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Press release from Business Wire

Lowe's Reports Second Quarter Sales and Earnings Results

Monday, August 20, 2012

Lowe's Reports Second Quarter Sales and Earnings Results06:00 EDT Monday, August 20, 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 $747 million for the quarter ended August 3, 2012, a 10.0 percent decrease over the same period a year ago. Diluted earnings per share of $0.64 were flat versus the second quarter of 2011. For the six months ended August 3, 2012, net earnings decreased 1.3 percent from the same period a year ago to $1.27 billion, while diluted earnings per share increased 9.2 percent to $1.07. Lowe's fiscal year ends on the Friday nearest the end of January; therefore, fiscal year 2011 included 53 weeks. The quarterly comparisons in 2012, which is a 52-week year, are impacted by a shift in comparable weeks. Sales for the second quarter decreased 2.0 percent to $14.2 billion from $14.5 billion in the second quarter of 2011. The week shift accounted for $259 million or 1.8 percent of the total sales decline for the second quarter. For the six month period, sales were $27.4 billion, a 2.5 percent increase over the same period a year ago. The week shift accounted for $255 million or 1.0 percent of the total sales increase for the six month period. The week shift negatively impacted diluted earnings per share by approximately $0.03 in the second quarter. For the six month period, the week shift contributed approximately $0.03 to diluted earnings per share. 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 second quarter by $15 million and diluted earnings per share by $0.01. For the six month period, this charge reduced pre-tax earnings by $32 million and diluted earnings per share by $0.02. Comparable store sales for the second quarter decreased 0.4 percent, while comparable store sales for the U.S. business decreased 0.2 percent. For the six month period, comparable store sales increased 1.0 percent, while comparable store sales for the U.S. business increased 1.2%. Comparable store sales are based on comparable 13-week periods. “Our results fell short of our overall expectations,” commented Robert A. Niblock, Lowe's chairman, president and CEO. “However, I have confidence in our strategy and in our employees, and while we recognize the significant magnitude of change that we've asked the organization to absorb as we transform our business, we fully understand that we must improve our level of execution.” Delivering on the commitment to return excess cash to shareholders, the company repurchased $1.0 billion or 36.8 million shares of stock and paid $166 million in dividends in the second quarter. For the six month period, the company repurchased $2.75 billion or 94.7 million shares of common stock and paid $340 million in dividends. As of August 3, 2012, Lowe's operated 1,748 stores in the United States, Canada and Mexico representing 196.8 million square feet of retail selling space. A conference call to discuss second quarter 2012 operating results is scheduled for today (Monday, August 20) 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 Second Quarter 2012 Earnings Conference Call Webcast. A replay of the call will be archived on Lowes.com/investor until November 18, 2012. Lowe's Business Outlook Fiscal Year 2012 – a 52-week Year (comparisons to fiscal year 2011 – a 53-week year; based on U.S. GAAP unless otherwise noted) Total sales are expected to be approximately flat. On a 52 versus 52 week basis, total sales are expected to increase approximately 1 percent. The company expects comparable store sales to increase approximately 0.5 percent (on a 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 45 basis points. Depreciation expense is expected to be approximately $1.5 billion. The effective income tax rate is expected to be approximately 37.8%. Diluted earnings per share of approximately $1.64 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 Ended   Six Months Ended     August 3, 2012July 29, 2011August 3, 2012July 29, 2011Current Earnings         Amount   Percent   AmountPercent   Amount   Percent   Amount   PercentNet sales$14,249   100.00$14,543100.00$27,402   100.00$26,728   100.00   Cost of sales 9,415 66.07 9,527 65.51 18,003 65.70 17,393 65.07   Gross margin4,83433.935,01634.499,39934.309,33534.93   Expenses:   Selling, general and administrative 3,172 22.26 3,232 22.22 6,414 23.40 6,351 23.76   Depreciation 369 2.59 365 2.51 739 2.70 737 2.76   Interest - net 96 0.68 90 0.62 199 0.73 178 0.67   Total expenses3,63725.533,68725.357,35226.837,26627.19   Pre-tax earnings1,1978.401,3299.142,0477.472,0697.74   Income tax provision 450 3.15 499 3.43 772 2.82 777 2.91   Net earnings$7475.25$8305.71$1,2754.65$1,2924.83                                               Weighted average common shares outstanding - basic 1,157 1,275 1,182 1,300   Basic earnings per common share (1)$0.64$0.65$1.07$0.99   