Lowe's Reports Second Quarter 2020 Sales And Earnings Results
Lowe's Companies reported impressive second-quarter results for 2020, achieving net earnings of $2.8 billion and diluted EPS of $3.74, a substantial increase from $1.7 billion and $2.14, respectively, in the same quarter of 2019. Total sales rose to $27.3 billion, a 34.2% increase compared to the prior year. The company invested $460 million in support of associates and safety measures during COVID-19 and recorded a profit-sharing bonus of $107 million for its hourly workers. All U.S. regions and merchandising divisions exhibited notable sales growth, indicating a strong consumer focus on home improvement.
- Net earnings increased to $2.8 billion from $1.7 billion YoY.
- Diluted EPS rose to $3.74, up from $2.14 YoY.
- Sales increased to $27.3 billion, a 34.2% year-over-year growth.
- All merchandising divisions posted growth exceeding 20%.
- Investment of $460 million in COVID-related support and safety.
- Withdrew financial guidance for fiscal year 2020 due to uncertainty.
MOORESVILLE, N.C., Aug. 19, 2020 /PRNewswire/ -- Lowe's Companies, Inc. (NYSE: LOW) today reported net earnings of
Sales for the second quarter were
In the second quarter, the Company invested
"Our highest priority has always been protecting the health and safety of our associates and customers through a safe store environment and shopping experience. We are incredibly proud of our associates, and we are grateful for their hard work and ongoing commitment to safety," commented Marvin R. Ellison, Lowe's president and CEO.
"We delivered very strong second quarter results, with all merchandising divisions posting comparable sales growth exceeding
As of July 31, 2020, Lowe's operated 1,968 home improvement and hardware stores in the United States and Canada representing 208 million square feet of retail selling space.
A conference call to discuss second quarter 2020 operating results is scheduled for today, Wednesday, August 19, at 9:00 am ET. The conference call will be available by webcast and can be accessed by visiting Lowe's website at ir.lowes.com and clicking on Lowe's Second Quarter 2020 Earnings Conference Call Webcast. Supplemental slides will be available approximately 15 minutes prior to the start of the conference call. A replay of the call will be archived at ir.lowes.com.
Lowe's Business Outlook
On May 20, 2020, the Company withdrew its financial guidance for fiscal year 2020 due to limited visibility into future business trends in this unprecedented operating environment, which results in an unusually wide range of potential outcomes for 2020 financial performance.
Lowe's Companies, Inc.
Lowe's Companies, Inc. (NYSE: LOW) is a FORTUNE® 50 home improvement company serving approximately 18 million customers a week in the United States and Canada. With fiscal year 2019 sales of
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", "outlook", "guidance", and similar expressions are forward-looking statements. Forward-looking statements involve, among other things, expectations, projections, and assumptions about future financial and operating results, objectives, business outlook, priorities, sales growth, shareholder value, capital expenditures, cash flows, the housing market, the home improvement industry, demand for products and services, share repurchases, Lowe's strategic initiatives, including those relating to acquisitions and dispositions and the impact of such transactions on our strategic and operational plans and financial results. Such statements involve risks and uncertainties and we can give no assurance that they will prove to be correct. Actual results may differ materially from those expressed or implied in such statements.
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, 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, changes in commodity prices, changes or threatened changes in tariffs, outbreak of public health crises, such as the COVID-19 pandemic, availability and cost of goods from suppliers, changes in our management and key personnel, and other factors that can negatively affect our customers.
Investors and others should carefully consider the foregoing factors and other uncertainties, risks and potential events including, but not limited to, those described in "Item 1A - Risk Factors" in our most recent Annual Report on Form 10-K and as may be updated from time to time in Item 1A in our quarterly reports on Form 10-Q or other subsequent filings with the SEC. All such forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update these statements other than as required by law.
LOW-IR
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 reconciliations between the Company's GAAP and non-GAAP financial results.
