10-KPeriod: FY2020

LOWES COMPANIES INC Annual Report, Year Ended Jan 31, 2020

Filed March 23, 2020For Securities:LOW

Summary

Lowe's Companies, Inc. (LOW) reported net sales of $72.1 billion for the fiscal year ended January 31, 2020, marking a 1.2% increase from the previous year. This growth was primarily driven by a 2.6% increase in comparable sales, which benefited from a 2.1% rise in average ticket and a 0.5% increase in transactions. The company demonstrated a significant improvement in profitability, with net earnings rising by 85.0% to $4.3 billion and diluted earnings per share increasing to $5.49 from $2.84 in the prior year. This earnings boost was partly attributable to the strategic actions taken to streamline operations, including exits from Mexico and Orchard Supply Hardware businesses, and store rationalizations in Canada, which incurred substantial one-time charges but positioned the company for future efficiency. Lowe's continued its commitment to shareholder returns, repurchasing $4.3 billion in stock and paying $1.6 billion in dividends during the fiscal year. The company also made strategic investments in its infrastructure, focusing on merchandising excellence, supply chain transformation, operational efficiency, and enhanced customer engagement. Despite facing headwinds such as tariff pressures impacting gross margin, Lowe's made progress on its multi-year transformation, aiming to build a robust omni-channel ecosystem. The company's outlook for the upcoming year included an approximately $1.6 billion capital expenditure forecast, emphasizing store investments and strategic initiatives.

Financial Highlights

51 data points
Beta

Revenue

$72.15B

31.8% Gross Margin

Net Income

$4.28B

5.9% Net Margin

EPS (Diluted)

$5.49

Total Assets

$39.47B

Cash & Equivalents

$716.00M

Free Cash Flow

$2.81B

Financial Statements
Beta
Revenue$72.15B
Cost of Revenue$49.20B
Gross Profit$22.94B
SG&A Expenses$15.37B
Operating Income$6.31B
Net Income$4.28B
EPS (Basic)$5.49
EPS (Diluted)$5.49
Shares Outstanding (Basic)777.00M
Shares Outstanding (Diluted)778.00M

Key Highlights

  • 1Net sales increased by 1.2% to $72.1 billion, driven by comparable sales growth of 2.6%.
  • 2Net earnings saw a substantial increase of 85.0% to $4.3 billion, with diluted EPS rising to $5.49.
  • 3Strategic exits from Mexico and Orchard Supply Hardware, along with Canadian store rationalizations, were completed, incurring significant charges but aiming for future operational improvements.
  • 4The company returned $5.9 billion to shareholders through $4.3 billion in share repurchases and $1.6 billion in dividends.
  • 5Investments were made in key strategic focus areas: merchandising excellence, supply chain transformation, operational efficiency, and customer engagement.
  • 6Gross margin as a percentage of sales decreased by 32 basis points, negatively impacted by tariff pressures and supply chain costs.
  • 7The company maintained strong liquidity, with $4.3 billion in cash flow from operating activities and significant credit facilities available.

Frequently Asked Questions

Lowe's sales growth was driven by a 2.6% increase in comparable sales, which was composed of a 2.1% increase in comparable average ticket and a 0.5% increase in comparable transactions. Several product categories, including Lawn & Garden, Décor, Tools, Paint, Appliances, Millwork, Seasonal & Outdoor Living, Hardware, Rough Plumbing & Electrical, and Lumber & Building Materials, showed positive comparable sales growth.

Lowe's improved its profitability significantly, with net earnings increasing by 85.0% year-over-year. This was largely due to operational efficiencies realized from strategic initiatives and restructuring, such as the exits from Mexico and Orchard Supply Hardware, and Canadian store closures. Selling, General, and Administrative (SG&A) expenses leveraged 311 basis points as a percentage of sales, primarily due to the prior year's significant impairment charges and discontinued projects that provided a favorable comparison base.

The company incurred significant pre-tax operating costs and charges totaling $265 million in fiscal year 2019 related to its strategic review of Canadian operations and the closure of the Mexico business. While these charges impacted reported earnings, they were part of a broader strategy to streamline operations and improve long-term profitability. The company also incurred substantial charges in fiscal year 2018 related to exiting Orchard Supply Hardware, closing underperforming stores, and exiting Mexico operations.

Lowe's generated $4.3 billion in cash flow from operating activities. The company demonstrated a strong commitment to shareholder returns by repurchasing $4.3 billion of its common stock and paying $1.6 billion in dividends during fiscal year 2019. As of January 31, 2020, Lowe's had $9.7 billion remaining under its share repurchase authorization.