Lowe's Reports Second Quarter Sales and Earnings Results

Lowe's Reports Second Quarter Sales and Earnings Results-- Comparable Sales Increased 4.4 Percent ---- Diluted Earnings Per Share Increased 18.2 Percent --

MOORESVILLE, N.C., Aug. 20, 2014 /PRNewswire/ -- Lowe's Companies, Inc. (NYSE: LOW) today reported net earnings of $1.04 billion for the quarter ended August 1, 2014, a 10.4 percent increase over the same period a year ago. Diluted earnings per share increased 18.2 percent to $1.04 from $0.88 in the second quarter of 2013. For the six months ended August 1, 2014, net earnings increased 12.2 percent from the same period a year ago to $1.66 billion, and diluted earnings per share increased 20.6 percent to $1.64

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Sales for the second quarter increased 5.7 percent to $16.6 billion from $15.7 billion in the second quarter of 2013, and comparable sales for the quarter increased 4.4 percent.  For the six month period, sales were $30.0 billion, a 4.2 percent increase over the same period a year ago, and comparable sales increased 2.8 percent.

"I would like to thank our employees for their hard work during our peak selling season, which helped us deliver solid results for the second quarter.  We were able to recover most of the outdoor product sales missed in the first quarter due to unfavorable weather conditions," commented Robert A. Niblock, Lowe's chairman, president and CEO.

"We believe home improvement spending will continue to progress in tandem with strengthening job and income growth," Niblock added.  "Our year-to-date sales performance, together with our previous assumptions for the second half of 2014, result in a modest reduction to our sales outlook for the year.  Our diluted earnings per share outlook is unchanged, which is a testament to our keen focus on profitability."

Delivering on its commitment to return excess cash to shareholders, the company repurchased $1.1 billion of stock under its share repurchase program and paid $183 million in dividends in the second quarter.  For the six month period, the company repurchased $2.0 billion of stock under its share repurchase program and paid $369 million in dividends. 

As of August 1, 2014, Lowe's operated 1,837 home improvement and hardware stores in the United States, Canada and Mexico representing 200.8 million square feet of retail selling space.

A conference call to discuss second quarter 2014 operating results is scheduled for today (Wednesday, August 20) at 9:00 am ET.  The conference call will be available by webcast and can be accessed by visiting Lowe's website at www.Lowes.com/investor and clicking on Lowe's Second Quarter 2014 Earnings Conference Call Webcast.  Supplemental slides will be available fifteen minutes prior to the start of the conference call. A replay of the call will be archived on Lowes.com/investor until November 18, 2014.

Lowe's Business Outlook

The company has combined its year-to-date sales performance with its previous assumptions for the second half of 2014 when providing the updated outlook below.

Fiscal Year 2014 (comparisons to fiscal year 2013; based on U.S. GAAP unless otherwise noted) 

  • Total sales are expected to increase approximately 4.5 percent.
  • Comparable sales are expected to increase approximately 3.5 percent.
  • The company expects to open approximately 10 home improvement and 5 hardware stores.
  • Earnings before interest and taxes as a percentage of sales (operating margin) are expected to increase approximately 65 basis points.
  • The effective income tax rate is expected to be approximately 37.2%.
  • Diluted earnings per share of approximately $2.63 are expected for the fiscal year ending January 30, 2015.  

Disclosure Regarding Forward-Looking Statements

This news release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Statements of the company's expectations for sales growth, comparable sales, earnings and performance, shareholder value, capital expenditures, cash flows, the housing market, the home improvement industry, demand for services, share repurchases, the Company's strategic initiatives and any statement of an assumption underlying any of the foregoing, constitute "forward-looking statements" under the Act.   Although we believe that the expectations, opinions, projections, and comments reflected in these forward-looking statements are reasonable, we can give no assurance that such statements will prove to be correct. A wide variety of potential risks, uncertainties, and other factors could materially affect our ability to achieve the results either expressed or implied by our forward-looking statements including, but not limited to, changes in general economic conditions, such as the  rate of unemployment, interest rate and currency fluctuations, higher fuel and other energy costs, slower growth in personal income, changes in consumer spending, changes in the rate of housing turnover, the availability and increasing regulation of consumer credit and of mortgage financing, inflation or deflation of commodity prices, and other factors which can negatively affect our customers, as well as our ability to: (i) respond to adverse trends in the housing industry, such as the psychological effects of lower home prices, and in the level of repairs, remodeling, and additions to existing homes, as well as a general reduction in commercial building activity; (ii) secure, develop, and otherwise implement new technologies and processes designed to enhance our efficiency and competitiveness; (iii) attract, train, and retain highly-qualified associates; (iv) manage our business effectively as we adapt our traditional operating model to meet the changing expectations of our customers; (v) maintain, improve, upgrade and protect our critical information systems; (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 or environmental issues; and (ix) respond to unanticipated weather conditions that could adversely affect sales. In addition, we could experience additional impairment losses if 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. For more information about these and other risks and uncertainties that we are exposed to, you should read the "Risk Factors" and "Critical Accounting Policies and Estimates" included in our Annual Report on Form 10-K to the United States Securities and Exchange Commission (the "SEC") and the description of material changes therein or updated version thereof, if any, included in our Quarterly Reports on Form 10-Q.

