10-QPeriod: Q3 FY2018

LOWES COMPANIES INC Quarterly Report for Q3 Ended Nov 3, 2017

Filed December 5, 2017For Securities:LOW

Summary

Lowe's Companies, Inc. reported a strong third quarter for fiscal year 2017, with net sales increasing by 6.5% to $16.8 billion and net earnings surging by 130.3% to $872 million, leading to a diluted EPS of $1.05, up significantly from $0.43 in the prior year's third quarter. This performance was driven by broad-based comparable sales increases across all product categories, particularly in Lumber & Building Materials and Appliances, and was further boosted by demand from Pro customers. The company also noted a positive impact from hurricanes Harvey and Irma on comparable sales, which contributed approximately 140 basis points. Operationally, Lowe's demonstrated improved efficiency, with Selling, General, and Administrative (SG&A) expenses leveraging significantly as a percentage of sales, largely due to the absence of prior year impairment charges. The company continued its commitment to returning cash to shareholders, with $344 million in dividends and $500 million in share repurchases during the quarter. Looking ahead, Lowe's anticipates the introduction of Craftsman products in 2018 and remains focused on enhancing its omni-channel capabilities and customer experience.

Key Highlights

  • 1Net sales increased 6.5% to $16.8 billion in Q3 2017, compared to the prior year's Q3.
  • 2Net earnings grew significantly by 130.3% to $872 million in Q3 2017.
  • 3Diluted earnings per share (EPS) rose to $1.05 in Q3 2017, from $0.43 in Q3 2016, a 144.2% increase.
  • 4Comparable sales increased by 5.7% in Q3 2017, reflecting broad-based strength across product categories and strong Pro customer demand.
  • 5Hurricanes Harvey and Irma positively impacted Q3 comparable sales by approximately 140 basis points.
  • 6The company repurchased $500 million of common stock and paid $344 million in dividends in Q3 2017, demonstrating a commitment to shareholder returns.
  • 7SG&A expenses leveraged 323 basis points as a percentage of sales in Q3 2017, primarily due to the absence of significant prior year impairment charges.

Frequently Asked Questions

The substantial increase in net earnings and EPS was primarily driven by a strong 6.5% increase in net sales, broad-based comparable sales growth across all product categories, and improved operational efficiency. A key factor was the absence of significant non-cash impairment charges and write-offs that impacted the prior year's third quarter, leading to a significant leverage in Selling, General, and Administrative (SG&A) expenses.

The acquisitions of Maintenance Supply Headquarters (MSH) and Central Wholesalers, Inc. contributed to sales growth, adding approximately 0.7% to the total sales increase in the third quarter. These acquisitions are intended to deepen relationships with Pro customers and enhance the company's ability to serve the multi-family housing industry.

Lowe's anticipates the introduction of Craftsman products in-store and online beginning in the second half of 2018. The company believes this partnership with Stanley Black & Decker will strengthen its product offerings across various categories and provide both DIY and Pro customers with access to high-quality, value-oriented products.

Lowe's continues to prioritize returning cash to shareholders. In the third quarter of fiscal 2017, the company paid $344 million in dividends and repurchased $500 million of common stock. As of November 3, 2017, there was approximately $2.1 billion remaining under its authorized share repurchase program.