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Press release from Business Wire

Lowe's Reports First Quarter Sales and Earnings Results

Monday, May 21, 2012

Lowe's Reports First Quarter Sales and Earnings Results06:00 EDT Monday, May 21, 2012 MOORESVILLE, N.C. (Business Wire) -- Lowe's Companies, Inc. (NYSE: LOW), the world's second largest home improvement retailer, today reported net earnings of $527 million for the quarter ended May 4, 2012, a 14.3 percent increase over the same period a year ago. Diluted earnings per share increased 26.5 percent to $0.43 from $0.34 in the first quarter of 2011. Sales for the quarter increased 7.9 percent to $13.2 billion from $12.2 billion in the first quarter of 2011. Lowe's fiscal year ends on the Friday nearest the end of January; therefore, fiscal year 2011 included 53 weeks. The 2012 quarterly comparisons will be impacted by a shift in comparable weeks. The week shift aided the first quarter sales increase by $514 million or 4.2 percent, and contributed approximately $0.05 to the diluted earnings per share growth. Included in the above reported results is a charge related to a previously announced reduction in staff at U.S. headquarters. This charge reduced pre-tax earnings for the first quarter by $17 million and diluted earnings per share by $0.01. Comparable store sales for the quarter increased 2.6 percent, while comparable store sales for the U.S. business increased 2.7 percent. “We delivered solid results for the quarter, consistent with our expectation at the beginning of the year,” commented Robert A. Niblock, Lowe's chairman, president and CEO. “While we capitalized on better than anticipated weather during most of the quarter, demand for seasonal products slowed toward the end. “We continue to maintain a cautious view of the housing and macro demand environment, and are focused on what we can control,” Niblock added. “We are building on our core strengths and strategically investing in ways that will better position Lowe's for success. I would like to express my gratitude to our employees for their continued dedication and customer focus.” As of May 4, 2012, Lowe's operated 1,747 stores in the United States, Canada and Mexico representing 196.7 million square feet of retail selling space. A conference call to discuss first quarter 2012 operating results is scheduled for today (Monday, May 21) at 9:00 am ET. The conference call will be available through a webcast and can be accessed by visiting Lowe's website at www.Lowes.com/investor and clicking on Lowe's First Quarter 2012 Earnings Conference Call Webcast. A replay of the call will be archived on Lowes.com until August 19, 2012. Lowe's Business Outlook Fiscal Year 2012 – a 52-week Year (comparisons to fiscal year 2011 – a 53-week year) Total sales are expected to increase 1 to 2 percent. On a 52 versus 52 week basis, total sales are expected to increase approximately 3 percent. The company expects comparable store sales to increase 1 to 3 percent (52 versus 52 week basis). The company expects to open approximately 10 stores in fiscal year 2012. Earnings before interest and taxes as a percentage of sales (operating margin) are expected to increase approximately 90 basis points. Depreciation expense is expected to be approximately $1.5 billion. The effective income tax rate is expected to be approximately 37.9%. Diluted earnings per share of $1.73 to $1.83 are expected for the fiscal year ending February 1, 2013. 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 store sales, earnings and performance, shareholder value, capital expenditures, store openings, 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 continued high rates 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) to 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. With fiscal year 2011 sales of $50.2 billion, Lowe's Companies, Inc. is a FORTUNE® 100 company that serves approximately 15 million customers a week at more than 1,745 home improvement stores in the United States, Canada and Mexico. Founded in 1946 and based in Mooresville, N.C., Lowe's is the second-largest home improvement retailer in the world. 