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 | ||||||||||||||||||||||||||
July 31, 2020 | August 2, 2019 | July 31, 2020 | August 2, 2019 | ||||||||||||||||||||||||
Current Earnings | Amount | % Sales | Amount | % Sales | Amount | % Sales | Amount | % Sales | |||||||||||||||||||
Net sales | $ | 27,302 | 100.00 | $ | 20,992 | 100.00 | $ | 46,977 | 100.00 | $ | 38,733 | 100.00 | |||||||||||||||
Cost of sales | 17,998 | 65.92 | 14,252 | 67.89 | 31,161 | 66.33 | 26,412 | 68.19 | |||||||||||||||||||
Gross margin | 9,304 | 34.08 | 6,740 | 32.11 | 15,816 | 33.67 | 12,321 | 31.81 | |||||||||||||||||||
Expenses: | |||||||||||||||||||||||||||
Selling, general and administrative | 5,020 | 18.39 | 4,048 | 19.29 | 9,215 | 19.62 | 7,909 | 20.42 | |||||||||||||||||||
Depreciation and amortization | 327 | 1.20 | 311 | 1.48 | 653 | 1.39 | 614 | 1.58 | |||||||||||||||||||
Operating income | 3,957 | 14.49 | 2,381 | 11.34 | 5,948 | 12.66 | 3,798 | 9.81 | |||||||||||||||||||
Interest – net | 219 | 0.80 | 169 | 0.80 | 423 | 0.90 | 331 | 0.86 | |||||||||||||||||||
Pre-tax earnings | 3,738 | 13.69 | 2,212 | 10.54 | 5,525 | 11.76 | 3,467 | 8.95 | |||||||||||||||||||
Income tax provision | 910 | 3.33 | 536 | 2.56 | 1,360 | 2.89 | 745 | 1.92 | |||||||||||||||||||
Net earnings | $ | 2,828 | 10.36 | $ | 1,676 | 7.98 | $ | 4,165 | 8.87 | $ | 2,722 | 7.03 | |||||||||||||||
Weighted average common shares outstanding – basic | 752 | 781 | 754 | 788 | |||||||||||||||||||||||
Basic earnings per common share (1) | $ | 3.74 | $ | 2.14 | $ | 5.50 | $ | 3.44 | |||||||||||||||||||
Weighted average common shares outstanding – diluted | 753 | 781 | 755 | 789 | |||||||||||||||||||||||
Diluted earnings per common share (1) | $ | 3.74 | $ | 2.14 | $ | 5.50 | $ | 3.44 | |||||||||||||||||||
Cash dividends per share | $ | 0.55 | $ | 0.55 | $ | 1.10 | $ | 1.03 | |||||||||||||||||||
Retained Earnings | |||||||||||||||||||||||||||
Balance at beginning of period | $ | 1,722 | $ | 3,095 | $ | 1,727 | $ | 3,452 | |||||||||||||||||||
Cumulative effect of accounting change | — | — | — | (263) | |||||||||||||||||||||||
Net earnings | 2,828 | 1,676 | 4,165 | 2,722 | |||||||||||||||||||||||
Cash dividends declared | (416) | (428) | (831) | (810) | |||||||||||||||||||||||
Share repurchases | — | (1,904) | (927) | (2,662) | |||||||||||||||||||||||
Balance at end of period | $ | 4,134 | $ | 2,439 | $ | 4,134 | $ | 2,439 | |||||||||||||||||||
(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 |
Lowe's Companies, Inc. | |||||||||||||||||||||||||||
Consolidated Statements of Comprehensive Income (Unaudited) | |||||||||||||||||||||||||||
In Millions, Except Percentage Data | |||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
July 31, 2020 | August 2, 2019 | July 31, 2020 | August 2, 2019 | ||||||||||||||||||||||||
Amount | % Sales | Amount | % Sales | Amount | % Sales | Amount | % Sales | ||||||||||||||||||||
Net earnings | $ | 2,828 | 10.36 | $ | 1,676 | 7.98 | $ | 4,165 | 8.87 | $ | 2,722 | 7.03 | |||||||||||||||
Foreign currency translation adjustments – net of tax | 114 | 0.41 | 69 | 0.33 | (45) | (0.10) | 36 | 0.09 | |||||||||||||||||||
Cash flow hedges – net of tax | (5) | (0.02) | — | — | (108) | (0.23) | (16) | (0.04) | |||||||||||||||||||
Other | (1) | — | — | — | 4 | 0.01 | 2 | — | |||||||||||||||||||
Other comprehensive income/(loss) | 108 | 0.39 | 69 | 0.33 | (149) | (0.32) | 22 | 0.05 | |||||||||||||||||||
Comprehensive income | $ | 2,936 | 10.75 | $ | 1,745 | 8.31 | $ | 4,016 | 8.55 | $ | 2,744 | 7.08 | |||||||||||||||
Lowe's Companies, Inc. | ||||||||||||
Consolidated Balance Sheets (Unaudited) | ||||||||||||