The forward-looking statements contained in this news release 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 the "Risk Factors" included in our Annual Report on Form 10-K to the SEC and the description of material changes, if any, therein included in our Quarterly Reports on Form 10-Q.  We expressly disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, change in circumstances, future events, or otherwise.

Lowe's Companies, Inc. (NYSE: LOW) is a FORTUNE® 100 home improvement company serving approximately 15 million customers a week in the United States, Canada and Mexico.  With fiscal year 2013 sales of $53.4 billion, Lowe's has more than 1,835 home improvement and hardware stores and 260,000 employees.  Founded in 1946 and based in Mooresville, N.C., Lowe's supports the communities it serves through programs that focus on K-12 public education and community improvement projects. For more information, visit Lowes.com.

 

Lowe's Companies, Inc.

   

Consolidated Statements of Current and Retained Earnings (Unaudited)

   

In Millions, Except Per Share and Percentage Data

   
                         
       

Three Months Ended

   

Six Months Ended

       

August 1, 2014

   

August 2, 2013

   

August 1, 2014

   

August 2, 2013

Current Earnings

     

 Amount 

Percent

   

 Amount 

Percent

   

 Amount 

Percent

   

 Amount 

Percent

Net sales

   

$

16,599

100.00

 

$

15,711

100.00

 

$

30,001

100.00

 

$

28,800

100.00

                                   

Cost of sales

     

10,864

65.45

   

10,314

65.65

   

19,508

65.02

   

18,848

65.44

                                   

Gross margin

     

5,735

34.55

   

5,397

34.35

   

10,493

34.98

   

9,952

34.56

                                   

Expenses:

                                 
                                   

Selling, general and administrative

     

3,541

21.33

   

3,414

21.73

   

6,859

22.87

   

6,635

23.04

                                   

Depreciation

     

375

2.26

   

367

2.33

   

748

2.49

   

719

2.50

                                   

Interest - net

     

126

0.76

   

110

0.70

   

250

0.83

   

223

0.77

                                   

Total expenses

     

4,042

24.35

   

3,891

24.76

   

7,857

26.19

   

7,577

26.31

                                   

Pre-tax earnings 

     

1,693

10.20

   

1,506

9.59

   

2,636

8.79

   

2,375

8.25

                                   

Income tax provision 

     

654

3.94

   

565

3.60

   

973

3.25

   

893

3.11

                                   

Net earnings

   

$

1,039

6.26

 

$

941

5.99

 

$

1,663

5.54

 

$

1,482

5.14

                                   
                                   

Weighted average common shares outstanding - basic

     

995

     

1,067

     

1,005

     

1,077

 
                                   

Basic earnings per common share (1)

   

$

1.04

   

$

0.88

   

$

1.65

   

$

1.37

 
                                   

Weighted average common shares outstanding - diluted

     

996

     

1,068

     

1,007

     

1,079

 
                                   

Diluted earnings per common share (1)

   

$

1.04

   

$

0.88

   

$

1.64

   

$

1.36

 
                                   

Cash dividends per share

   

$

0.23

   

$

0.18

   

$

0.41

   

$

0.34

 
                                   
                                   

Retained Earnings

                                 

Balance at beginning of period

   

$

10,985

   

$

12,618

   

$

11,355

   

$

13,224

 

Net earnings 

     

1,039

     

941

     

1,663

     

1,482

 

Cash dividends

     

(229)

     

(192)

     

(411)

     

(366)

 

Share repurchases

     

(1,046)

     

(863)

     

(1,858)

     

(1,836)

 

Balance at end of period

   

$

10,749

   

$

12,504

   

$

10,749

   

$

12,504

 
                                   
                                   

(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 $1,033 million for the three months ended August 1, 2014 and $935 million for the three months ended August 2, 2013. Net earnings allocable to common shares used in the basic and diluted earnings per share calculation were $1,654 million for the six months ended August 1, 2014 and $1,472 million for the six months ended August 2, 2013.

 

 

Lowe's Companies, Inc.

                 

Consolidated Statements of Comprehensive Income (Unaudited)

                 

In Millions, Except Percentage Data

                 
                                   
       

Three Months Ended 

   

Six Months Ended

       

August 1, 2014

   

August 2, 2013

   

August 1, 2014

   

August 2, 2013

       

 Amount 

Percent

   

 Amount 

Percent

   

 Amount 

Percent

   

 Amount 

Percent

Net earnings

   

$

1,039

6.26

 

$

941

5.99

 

$

1,663

5.54

 

$

1,482

5.14

                                   

Foreign currency translation adjustments - net of tax

     

4

0.02

   

(26)

(0.17)

   

12

0.04

   

(26)

(0.09)

                                   

Other comprehensive income/(loss)

     

4

0.02

   

(26)

(0.17)

   

12

0.04

   

(26)

(0.09)

                                   

Comprehensive income

   

$

1,043

6.28

 

$

915

5.82

 

$

1,675

5.58

 

$

1,456

5.05

                                   

 

 

Lowe's Companies, Inc.

