"We have substantially completed a detailed reassessment of our business and are diligently implementing process and technology improvements that are rooted in the fundamentals of retail and designed to position
Today's presentations include the company's strategies to engage customers, drive merchandising excellence and deliver a seamless, omni-channel experience while maximizing operational efficiency.
"We anticipate that targeted initiatives designed to drive profitable sales, combined with an expense reduction culture, will allow us to generate significant cash flow from operations over the next three years," commented
Underscoring its commitment to return excess cash to shareholders, the Board of Directors has authorized a new
"While our top priority remains building a sustainable foundation for long-term success, with our strategic reassessment substantially complete, we are committed to delivering on our near-term financial objectives," Denton added. "We are pleased with our performance quarter-to-date, and we expect to achieve our Business Outlook."
Lowe's Business Outlook
Fiscal Year 2018 (comparisons to fiscal year 2017)
- Total sales are expected to increase approximately 4 percent.
- Comparable sales are expected to increase approximately 2.5 percent.
- The company expects to add approximately 8 home improvement stores.
- Operating income as a percentage of sales (operating margin) is expected to decrease 240 to 255 basis points1, including 135 to 150 basis points from charges associated with its strategic reassessment.
- The effective income tax rate is expected to be approximately 24 percent.
- Diluted earnings per share of
$4.08 to$4.24 are expected for the fiscal year endingFeb. 1, 2019 . - Adjusted diluted earnings per share2 are expected to be
$5.08 to$5.13 .
1 Includes 4 basis point net negative impact from the gain on the sale of the company's interest in its Australian joint venture (2Q 2017) and the one-time bonus paid to eligible hourly
2 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 a reconciliation between the Company's GAAP and non-GAAP financial results.
Fiscal Year 2019 (comparisons to fiscal year 2018 business outlook)
- Total sales are expected to increase approximately 2 percent.
- Comparable sales are expected to increase approximately 3 percent.
- Operating income as a percentage of sales (operating margin) is expected to increase 235 to 250 basis points3.
- The effective income tax rate is expected to be approximately 25 percent.
- Diluted earnings per share of
$6.00 to$6.10 are expected for the fiscal year endingJan. 31, 2020 .
3 Includes 135 to 150 basis points positive impact from expected charges associated with the exit of Orchard Supply Hardware (2Q 2018) as well as certain
A replay of today's webcast, including the accompanying slides and other relevant materials, will be archived on Lowes.com/investor until the next
Cautionary Note 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" and similar expressions are forward-looking statements. Forward-looking statements involve estimates, expectations, projections, goals, forecasts, assumptions, risks and uncertainties. Forward-looking statements include, but are not limited to, statements about future financial and operating results,
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, management and key personnel change, changes in general economic conditions, such as the rate of unemployment, interest rate and currency fluctuations, fuel and other energy costs, slower growth in personal income, changes in consumer spending, changes in the rate of housing turnover, the availability of consumer credit and of mortgage financing, inflation or deflation of commodity prices, recently enacted or proposed tariffs, and other factors that can negatively affect our customers, as well as our ability to: (i) respond to adverse trends in the housing industry, a reduced rate of growth in household formation, and slower rates of growth in housing renovation and repair activity, as well as uneven recovery in commercial building activity; (ii) secure, develop, and otherwise implement new technologies and processes necessary to realize the benefits of our strategic initiatives focused on omni-channel sales and marketing presence and enhance our efficiency, and otherwise successfully execute on our strategy and implement our strategic initiatives, including acquisitions, dispositions and the closing of certain stores and facilities; (iii) attract, train, and retain highly-qualified associates; (iv) manage our business effectively as we adapt our operating model to meet the changing expectations of our customers; (v) maintain, improve, upgrade and protect our critical information systems from data security breaches, ransomware and other cyber threats; (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, environmental issues or privacy and data protection; (ix) positively and effectively manage our public image and reputation and respond appropriately to unanticipated failures to maintain a high level of product and service quality that could result in a negative impact on customer confidence and adversely affect sales; and (x) effectively manage our relationships with selected suppliers of brand name products and key vendors and service providers, including third party installers. In addition, we could experience impairment losses and other charges if either 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, or we are required to reduce the carrying amount of our investment in certain unconsolidated entities. With respect to acquisitions and dispositions, potential risks include the effect of such transactions on