In Millions, Except Par Value Data | ||||||||||||
July 31, 2020 | August 2, 2019 | January 31, 2020 | ||||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 11,641 | $ | 1,796 | $ | 716 | ||||||
Short-term investments | 1,085 | 275 | 160 | |||||||||
Merchandise inventory – net | 13,831 | 13,730 | 13,179 | |||||||||
Other current assets | 1,160 | 995 | 1,263 | |||||||||
Total current assets | 27,717 | 16,796 | 15,318 | |||||||||
Property, less accumulated depreciation | 18,612 | 18,203 | 18,669 | |||||||||
Operating lease right-of-use assets | 3,798 | 3,967 | 3,891 | |||||||||
Long-term investments | 326 | 179 | 372 | |||||||||
Deferred income taxes – net | 267 | 512 | 216 | |||||||||
Other assets | 1,043 | 1,038 | 1,005 | |||||||||
Total assets | $ | 51,763 | $ | 40,695 | $ | 39,471 | ||||||
Liabilities and shareholders' equity | ||||||||||||
Current liabilities: | ||||||||||||
Short-term borrowings | $ | 1,000 | $ | — | $ | 1,941 | ||||||
Current maturities of long-term debt | 609 | 1,009 | 597 | |||||||||
Current operating lease liabilities | 520 | 492 | 501 | |||||||||
Accounts payable | 12,916 | 9,499 | 7,659 | |||||||||
Accrued compensation and employee benefits | 1,139 | 717 | 684 | |||||||||
Deferred revenue | 1,715 | 1,324 | 1,219 | |||||||||
Other current liabilities | 3,471 | 2,794 | 2,581 | |||||||||
Total current liabilities | 21,370 | 15,835 | 15,182 | |||||||||
Long-term debt, excluding current maturities | 20,197 | 16,538 | 16,768 | |||||||||
Noncurrent operating lease liabilities | 3,859 | 4,055 | 3,943 | |||||||||
Deferred revenue – extended protection plans | 981 | 868 | 894 | |||||||||
Other liabilities | 1,000 | 759 | 712 | |||||||||
Total liabilities | 47,407 | 38,055 | 37,499 | |||||||||
Shareholders' equity: | ||||||||||||
Preferred stock, | — | — | — | |||||||||
Common stock, | 378 | 388 | 381 | |||||||||
Capital in excess of par value | 129 | — | — | |||||||||
Retained earnings | 4,134 | 2,439 | 1,727 | |||||||||
Accumulated other comprehensive loss | (285) | (187) | (136) | |||||||||
Total shareholders' equity | 4,356 | 2,640 | 1,972 | |||||||||
Total liabilities and shareholders' equity | $ | 51,763 | $ | 40,695 | $ | 39,471 | ||||||
Lowe's Companies, Inc. | |||||||
Consolidated Statements of Cash Flows (Unaudited) | |||||||
In Millions | |||||||
Six Months Ended | |||||||
July 31, 2020 | August 2, 2019 | ||||||
Cash flows from operating activities: | |||||||
Net earnings | $ | 4,165 | $ | 2,722 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Depreciation and amortization | 747 | 684 | |||||
Noncash lease expense | 234 | 228 | |||||
Deferred income taxes | (14) | (121) | |||||
Loss on property and other assets – net | 80 | 38 | |||||
Share-based payment expense | 64 | 51 | |||||
Changes in operating assets and liabilities: | |||||||
Merchandise inventory – net | (674) | (1,153) | |||||
Other operating assets | 66 | (104) | |||||
Accounts payable | 5,259 | 1,202 | |||||
Other operating liabilities | 1,825 | 36 | |||||
Net cash provided by operating activities | 11,752 | 3,583 | |||||
Cash flows from investing activities: | |||||||
Purchases of investments | (1,132) | (245) | |||||
Proceeds from sale/maturity of investments | 260 | 272 | |||||
Capital expenditures | (710) | (526) | |||||
Proceeds from sale of property and other long-term assets | 46 | 42 | |||||
Other – net | (24) | (1) | |||||
Net cash used in investing activities | (1,560) | (458) | |||||
Cash flows from financing activities: | |||||||
Net change in commercial paper | (941) | (722) | |||||
Net proceeds from issuance of debt | 3,961 | 2,972 | |||||
