Sales for the first quarter increased 3.0 percent to
During the quarter, the company adopted the new revenue recognition accounting standard ASU No. 2014-09. As a result, the company reclassified certain items within operating income. This change resulted in an increase to sales of approximately
"We drove solid performance in indoor categories and continued to grow our sales to Pro customers. However, prolonged unfavorable weather across geographies led to a delayed spring selling season which impacted results in outdoor categories," commented Robert A. Niblock,
"We continue to work diligently to improve conversion, better manage inventory and stabilize gross margin, while investing in the capabilities required to deliver simple and seamless customer experiences," Niblock added. "I'd like to thank our employees for their commitment and dedication to helping people love where they live."
Delivering on its commitment to return excess cash to shareholders, the company repurchased
As of
A conference call to discuss first quarter 2018 operating results is scheduled for today (
Lowe's Business Outlook
The company has reflected the impact of its adoption of the new revenue recognition accounting standard in its Business Outlook, which resulted in the reclassification of certain items within operating income. Although this change has no effect on operating income, it does positively impact total sales growth by approximately 1 percent and negatively impact operating margin by approximately 10 basis points.
Fiscal Year 2018 (comparisons to fiscal year 2017; based on
- Total sales are expected to increase approximately 5 percent.
- Comparable sales are expected to increase approximately 3.5 percent.
- The company expects to add approximately 10 home improvement and hardware stores.
- Operating income as a percentage of sales (operating margin) is expected to decrease approximately 40 basis points.2
- The effective income tax rate is expected to be approximately 25.5%.
- Diluted earnings per share of
$5.40 to$5.50 are expected for the fiscal year endingFeb. 1, 2019 .
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 a reconciliation between the Company's GAAP and non-GAAP financial results.
2 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
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" 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, changes to tax laws applicable to corporate multinationals, such as the recently enacted
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
|
|||||||||||||
Consolidated Statements of Current and Retained Earnings (Unaudited) |
|||||||||||||
In Millions, Except Per Share and Percentage Data |
|||||||||||||
Three Months Ended |
|||||||||||||
|
|
||||||||||||
Current Earnings |
Amount |
% Sales |
Amount |
% Sales |
|||||||||
Net sales |
$ |
17,360 |
100.00 |
$ |
16,860 |
100.00 |
|||||||
Cost of sales |
11,348 |
65.37 |
11,060 |
65.60 |
|||||||||
Gross margin |
6,012 |
34.63 |
5,800 |
34.40 |
|||||||||
Expenses: |
|||||||||||||
Selling, general and administrative |
4,187 |
24.12 |
3,876 |
22.99 |
|||||||||
Depreciation and amortization |
360 |
2.07 |
365 |
2.16 |
|||||||||
Operating income |
1,465 |
8.44 |
1,559 |
9.25 |
|||||||||
Interest - net |
160 |
0.92 |
161 |
0.96 |
|||||||||
Loss on extinguishment of debt |
— |
— |
464 |
2.75 |
|||||||||
Pre-tax earnings |
1,305 |
7.52 |
934 |
5.54 |
|||||||||
Income tax provision |
317 |
1.83 |
332 |
1.97 |
|||||||||
Net earnings |
$ |
988 |
5.69 |
$ |
602 |
3.57 |
|||||||
Weighted average common shares outstanding - basic |
825 |
857 |
|||||||||||
Basic earnings per common share (1) |
$ |
1.19 |
$ |
0.70 |
|||||||||
Weighted average common shares outstanding - diluted |
826 |
858 |
|||||||||||
Diluted earnings per common share (1) |
$ |
1.19 |
$ |
0.70 |
|||||||||
Cash dividends per share |
$ |
0.41 |
$ |
0.35 |
|||||||||
Retained Earnings |
|||||||||||||
Balance at beginning of period |
$ |
5,425 |
$ |
6,241 |
|||||||||
Cumulative effect of accounting change |
33 |
— |
|||||||||||
Net earnings |
988 |
602 |
|||||||||||
Cash dividends declared |
(338) |
(299) |
|||||||||||
Share repurchases |
(703) |
(1,198) |
|||||||||||
Balance at end of period |
$ |
5,405 |
$ |
5,346 |
|||||||||
(1) Under the two-class method, earnings per share is calculated using net earnings allocable to common shares, which is derived by |
|
|||||||||||||
Consolidated Statements of Comprehensive Income (Unaudited) |
|||||||||||||
In Millions, Except Percentage Data |
|||||||||||||
Three Months Ended |
|||||||||||||
|
|
||||||||||||
Amount |
% Sales |
Amount |
% Sales |
||||||||||
Net earnings |
$ |
988 |
5.69 |
$ |
602 |
3.57 |
|||||||
Foreign currency translation adjustments - net of tax |
(83) |
(0.48) |
(1) |
— |
|||||||||
Other comprehensive loss |
(83) |
(0.48) |
(1) |
— |
|||||||||
Comprehensive income |
$ |
905 |
5.21 |
$ |
601 |
3.57 |
|||||||
|
||||||||||||||
Consolidated Balance Sheets |
||||||||||||||
In Millions, Except Par Value Data |
||||||||||||||
(Unaudited) |
(Unaudited) |
|||||||||||||
|
|
|
||||||||||||
Assets |
||||||||||||||
Current assets: |
||||||||||||||
Cash and cash equivalents |
$ |
