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LOWES COMPANIES INC Annual Report, Year Ended Jan 31, 2003

Filing Date
Filed April 15, 2003
Period End
January 31, 2003
Security
LOW
In the record · 2016–202610-K1110-Q328-K126

LOW filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 126 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · May ’17May ’17
  2. Leadership change8-K · Apr ’20Apr ’20
  3. Leadership change8-K · Jun ’22Jun ’22
  4. Deal closed8-K · Oct ’25Oct ’25

01—Abstract

Summary

Summary of the 10-K filed April 15, 2003. Cited figures are marked; the original filing is the authoritative source.

Lowe's Companies (NYSE: LOW) closed fiscal 2002 (year ended January 31, 2003) with a strong performance driven by aggressive store expansion and solid comparable-store growth.

Net sales rose 20% to $26.5 billiona, up from $22.1 billion, while comparable store sales increased 5.6%. Net earnings climbed 44% to $1.47 billion (5.6% of sales, versus 4.6% in 2001), and diluted EPS rose to $1.85 from $1.30. Gross margin expanded to 30.3% of sales from 28.8%, primarily from product mix improvements, lower costs, and better shrinkage, while SG&A held roughly flat as a percentage of sales at 17.9%.

Return on beginning shareholders' equity improved to 22.0%. The balance sheet and cash flow profile remain healthy. Operating cash flow nearly doubled to $2.7 billionb, and the company funded $2.4 billion of fixed asset additions largely from internal cash generation.

Total debt was stable at roughly $3.8 billionc, and the long-term debt-to-capitalization ratio fell to 31.2% from 36.2%. Lowe's exercised purchase options in January 2003 to buy $261.5 million of properties previously held under operating leases, and it reports a 2003 capital budget of $2.9 billion. Credit ratings remain investment grade (S&P A, Moody's A3, Fitch A), with a positive outlook from Moody's.

The company's growth strategy centers on opening about 130 stores in 2003, with roughly 64%d of expansion targeted at metro markets of 500,000 or more people, and on building its commercial business customer base. Key risks disclosed include sensitivity to housing starts, remodeling activity, and economic cycles; commodity price volatility, especially lumber; competitive pressure as the company enters larger markets and the Internet; and weather effects on seasonal categories. Management also flagged rising interest costs from higher debt levels and reduced capitalized interest, plus a higher effective tax rate of 37.6% due to expansion into higher-tax states.

02—Key points

Key Highlights

  1. Net sales grew 20% to $26.5 billion in 2002, with comparable store sales up 5.6%, driven by new store openings and improved performance across most merchandising categories.
  2. Net earnings rose 44% to $1.47 billion, and diluted EPS increased to $1.85 from $1.30, with net margin expanding to 5.6% of sales from 4.6%.
  3. Gross margin widened to 30.3% from 28.8% in 2001, reflecting product mix improvements, lower costs, and improved shrinkage, while SG&A remained controlled at 17.9% of sales.
  4. Operating cash flow increased to $2.7 billion from $1.6 billion, and the long-term debt-to-capitalization ratio improved to 31.2% from 36.2%.
  5. The company operated 854 stores in 44 states at year-end, after opening 112 new and 11 relocated stores, and plans about 130 openings in 2003 with a $2.9 billion capital budget.
  6. Lowe's exercised options to repurchase $261.5 million of properties previously held under operating leases, and maintains investment-grade ratings (S&P A, Moody's A3, Fitch A).
  7. Key risks include housing and remodeling cycle sensitivity, commodity price swings (notably lumber), rising competition in larger metro markets and online, and rising interest costs and tax rates.

03—Questions

Frequently Asked Questions

  1. How strong was Lowe's financial performance in fiscal 2002?

    Performance was strong. Sales rose 20% to $26.5 billion, net earnings grew 44% to $1.47 billion, and diluted EPS reached $1.85, up from $1.30. Return on beginning shareholders' equity improved to 22.0% from 18.6%.

  2. What is driving Lowe's margin improvement?

    Gross margin expanded 150 basis points to 30.3%, mainly due to product mix shifts, lower costs from ongoing line reviews, and improved inventory shrinkage. SG&A held roughly steady as a share of sales, so most of the gross margin gain flowed to operating profit.

  3. How is Lowe's growth strategy evolving?

    Lowe's continues an aggressive store expansion, planning about 130 openings in 2003 with a 2003 capital budget of $2.9 billion. Roughly 64% of expansion is focused on metro markets with populations of 500,000 or more, and the company is pursuing commercial business customers more actively.

  4. Is Lowe's balance sheet and liquidity position sound?

    Yes. Operating cash flow of $2.7 billion funded most of the $2.4 billion in fixed asset investment, total long-term debt is about $3.7 billion, and the long-term debt-to-capitalization ratio dropped to 31.2%. The company has an $800 million senior credit facility with no outstanding borrowings and carries investment-grade credit ratings.

  5. What are the main risks investors should consider?

    Key risks include sensitivity to housing starts, remodeling activity, and economic downturns; commodity price volatility, particularly lumber; intensifying competition as the company moves into larger markets and online; dependence on vendors for reliable supply at competitive prices; and weather effects on seasonal product lines. Rising interest expense and a higher effective tax rate of 37.6% also pressure earnings.

04—Continue

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