The forward-looking statements contained in this news release are expressly qualified in their entirety by the foregoing cautionary statements. The foregoing list of important factors that may affect future results is not exhaustive. When relying on forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. All such forward-looking statements 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 in the "Risk Factors" included in our most recent Annual Report on Form 10-K and the description of material changes thereto, if any, included in our Quarterly Reports on Form 10-Q or subsequent filings with the
Non-GAAP Financial Measures Reconciliation (Unaudited)
To provide additional transparency, the Company has presented the non-GAAP financial measure of forecasted adjusted diluted earnings per share to exclude the impacts of certain discrete items, as further described below, not contemplated in
During the first nine months of fiscal 2018, the Company performed a strategic reassessment that resulted in the following pre-tax charges, not contemplated in the Company's original Business Outlook for fiscal 2018, being reflected in our forecasted results for fiscal 2018:
- On
August 17, 2018 , the company committed to exit its Orchard Supply Hardware (Orchard) operations. As a result, during the first nine months of 2018, the Company recognized$353 million of pre-tax charges, consisting of long-lived asset impairments, discontinued projects, accelerated depreciation and amortization, severance and lease obligations related to the decision to close all Orchard locations. During the fourth quarter of fiscal 2018, the Company expects to recognize additional pre-tax charges of$270 million to$350 million related to lease obligations. Total pre-tax charges for fiscal year 2018 are estimated to range from$623 million to$703 million (Orchard Supply Hardware charges);
- On
October 31, 2018 , the Company committed to close 20 under-performing stores across theU.S. and 31 locations inCanada , including 27 under-performing stores. As a result, during the first nine months of 2018, the Company recognized$121 million of pre-tax charges, consisting of long-lived asset impairment and severance obligations. During the fourth quarter of fiscal 2018, the company expects to recognize additional pre-tax charges of$190 million to$230 million related to lease obligations. Total pre-tax charges for fiscal year 2018 are estimated to range from$311 million to$351 million (U.S. andCanada closing charges);
- On
November 20, 2018 , the Company announced its plans to exit retail operations inMexico and is exploring strategic alternatives. During the first nine months of 2018,$22 million of long-lived asset impairment was recognized on certain assets inMexico as a result of the strategic evaluation (Mexico impairment charge), and;
- During the third quarter of fiscal 2018, the company identified certain non-core activities within its
U.S. home improvement business to exit, including Alacrity Renovation Services andIris Smart Home . As a result, during the first nine months of 2018, the Company recognized pre-tax charges of$14 million associated with long-lived asset impairment and inventory write-down (Non-core activities charges).
Forecasted adjusted diluted earnings per share should not be considered an alternative to, or a more meaningful indicator of, the Company's actual or forecasted diluted earnings per share as prepared in accordance with GAAP. The company's methods of determining this non-GAAP financial measures may differ from the method used by other companies for these or similar non-GAAP financial measures. Accordingly, this non-GAAP measure may not be comparable to the measures used by other companies.
Detailed reconciliations between the company's GAAP and non-GAAP financial results are shown below and available on the company's website at www.lowes.com/investor.
Fiscal 2018 Lowe's Business Outlook |
|||||||||||||||||||
Low End of |
High End of |
||||||||||||||||||
Pre-Tax Impact |
Tax Impact |
Net Earnings Impact |
Pre-Tax Impact |
Tax Impact |
Net Earnings Impact |
||||||||||||||
Forecasted diluted earnings per share |
$ |
4.08 |
$ |
4.24 |
|||||||||||||||
Non-GAAP Adjustments |
|||||||||||||||||||
Orchard Supply Hardware charges |
0.86 |
(0.22) |
0.64 |
0.76 |
(0.19) |
0.57 |
|||||||||||||
|
0.44 |
(0.11) |
0.33 |
0.39 |
(0.10) |
0.29 |
|||||||||||||
|
0.02 |
— |
0.02 |
0.02 |
— |
0.02 |
|||||||||||||
Non-core activities charges |
0.02 |
(0.01) |
0.01 |
0.02 |
(0.01) |
0.01 |
|||||||||||||
Forecasted adjusted diluted earnings per share |
$ |
5.08 |
$ |
5.13 |
|||||||||||||||
1 The amounts, nature and timing of any additional charges associated with the intended exit of the
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