1,565 |
$ |
1,963 |
$ |
588 |
||||||||
Short-term investments |
205 |
84 |
102 |
|||||||||||
Merchandise inventory - net |
13,204 |
12,254 |
11,393 |
|||||||||||
Other current assets |
1,059 |
975 |
689 |
|||||||||||
Total current assets |
16,033 |
15,276 |
12,772 |
|||||||||||
Property, less accumulated depreciation |
19,500 |
19,748 |
19,721 |
|||||||||||
Long-term investments |
321 |
477 |
408 |
|||||||||||
Deferred income taxes - net |
199 |
272 |
168 |
|||||||||||
|
1,288 |
1,081 |
1,307 |
|||||||||||
Other assets |
896 |
759 |
915 |
|||||||||||
Total assets |
$ |
38,237 |
$ |
37,613 |
$ |
35,291 |
||||||||
Liabilities and shareholders' equity |
||||||||||||||
Current liabilities: |
||||||||||||||
Short-term borrowings |
$ |
— |
$ |
— |
$ |
1,137 |
||||||||
Current maturities of long-term debt |
896 |
295 |
294 |
|||||||||||
Accounts payable |
10,104 |
9,905 |
6,590 |
|||||||||||
Accrued compensation and employee benefits |
715 |
725 |
747 |
|||||||||||
Deferred revenue |
1,439 |
1,415 |
1,378 |
|||||||||||
Other current liabilities |
2,620 |
2,346 |
1,950 |
|||||||||||
Total current liabilities |
15,774 |
14,686 |
12,096 |
|||||||||||
Long-term debt, excluding current maturities |
14,948 |
15,770 |
15,564 |
|||||||||||
Deferred revenue - extended protection plans |
808 |
769 |
803 |
|||||||||||
Other liabilities |
962 |
857 |
955 |
|||||||||||
Total liabilities |
32,492 |
32,082 |
29,418 |
|||||||||||
Shareholders' equity: |
||||||||||||||
Preferred stock - |
— |
— |
— |
|||||||||||
Common stock - |
||||||||||||||
Shares issued and outstanding |
||||||||||||||
|
822 |
|||||||||||||
|
853 |
|||||||||||||
|
830 |
411 |
426 |
415 |
||||||||||
Capital in excess of par value |
— |
— |
22 |
|||||||||||
Retained earnings |
5,405 |
5,346 |
5,425 |
|||||||||||
Accumulated other comprehensive income/(loss) |
(71) |
(241) |
11 |
|||||||||||
Total shareholders' equity |
5,745 |
5,531 |
5,873 |
|||||||||||
Total liabilities and shareholders' equity |
$ |
38,237 |
$ |
37,613 |
$ |
35,291 |
||||||||
|
|||||||
Consolidated Statements of Cash Flows (Unaudited) |
|||||||
In Millions |
|||||||
Three Months Ended |
|||||||
|
|
||||||
Cash flows from operating activities: |
|||||||
Net earnings |
$ |
988 |
$ |
602 |
|||
Adjustments to reconcile net earnings to net cash provided by operating activities: |
|||||||
Depreciation and amortization |
387 |
389 |
|||||
Deferred income taxes |
(21) |
(64) |
|||||
Loss on property and other assets - net |
6 |
11 |
|||||
Loss on extinguishment of debt |
— |
464 |
|||||
Loss on cost method and equity method investments |
— |
7 |
|||||
Share-based payment expense |
24 |
26 |
|||||
Changes in operating assets and liabilities: |
|||||||
Merchandise inventory - net |
(1,846) |
(1,808) |
|||||
Other operating assets |
(234) |
(64) |
|||||
Accounts payable |
3,521 |
3,291 |
|||||
Other operating liabilities |
604 |
441 |
|||||
Net cash provided by operating activities |
3,429 |
3,295 |
|||||
Cash flows from investing activities: |
|||||||
Purchases of investments |
(573) |
(153) |
|||||
Proceeds from sale/maturity of investments |
556 |
59 |
|||||
Capital expenditures |
(224) |
(202) |
|||||
Proceeds from sale of property and other long-term assets |
5 |
6 |
|||||
Other - net |
— |
(1) |
|||||
Net cash used in investing activities |
(236) |
(291) |
|||||
Cash flows from financing activities: |
|||||||
Net change in short-term borrowings |
(1,140) |
(511) |
|||||
Net proceeds from issuance of long-term debt |
— |
2,968 |
|||||
Repayment of long-term debt |
(13) |
(2,558) |
|||||
Proceeds from issuance of common stock under share-based payment plans |
8 |
38 |
|||||
Cash dividend payments |
(340) |
(304) |
|||||
Repurchase of common stock |
(728) |
(1,237) |
|||||
Other - net |
(2) |
(1) |
|||||
Net cash used in financing activities |
(2,215) |
(1,605) |
|||||
Effect of exchange rate changes on cash |
(1) |
6 |
|||||
Net increase in cash and cash equivalents |
977 |
1,405 |
|||||
Cash and cash equivalents, beginning of period |
588 |
558 |
|||||
Cash and cash equivalents, end of period |
$ |
1,565 |
$ |
1,963 |
|||
Non-GAAP Financial Measures Reconciliation
To provide additional transparency, the company has presented the non-GAAP financial measure of adjusted earnings per share to exclude the impact of certain discrete items, as further described below, not contemplated in
In the first quarter of 2017, the company recognized a
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 this non-GAAP financial measure may differ from the method used by other companies for this 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.
Three Months Ended |
|||||||||||||||||||
(Unaudited) |
(Unaudited) |
||||||||||||||||||
|
|
||||||||||||||||||
(millions, except per share data) |
Pre-Tax |
Tax |
Net |
Pre-Tax |
Tax |
Net |
|||||||||||||
Diluted earnings per share, as reported |
$ |
1.19 |
$ |
0.70 |
|||||||||||||||
Non-GAAP Adjustments |
|||||||||||||||||||
Loss on extinguishment of debt |
— |
— |
— |
0.54 |
(0.21) |
0.33 |
|||||||||||||
Adjusted diluted earnings per share |
$ |
1.19 |
$ |
1.03 |
|||||||||||||||
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