Weighted average common shares outstanding - diluted 1,159 1,278 1,183 1,303   Diluted earnings per common share (1)$0.64$0.64$1.07$0.98   Cash dividends per share$0.16$0.14$0.30$0.25                                               Retained Earnings                                           Balance at beginning of period $ 14,557 $ 16,715 $ 15,852 $ 17,371 Net earnings 747 830 1,275 1,292 Cash dividends (184 ) (176 ) (350 ) (322 ) Share repurchases (921 ) (1,309 ) (2,578 ) (2,281 ) Balance at end of period $ 14,199 $ 16,060 $ 14,199 $ 16,060                                                 (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 $742 million for the three months ended August 3, 2012 and $823 million for the three months ended July 29, 2011. Net earnings allocable to common shares used in the basic and diluted earnings per share calculation were $1,266 million for the six months ended August 3, 2012 and $1,281 million for the six months ended July 29, 2011.   Lowe's Companies, Inc.Consolidated Statements of Comprehensive Income (Unaudited) In Millions, Except Percentage Data             Three Months Ended       Six Months Ended     August 3, 2012July 29, 2011August 3, 2012July 29, 2011Amount   Percent   AmountPercentAmount   Percent   Amount   PercentNet earnings$7475.25$8305.71$1,2754.65$1,2924.83   Foreign currency translation adjustments (8 ) (0.05 ) (4 ) (0.03 ) (1 ) (0.00 ) 27 0.10   Net unrealized investment gains 3 0.01 1 0.01 2 0.01 2 0.01   Other comprehensive (loss)/income(5)(0.04)(3)(0.02)10.01290.11   Comprehensive income     $   742     5.21     $827   5.69     $1,276     4.66     $1,321     4.94         Lowe's Companies, Inc.Consolidated Balance Sheets In Millions, Except Par Value Data                           (Unaudited)   (Unaudited)   August 3, 2012July 29, 2011February 3, 2012Assets   Current assets: Cash and cash equivalents $ 1,710 $ 568 $ 1,014 Short-term investments 586 340 286 Merchandise inventory - net 8,699 8,825 8,355 Deferred income taxes - net 279 222 183 Other current assets   325   213   234   Total current assets11,59910,16810,072   Property, less accumulated depreciation 21,734 22,195 21,970 Long-term investments 485 857 504 Other assets   1,214   825   1,013   Total assets$35,032$34,045$33,559   Liabilities and shareholders' equity   Current liabilities: Current maturities of long-term debt $ 594 $ 39 $ 592 Accounts payable 5,084 5,378 4,352 Accrued compensation and employee benefits 561 495 613 Deferred revenue 847 831 801 Other current liabilities   1,936   1,934   1,533   Total current liabilities9,0228,6777,891   Long-term debt, excluding current maturities 9,008 6,581 7,035 Deferred income taxes - net 580 479 531 Deferred revenue - extended protection plans 726 673 704 Other liabilities   872   856   865   Total liabilities   20,208   17,266   17,026   Shareholders' equity: Preferred stock - $5 par value, none issued --- Common stock - $.50 par value; Shares issued and outstanding August 3, 2012 1,152 July 29, 2011 1,260 February 3, 2012 1,241 576 630 621 Capital in excess of par value 2 7 14 Retained earnings 14,199 16,060 15,852 Accumulated other comprehensive income   47   82   46   Total shareholders' equity   14,824   16,779   16,533   Total liabilities and shareholders' equity$35,032$34,045$33,559   Lowe's Companies, Inc.             Consolidated Statements of Cash Flows (Unaudited) In Millions                   Six Months EndedAugust 3, 2012     July 29, 2011Cash flows from operating activities: Net earnings $ 1,275 $ 1,292 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 789 786 Deferred income taxes (59 ) (50 ) Loss on property and other assets - net 36 100 Loss on equity method investments 29 4 Share-based payment expense 54 59 Net changes in operating assets and liabilities: Merchandise inventory - net (345 ) (495 ) Other operating assets (159 ) 121 Accounts payable 731 1,026 Other operating liabilities 445 450 Net cash provided by operating activities2,7963,293   Cash flows from investing activities: Purchases of investments (1,176 ) (948 ) Proceeds from sale/maturity of investments 897 1,232 Property acquired (622 ) (780 ) Change in equity method investments - net (159 ) (204 ) Proceeds from sale of property and other long-term assets 49 20 Other - net (21 ) (14 ) Net cash used in investing activities(1,032)(694)   Cash flows from financing activities: Net proceeds from issuance of long-term debt 1,984 - Repayment of long-term debt (20 ) (18 ) Proceeds from issuance of common stock under share-based payment plans 90 55 Cash dividend payments (340 ) (294 ) Repurchase of common stock (2,793 ) (2,433 ) Other - net 13 3 Net cash used in financing activities(1,066)(2,687)   Effect of exchange rate changes on cash(2)4   Net increase/(decrease) in cash and cash equivalents 696 (84 ) Cash and cash equivalents, beginning of period 1,014 652 Cash and cash equivalents, end of period$1,710$568 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