Consolidated Balance Sheets

In Millions, Except Par Value Data

                     
     

 (Unaudited) 

   

 (Unaudited) 

       
     

August 1, 2014

   

August 2, 2013

   

January 31, 2014

 

Assets

                   
                     

     Current assets:

                   

     Cash and cash equivalents

 

$

1,039

 

$

1,085

 

$

391

 

     Short-term investments 

   

90

   

189

   

185

 

     Merchandise inventory - net

   

9,315

   

9,106

   

9,127

 

     Deferred income taxes - net 

   

276

   

224

   

252

 

     Other current assets

   

355

   

309

   

341

 
                     

     Total current assets

   

11,075

   

10,913

   

10,296

 
                     

     Property, less accumulated depreciation  

   

20,368

   

20,969

   

20,834

 

     Long-term investments 

   

382

   

306

   

279

 

     Other assets

   

1,312

   

1,220

   

1,323

 
                     

     Total assets

 

$

33,137

 

$

33,408

 

$

32,732

 
                     

Liabilities and shareholders' equity

                   
                     

     Current liabilities:

                   

     Short-term borrowings

 

$

-

 

$

-

 

$

386

 

     Current maturities of long-term debt

   

54

   

47

   

49

 

     Accounts payable

   

6,191

   

5,664

   

5,008

 

     Accrued compensation and employee benefits 

 

635

   

651

   

785

 

     Deferred revenue

   

1,039

   

985

   

892

 

     Other current liabilities

   

2,094

   

1,993

   

1,756

 
                     

     Total current liabilities

   

10,013

   

9,340

   

8,876

 
                     

     Long-term debt, excluding current maturities 

 

10,063

   

9,015

   

10,086

 

     Deferred income taxes - net  

   

187

   

390

   

291

 

     Deferred revenue - extended protection plans

 

743

   

733

   

730

 

     Other liabilities 

   

891

   

868

   

896

 
                     

     Total liabilities

   

21,897

   

20,346

   

20,879

 
                     

     Shareholders' equity:

                   

     Preferred stock - $5 par value, none issued

   

-

   

-

   

-

 

     Common stock - $.50 par value; 

                   

Shares issued and outstanding

                   

August 1, 2014

991

                 

August 2, 2013

1,063

                 

January 31, 2014

1,030

 

496

   

532

   

515

 

     Capital in excess of par value

   

-

   

-

   

-

 

     Retained earnings

   

10,749

   

12,504

   

11,355

 

     Accumulated other comprehensive (loss)/income

 

(5)

   

26

   

(17)

 
                     

     Total shareholders' equity

   

11,240

   

13,062

   

11,853

 
                     

     Total liabilities and shareholders' equity

$

33,137

 

$

33,408

 

$

32,732

 
                     

 

 

Lowe's Companies, Inc.

Consolidated Statements of Cash Flows (Unaudited)

In Millions

         
   

Six Months Ended

   

August 1, 2014

 

August 2, 2013

Cash flows from operating activities:

       

Net earnings 

 

$                   1,663

 

$                      1,482

Adjustments to reconcile net earnings to net cash provided by

       

operating activities:

       

Depreciation and amortization

 

798

 

767

Deferred income taxes

 

(137)

 

(56)

Loss on property and other assets - net

 

29

 

12

Loss on equity method investments

 

31

 

27

Share-based payment expense

 

53

 

44

Changes in operating assets and liabilities:

       

Merchandise inventory - net

 

(182)

 

(517)

Other operating assets

 

90

 

4

Accounts payable 

 

1,180

 

1,009

Other operating liabilities

 

398

 

584

Net cash provided by operating activities

 

3,923

 

3,356

         

Cash flows from investing activities:

       

Purchases of investments

 

(300)

 

(303)

Proceeds from sale/maturity of investments

 

293

 

224

Capital expenditures

 

(384)

 

(376)

Contributions to equity method investments - net

 

(151)

 

(113)

Proceeds from sale of property and other long-term assets

 

24

 

47

Other - net

 

(7)

 

3

Net cash used in investing activities

 

(525)

 

(518)

         

Cash flows from financing activities:

       

Net change in short-term borrowings

 

(386)

 

-

Repayment of long-term debt

 

(25)

 

(22)

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

 

68

 

100

Cash dividend payments

 

(369)

 

(352)

Repurchase of common stock

 

(2,051)

 

(2,027)

Other - net

 

12

 

8

Net cash used in financing activities

 

(2,751)

 

(2,293)

         

Effect of exchange rate changes on cash

 

1

 

(1)

         

Net increase in cash and cash equivalents

 

648

 

544

Cash and cash equivalents, beginning of period

 

391

 

541

Cash and cash equivalents, end of period

 

$                  1,039

 

$                    1,085

         

 

 

SOURCE Lowe's Companies, Inc.