10-QPeriod: Q3 FY2022

LOWES COMPANIES INC Quarterly Report for Q3 Ended Oct 29, 2021

Filed November 24, 2021For Securities:LOW

Summary

Lowe's Companies, Inc. reported a strong third quarter for fiscal year 2021, with net sales increasing by 2.7% to $22.9 billion, driven by a 2.2% rise in comparable sales. Net earnings saw a significant jump of 174.0% to $1.9 billion, translating to diluted earnings per share of $2.73, up from $0.91 in the prior year. This robust performance was bolstered by favorable product mix, improved credit revenue, and effective cost management, particularly in SG&A expenses which leveraged 230 basis points due to reduced COVID-19 related costs and operational efficiencies. For the first nine months of fiscal 2021, net sales grew 8.1% to $74.9 billion, with comparable sales up 7.4%. The company demonstrated strong operating cash flow of $9.2 billion. Lowe's continued its commitment to shareholder returns, repurchasing $2.9 billion in common stock and paying $563 million in dividends during the third quarter. The company is executing its 'Total Home' strategy, focusing on Pro customers, online expansion, and supply chain modernization to drive future growth and market share gains despite ongoing supply chain disruptions.

Financial Highlights

50 data points
Beta

Revenue

$22.92B

33.1% Gross Margin

Net Income

$1.90B

8.3% Net Margin

EPS (Diluted)

$2.73

Total Assets

$49.40B

Cash & Equivalents

$6.12B

Free Cash Flow

$1.86B

Financial Statements
Beta
Revenue$22.92B
Cost of Revenue$15.33B
Gross Profit$7.59B
SG&A Expenses$4.37B
Operating Income$2.79B
Net Income$1.90B
EPS (Basic)$2.74
EPS (Diluted)$2.73
Shares Outstanding (Basic)690.00M
Shares Outstanding (Diluted)692.00M

Key Highlights

  • 1Q3 2021 Net Sales increased 2.7% to $22.9 billion, with comparable sales up 2.2%.
  • 2Q3 2021 Net Earnings surged 174.0% to $1.9 billion, and Diluted EPS rose to $2.73 from $0.91 year-over-year.
  • 3Nine-month sales reached $74.9 billion, an 8.1% increase, with comparable sales up 7.4%.
  • 4Operating cash flow for the first nine months was strong at $9.2 billion.
  • 5Significant share repurchases totaling $2.9 billion in Q3, with $10.7 billion remaining on the authorization.
  • 6Selling, General & Administrative (SG&A) expenses leveraged 230 basis points in Q3, indicating improved operational efficiency.
  • 7The company is advancing its 'Total Home' strategy, focusing on Pro customers and supply chain modernization.

Frequently Asked Questions

The substantial increase in net earnings was driven by several factors, including a 2.7% rise in net sales, improved comparable sales, and a significant leveraging of SG&A expenses. Notably, the prior year's third quarter included a $1.1 billion pre-tax loss on extinguishment of debt and Canadian restructuring costs, which are absent in the current year's results. Improved gross margin due to higher credit revenue and inventory shrink also contributed positively.

Lowe's is actively managing supply chain challenges by ordering seasonal inventory earlier, leveraging its scale and carrier relationships to secure transportation capacity, and implementing data-driven pricing and product cost management strategies. The company also noted that unit price increases in certain categories, like Electrical due to copper inflation, helped offset some cost pressures.

The 'Total Home' strategy, launched at the end of 2020, focuses on key pillars: the Pro customer, online business expansion, modernization of installation services, improving localization, and elevating product assortment. The company reported strong results with both Pro and DIY customers and sees this strategy as key to gaining market share and driving operating efficiency. Comparable sales increased across many product categories and U.S. regions during the quarter.

Lowe's is committed to returning excess cash to shareholders. In the third quarter of 2021, the company repurchased $2.9 billion of common stock and paid $563 million in dividends. It has a substantial $10.7 billion remaining authorization for share repurchases, indicating a continued focus on shareholder returns.