01—Abstract
Summary
Summary of the 10-K filed March 23, 2020. Cited figures are marked; the original filing is the authoritative source.
Lowe's Companies, Inc. (LOW) reported net sales of $72.1 billiona 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 billionb 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 billionc 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 billiond capital expenditure forecast, emphasizing store investments and strategic initiatives.
02—Key points
Key Highlights
- Net sales increased by 1.2% to $72.1 billion, driven by comparable sales growth of 2.6%.
- Net earnings saw a substantial increase of 85.0% to $4.3 billion, with diluted EPS rising to $5.49.
- Strategic exits from Mexico and Orchard Supply Hardware, along with Canadian store rationalizations, were completed, incurring significant charges but aiming for future operational improvements.
- The company returned $5.9 billion to shareholders through $4.3 billion in share repurchases and $1.6 billion in dividends.
- Investments were made in key strategic focus areas: merchandising excellence, supply chain transformation, operational efficiency, and customer engagement.
- Gross margin as a percentage of sales decreased by 32 basis points, negatively impacted by tariff pressures and supply chain costs.
- The company maintained strong liquidity, with $4.3 billion in cash flow from operating activities and significant credit facilities available.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Lowes Companies Inc kept $0.06.
- Revenue$72.15B100.0%
- Cost of revenue−$49.20B68.2%
- Gross profit$22.94B31.8%
- Operating costs−$16.63B23.0%
- Operating income$6.31B8.8%
- Interest, other & tax−$2.03B2.8%
- Net income$4.28B5.9%
Where FY2020 revenue went
$72.15B- Cost of revenue: $49.20B, 68% of revenue
- SG&A: $15.37B, 21% of revenue
- Net income: $4.28B, 5.9% of revenue
- Other operating costs: $1.26B, 1.7% of revenue
- Interest, other & tax: $2.03B, 2.8% of revenue
Kept 5.9% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed March 23, 2020Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $72.15B$71.31B | +1.2% |
| Cost of Revenue | $49.20B$48.40B | +1.7% |
| Gross Profit | $22.94B$22.91B | +0.2% |
| SG&A Expenses | $15.37B$17.41B | −11.7% |
| Operating Income | $6.31B$4.02B | +57.1% |
| Net Income | $4.28B$2.31B | +85.0% |
| EPS (Basic) | $5.49$2.84 | +93.3% |
| EPS (Diluted) | $5.49$2.84 | +93.3% |
| Shares Outstanding (Basic) | 777.00M811.00M | −4.2% |
| Shares Outstanding (Diluted) | 778.00M812.00M | −4.2% |
05—Questions
Frequently Asked Questions
What were the key drivers of Lowe's sales growth in fiscal year 2019?
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.
How did Lowe's manage its expenses and profitability in fiscal year 2019?
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.
What impact did strategic repositioning and exit activities have on the company's financial results?
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.
How did Lowe's manage its cash and return capital to shareholders?
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.
06—Continue