10-QPeriod: Q3 FY2011

LOWES COMPANIES INC Quarterly Report for Q3 Ended Oct 29, 2010

Filed December 1, 2010For Securities:LOW

Summary

Lowe's Companies, Inc. reported its third-quarter and nine-month results for the period ending October 29, 2010. For the third quarter, the company saw a slight increase in comparable store sales of 0.2%, indicating a cautious consumer environment impacted by economic uncertainty and housing market sluggishness. Despite this modest sales growth, Lowe's effectively managed its margins, with gross margin increasing by 85 basis points due to strategic pricing initiatives and efficient seasonal inventory management. This focus on operational efficiency and expense control is crucial as the company navigates a slow-growth economy. For the first nine months of the fiscal year, net sales increased by 3.5% compared to the prior year. The company demonstrated solid profitability, with diluted earnings per share for the nine-month period of $1.21, up from $1.07 in the prior year. Lowe's continued to strengthen its financial position, with significant cash flow from operations and a well-managed balance sheet. The company also actively returned capital to shareholders through share repurchases and dividends. Looking ahead, Lowe's anticipates continued modest growth and is focused on maintaining market share and operational excellence.

Financial Highlights

49 data points
Beta

Revenue

$11.59B

35.0% Gross Margin

Net Income

$404.00M

3.5% Net Margin

EPS (Diluted)

$0.29

Total Assets

$34.34B

Cash & Equivalents

$1.08B

Free Cash Flow

$651.00M

Financial Statements
Beta
Revenue$11.59B
Cost of Revenue$7.53B
Gross Profit$4.06B
SG&A Expenses$2.93B
Operating Expenses$3.41B
Interest Expense$80.00M
Net Income$404.00M
EPS (Basic)$0.29
EPS (Diluted)$0.29
Shares Outstanding (Basic)1.39B
Shares Outstanding (Diluted)1.39B

Key Highlights

  • 1Comparable store sales increased by 0.2% for the third quarter of 2010, reflecting a cautious consumer environment.
  • 2Gross margin improved by 85 basis points in the third quarter due to pricing strategies and effective seasonal sell-through.
  • 3Diluted earnings per share for the nine months ended October 29, 2010, was $1.21, an increase from $1.07 in the prior year.
  • 4Net sales for the nine months increased by 3.5% to $38.3 billion.
  • 5The company repurchased approximately $1.6 billion of its common stock in the first nine months of 2010 under its share repurchase program.
  • 6Lowe's continued to gain market share, with an increase of 20 basis points in total store unit market share.
  • 7Despite flat comparable store sales, the company managed SG&A expenses effectively, decreasing by 4 basis points as a percentage of sales in the third quarter.

Frequently Asked Questions

For the third quarter of 2010, Lowe's reported a net sales increase of 1.9% to $11.6 billion. Comparable store sales saw a modest increase of 0.2%, driven by a slight rise in customer transactions and average ticket price. This performance was influenced by a cautious consumer sentiment and adverse weather conditions.

Lowe's demonstrated strong gross margin expansion, increasing by 85 basis points as a percentage of sales. This improvement was attributed to strategic pricing initiatives, including an increase in competitive pricing zones and Base Price Optimization, along with effective seasonal inventory management and favorable sell-through of key seasonal items.

Lowe's projected moderate sales growth for the fourth quarter and fiscal year 2010. The company is focused on operational efficiencies and expense management. Capital allocation remains robust, with plans for store expansion, investments in existing stores, and continued share repurchases, supported by strong operating cash flows and recent debt issuances.

During the nine months ended October 29, 2010, Lowe's recorded operating store impairment charges of $36 million and excess property impairment charges of $12 million. These were related to specific store locations and properties where carrying amounts were determined to be unrecoverable based on estimated future cash flows and fair values.