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 EndedMay 4, 2012April 29, 2011Current Earnings   Amount   Percent   Amount   PercentNet sales$13,153100.00$12,185100.00   Cost of sales 8,589 65.30 7,866 64.56   Gross margin4,56434.704,31935.44   Expenses:   Selling, general and administrative 3,241 24.65 3,120 25.60   Depreciation 370 2.81 371 3.05   Interest - net 103 0.78 88 0.72   Total expenses3,71428.243,57929.37   Pre-tax earnings8506.467406.07   Income tax provision 323 2.45 279 2.28   Net earnings$5274.01$4613.79                         Weighted average common shares outstanding - basic 1,206 1,324   Basic earnings per common share (1)$0.43$0.35   Weighted average common shares outstanding - diluted 1,208 1,328   Diluted earnings per common share (1)$0.43$0.34   Cash dividends per share$0.14$0.11                         Retained Earnings                     Balance at beginning of period $ 15,852 $ 17,371 Net earnings 527 461 Cash dividends (165 ) (145 ) Share repurchases (1,657 ) (972 ) Balance at end of period $ 14,557 $ 16,715                         (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 $524 million for the three months ended May 4, 2012, and $458 million for the three months ended April 29, 2011.     Lowe's Companies, Inc.Consolidated Statements of Comprehensive Income (Unaudited) In Millions, Except Percentage Data       Three Months EndedMay 4, 2012April 29, 2011Amount   Percent   Amount   PercentNet earnings$5274.01$4613.79   Foreign currency translation adjustments 7 0.05 31 0.25   Net unrealized investment gains - 0.00 1 0.01   Other comprehensive income70.05320.26   Comprehensive income$5344.06$4934.05         Lowe's Companies, Inc.Consolidated Balance Sheets In Millions, Except Par Value Data                       (Unaudited)(Unaudited)May 4, 2012April 29, 2011February 3, 2012Assets   Current assets: Cash and cash equivalents $ 3,072 $ 1,496 $ 1,014 Short-term investments 161 345 286 Merchandise inventory - net 9,786 9,661 8,355 Deferred income taxes - net 279 232 183 Other current assets   330   239   234   Total current assets13,62811,97310,072   Property, less accumulated depreciation 21,821 22,060 21,970 Long-term investments 710 1,209 504 Other assets   1,049   642   1,013   Total assets$37,208$35,884$33,559   Liabilities and Shareholders' Equity   Current liabilities: Current maturities of long-term debt $ 593 $ 38 $ 592 Accounts payable 6,977 6,694 4,352 Accrued compensation and employee benefits 492 557 613 Deferred revenue 881 970 801 Other current liabilities   2,053   1,662   1,533   Total current liabilities10,9969,9217,891   Long-term debt, excluding current maturities 9,018 6,538 7,035 Deferred income taxes - net 412 498 531 Deferred revenue - extended protection plans 716 650 704 Other liabilities   863   818   865   Total liabilities   22,005   18,425   17,026   Shareholders' equity: Preferred stock - $5 par value, none issued --- Common stock - $.50 par value; Shares issued and outstanding May 4, 2012 1,187 April 29, 2011 1,318 February 3, 2012 1,241 594 659 621 Capital in excess of par value - - 14 Retained earnings 14,557 16,715 15,852 Accumulated other comprehensive income   52   85   46   Total shareholders' equity   15,203   17,459   16,533   Total liabilities and shareholders' equity$37,208$35,884$33,559       Lowe's Companies, Inc.Consolidated Statements of Cash Flows (Unaudited) In Millions                   Three Months EndedMay 4, 2012April 29, 2011Cash flows from operating activities: Net earnings $ 527 $ 461 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 396 397 Deferred income taxes (230 ) (43 ) Loss on property and other assets - net 19 9 Loss on equity method investments 15 2 Share-based payment expense 25 30 Net changes in operating assets and liabilities: Merchandise inventory - net (1,432 ) (1,329 ) Other operating assets (65 ) 104 Accounts payable 2,625 2,339 Other operating liabilities 587 453 Net cash provided by operating activities2,4672,423   Cash flows from investing activities: Purchases of investments (708 ) (627 ) Proceeds from sale/maturity of investments 627 554 Property acquired (337 ) (313 ) Change in equity method investments - net (70 ) (32 ) Proceeds from sale of property and other long-term assets 29 5 Other - net (11 ) 2 Net cash used in investing activities(470)(411)   Cash flows from financing activities: Net proceeds from issuance of long-term debt 1,984 - Repayment of long-term debt (10 ) (9 ) Proceeds from issuance of common stock under share-based payment plans 53 15 Cash dividend payments (174 ) (149 ) Repurchase of common stock (1,789 ) (1,031 ) Other - net (4 ) 3 Net cash provided by (used in) financing activities60(1,171)   Effect of exchange rate changes on cash13   Net increase in cash and cash equivalents 2,058 844 Cash and cash equivalents, beginning of period 1,014 652 Cash and cash equivalents, end of period$3,072$1,496   Lowe?s Companies, Inc.Shareholders?/Analysts? Inquiries:Tiffany Mason, 704-758-2033tiffany.l.mason@lowes.comorMedia Inquiries:Chris Ahearn, 704-758-2304chris.c.ahearn@lowes.com