Repayment of long-term debt | (568) | (629) | |||||
Proceeds from issuance of common stock under share-based payment plans | 83 | 72 | |||||
Cash dividend payments | (836) | (767) | |||||
Repurchase of common stock | (966) | (2,770) | |||||
Other – net | (4) | (7) | |||||
Net cash provided by (used in) financing activities | 729 | (1,851) | |||||
Effect of exchange rate changes on cash | 4 | (1) | |||||
Net increase in cash and cash equivalents, including cash classified within current assets held for sale | 10,925 | 1,273 | |||||
Less: Net decrease in cash classified within current assets held for sale | — | 12 | |||||
Net increase in cash and cash equivalents | 10,925 | 1,285 | |||||
Cash and cash equivalents, beginning of period | 716 | 511 | |||||
Cash and cash equivalents, end of period | $ | 11,641 | $ | 1,796 | |||
Lowe's Companies, Inc.
Non-GAAP Financial Measures Reconciliation (Unaudited)
To provide additional transparency, the Company has presented the non-GAAP financial measure of adjusted diluted earnings per share for comparing its operating performance for the three months ended July 31, 2020, with the respective period ended August 2, 2019. This measure excludes the impact of certain discrete items, as further described below, not contemplated in Lowe's Original Business Outlook to assist analysts and investors in understanding operational performance for the second quarter of fiscal 2020 and fiscal 2019.
Fiscal 2020 Impacts
For fiscal 2020, the Company has recognized financial impacts from the following discrete item, not contemplated in the Company's Original Business Outlook for the second quarter of fiscal 2020:
- Beginning in the third quarter of fiscal 2019, the Company began a strategic review of its Canadian operations, and in the fourth quarter of fiscal 2019, the Company announced additional actions to improve future performance and profitability of its Canadian operations. As a result of this review and related actions, in the second quarter of fiscal 2020, the Company recognized
$10 million of pre-tax operating costs related to remaining inventory write-downs and store closing costs (Canada restructuring).
Fiscal 2019 Impacts
During fiscal 2019, the Company recognized financial impacts from the following discrete item, not contemplated in the Company's Business Outlook for the second quarter of fiscal 2019:
- Prior to the beginning of fiscal 2019, the Company announced its intention to exit its Mexico retail operations and had planned to sell the operating business. During the three months ended August 2, 2019, the Company recognized a net loss of
$12 million in pre-tax operating losses associated with the exit and ongoing wind-down of the Mexico retail operations (Mexico adjustments).
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 non-GAAP financial measures may differ from the method used by other companies and may not be comparable.
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) | ||||||||||||||||||
July 31, 2020 | August 2, 2019 | ||||||||||||||||||
(in millions, except per share data) | Pre-Tax | Tax | Net | Pre-Tax | Tax | Net | |||||||||||||
Diluted earnings per share, as reported | $ | 3.74 | $ | 2.14 | |||||||||||||||
Non-GAAP adjustments – per share impacts | |||||||||||||||||||
Canada restructuring | 0.01 | — | 0.01 | — | — | — | |||||||||||||
Mexico adjustments | — | — | — | 0.02 | (0.01) | 0.01 | |||||||||||||
Adjusted diluted earnings per share | $ | 3.75 | $ | 2.15 | |||||||||||||||
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SOURCE Lowe's Companies, Inc.
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