities

(1,115)

 

(1,360)

       

Cash flows from financing activities:

     

Net proceeds from issuance of debt

9,667

 

4,972

Repayment of debt

(831)

 

(595)

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

86

 

72

Cash dividend payments

(1,727)

 

(1,433)

Repurchases of common stock

(12,127)

 

(8,999)

Other – net

 

(408)

Net cash used in financing activities

(4,932)

 

(6,391)

       

Effect of exchange rate changes on cash

(32)

 

3

       

Net increase in cash and cash equivalents

2,059

 

1,431

Cash and cash equivalents, beginning of period

1,133

 

4,690

Cash and cash equivalents, end of period

$                        3,192

 

$                        6,121

       

Lowe's Companies, Inc.
Non-GAAP Financial Measure Reconciliation (Unaudited)

To provide additional transparency, the Company has presented a comparison to the non-GAAP financial measure of adjusted diluted earnings per share for the three months ended October 28, 2022.  This measure excludes the impact of a discrete item, further described below, not contemplated in Lowe's Business Outlook to assist analysts and investors in understanding operational performance for the third quarter of fiscal 2022.

Fiscal 2022 Impacts

During the third quarter, the Company recognized financial impacts from the following discrete item, not contemplated in the Company's Business Outlook for fiscal 2022:

  • In the third quarter of fiscal 2022, the Company recognized a pre-tax $2.1 billion long-lived asset impairment of the Canadian retail business (Canadian retail business transaction costs).

Adjusted diluted earnings per share should not be considered an alternative to, or more meaningful indicator of, the Company's diluted earnings per share as prepared in accordance with GAAP.  The Company's methods of determining non-GAAP financial measures may differ from the method used by other companies and may not be comparable.

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 without unreasonable effort, including timing of and deal-related transaction costs associated with the sale of our Canadian retail business.

A reconciliation between the Company's GAAP and non-GAAP financial results is shown below and available on the Company's website at ir.lowes.com.

 

Three Months Ended

 

October 28, 2022

 

Pre-Tax
Earnings

 

Tax1

 

Net
Earnings

Diluted earnings per share, as reported

       

$       0.25

Non-GAAP adjustments per share impacts

         

Canada retail business transaction costs

3.32

 

(0.30)

 

3.02

Adjusted diluted earnings per share

       

$       3.27

1   

Represents the corresponding tax benefit or expense related to the item excluded from adjusted diluted earnings per share.

 

           
 

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SOURCE Lowe's Companies, Inc.

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