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LOWES COMPANIES INC Annual Report, Year Ended Feb 3, 2006

Filing Date
Filed April 7, 2006
Period End
February 3, 2006
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 7, 2006. Cited figures are marked; the original filing is the authoritative source.

Lowe's Companies, Inc. (NYSE: LOW) reported strong fiscal 2005 results for the 53-week year ended February 3, 2006.

Net sales rose 19% to $43.2 billiona (about 2.1 points of that growth came from the extra week), and comparable store sales increased 6.1% on top of 6.6% in 2004 and 6.7% in 2003. Gross margin expanded 62 basis points to 34.23%, and net earnings grew 27% to $2.77 billion, or $3.46 per diluted share, versus $2.71 in 2004. Return on beginning shareholders' equity improved to 24.0%.

Growth was driven by the 150 new stores opened in 2005, higher average ticket ($67.67b vs. $63.43), and strong specialty sales: Installed Sales rose 31% to $2.6 billion and Special Order Sales rose 25% to $3.9 billion. The balance sheet and cash flow profile remain healthy. Operating cash flow increased 25% to $3.8 billion, while capital expenditures for fixed assets were $3.4 billion.

Long-term debt, excluding current maturities, rose to $3.5 billionc after a $1 billion senior notes issuance in October 2005, and the debt-to-total-capitalization ratio fell to 19.8% from 24.2%, largely because convertible notes converted into equity. Shareholders' equity grew to $14.3 billion. Lowe's returned capital through a $774 million buyback in 2005 and a quarterly dividend that rose to $0.06 per share, and the board authorized an additional $1 billion repurchase program in January 2006, leaving $1.2 billion of remaining authorization.

Looking ahead, management guided fiscal 2006 to total sales growth of 13-14%, comparable store sales growth of 5-6%, and diluted EPS of $4.03 to $4.13d. The company plans to open 155 stores (about 12% square footage growth) and is entering Canada with 6-10 stores in the Greater Toronto Area in 2007.

Risks highlighted in the filing include sensitivity to housing-related consumer spending and interest rates, weather, competition, supply-chain disruption from imports, and execution of the aggressive store expansion program. Fiscal 2006 comparisons will be pressured by lapping the 53rd week of fiscal 2005.

02—Key points

Key Highlights

  1. Net sales grew 19% to $43.2 billion in fiscal 2005, including roughly 2.1 points from the 53rd week; comparable store sales rose 6.1%.
  2. Net earnings rose 27% to $2.77 billion; diluted EPS was $3.46 versus $2.71 in 2004, and return on beginning equity reached 24.0%.
  3. Gross margin improved 62 basis points to 34.23%, helped by imports growth, lower shrink, and sales mix, with about 40 basis points from the EITF 02-16 accounting change.
  4. Specialty sales were strong: Installed Sales grew 31% to $2.6 billion and Special Order Sales grew 25% to $3.9 billion.
  5. Operating cash flow increased 25% to $3.8 billion, while the company invested $3.4 billion in fixed assets, including 150 new stores in 2005.
  6. Balance sheet strengthened: the debt-to-capitalization ratio fell to 19.8% from 24.2% as convertible notes converted to equity, despite a $1 billion senior notes issuance in October 2005.
  7. Fiscal 2006 guidance calls for 13-14% sales growth, 5-6% comparable store sales growth, and diluted EPS of $4.03-$4.13, with 155 planned store openings and entry into Canada in 2007.

03—Questions

Frequently Asked Questions

  1. How did Lowe's perform financially in fiscal 2005?

    Lowe's posted net sales of $43.2 billion, up 19%, and net earnings of $2.77 billion, up 27%. Diluted EPS was $3.46, compared with $2.71 in 2004. Comparable store sales rose 6.1%, and the 53-week year added about 2.1 points to sales growth.

  2. What is driving Lowe's growth?

    Growth came from comparable store sales gains driven by higher average ticket, the opening of 150 new stores, and specialty sales initiatives. Installed Sales rose 31% and Special Order Sales rose 25%. Management is also gaining share in appliances and outdoor power equipment and expanding its Commercial Business Customer business.

  3. What is Lowe's outlook for fiscal 2006?

    As of February 27, 2006, management expected total sales growth of 13-14%, comparable store sales growth of 5-6%, and diluted EPS of $4.03-$4.13. The company plans to open 155 stores, growing square footage about 12%. Reported comparisons will be pressured by lapping the extra week in fiscal 2005.

  4. How strong is Lowe's balance sheet and how is it returning capital?

    Shareholders' equity was $14.3 billion and the debt-to-capitalization ratio was 19.8%, down from 24.2%. The company issued $1 billion in senior notes in October 2005 and repurchased $774 million of stock in 2005. It also raised its quarterly dividend to $0.06 per share and authorized an additional $1 billion buyback in January 2006, leaving $1.2 billion available.

  5. What are the main risks to Lowe's business?

    The filing cites dependence on the general economy and home improvement spending, which can be hurt by higher interest rates, reduced credit availability, and slowing home-price appreciation. Other risks include unseasonable weather, the execution of the aggressive store expansion program, competition, product liability claims, disruption in the import supply chain, and reliance on information systems.

04—Continue

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