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LOWES COMPANIES INC Annual Report, Year Ended Jan 30, 2004

Filing Date
Filed April 8, 2004
Period End
January 30, 2004
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 8, 2004. Cited figures are marked; the original filing is the authoritative source.

Lowe's reported a strong fiscal 2003 (year ended January 30, 2004), with net sales rising 18% to $30.8 billiona and comparable store sales up 6.7%, versus 5.8% in 2002.

Diluted EPS climbed 27% to $2.34b from $1.85, and net earnings reached $1.9 billion, or 6.1% of sales. Gross margin expanded to 31.2% from 30.4%, driven mainly by lower inventory acquisition costs and reduced shrink, while SG&A rose to 18.0% of sales, partly due to first-time stock-based compensation expense of $41 million under SFAS 123. Operating cash flow from continuing operations was $3.0 billion, against $2.4 billion of fixed asset spending.

Growth remains the central story. Lowe's ended the year with 952 stores in 45 states, up from 854, and plans about 140 openings in 2004, which should expand selling square footage by roughly 14%c. The company is shifting its expansion toward metropolitan markets over 500,000 in population, which accounted for about 46% of 2003 openings.

Its 2004 outlook calls for sales growth near 17%, comparable store sales growth of 5% to 6%, and diluted EPS of $2.63 to $2.66d after a roughly $0.13 per-share hit from adopting EITF 02-16. The filing also discloses a $1 billion share repurchase authorization through 2005 that had not yet been used, and a planned increase in the quarterly dividend to $0.03. The balance sheet is conservative.

Long-term debt was $3.7 billion, the long-term debt-to-capitalization ratio fell to 26.3% from 31.0%, and the company holds an A-rated senior debt profile with a positive outlook from S&P. Risks flagged in the filing include sensitivity to housing starts, the economic cycle, commodity lumber and plywood price swings, rising competition as Lowe's enters larger markets, and the execution demands of rapid expansion. Management also notes that the EITF 02-16 accounting change will modestly reduce 2004 earnings.

02—Key points

Key Highlights

  1. Net sales grew 18% to $30.8 billion, with comparable store sales up 6.7% (vs. 5.8% in 2002) and average ticket rising 4% to $59.21.
  2. Diluted EPS rose 27% to $2.34 (from $1.85), and net earnings increased 28% to $1.9 billion, or 6.1% of sales.
  3. Gross margin expanded to 31.2% of sales (from 30.4%), driven by lower inventory acquisition costs and reduced shrink rather than price increases.
  4. SG&A rose to 18.0% of sales, reflecting $41 million of new stock-based compensation expense, which weighed on margins.
  5. The company operated 952 stores at year-end and plans about 140 openings in 2004, expanding square footage roughly 14%, with a focus on metro markets of 500,000+ people.
  6. 2004 guidance: sales up ~17%, comparable store sales up 5% to 6%, and diluted EPS of $2.63 to $2.66 (including a ~$0.13 EITF 02-16 headwind).
  7. Balance sheet strengthened: long-term debt to capitalization fell to 26.3% (from 31.0%), operating cash flow reached $3.0 billion, and a $1 billion buyback authorization is in place.

03—Questions

Frequently Asked Questions

  1. How did Lowe's perform financially in fiscal 2003?

    Lowe's posted record results: net sales rose 18% to $30.8 billion, net earnings increased 28% to $1.9 billion, and diluted EPS reached $2.34, up from $1.85 a year earlier. Comparable store sales grew 6.7%, and gross margin improved to 31.2% of sales.

  2. What is Lowe's growth strategy and what does 2004 look like?

    The company plans to open about 140 stores in 2004, expanding square footage about 14%, and is increasingly targeting metropolitan markets of over 500,000 people. Management guides to roughly 17% sales growth, 5% to 6% comparable store sales growth, and diluted EPS of $2.63 to $2.66 after the EITF 02-16 accounting change.

  3. Why did SG&A increase as a percentage of sales?

    SG&A rose to 18.0% of sales from 17.9% primarily because Lowe's began expensing stock-based compensation under SFAS 123 for awards granted after January 31, 2003. That charge totaled $41 million in 2003.

  4. What is the EITF 02-16 change and how will it affect earnings?

    EITF 02-16 required Lowe's to treat certain vendor cooperative advertising and in-store service funds as a reduction of inventory cost rather than an offset to expenses. The change does not affect cash flows, but it shifts income recognition timing and is estimated to reduce fiscal 2004 EPS by about $0.13.

  5. How strong is Lowe's balance sheet and what capital return programs are in place?

    Lowe's ended the year with $1.4 billion in cash, total assets of $19.0 billion, and long-term debt of $3.7 billion. Its long-term debt-to-capitalization ratio dropped to 26.3%. The board approved a $1 billion share repurchase program through 2005, with no shares repurchased as of year-end, and raised the quarterly dividend 20% to $0.03.

04—Continue

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