MOORESVILLE, N.C., Aug. 18 /PRNewswire-FirstCall/ -- Lowe's Companies,
Inc. (NYSE: LOW), the world's second largest home improvement retailer, today
reported net earnings of $938 million for the quarter ended August 1, 2008, a
7.9 percent decline from the same period a year ago. Diluted earnings per
share declined 4.5 percent to $0.64 from $0.67 in the second quarter of 2007.
For the six months ended August 1, 2008, net earnings declined 12.1 percent to
$1.54 billion while diluted earnings per share declined 8.7 percent to $1.05.
(Logo: http://www.newscom.com/cgi-bin/prnh/20031205/LOWLOGO )
Sales for the quarter increased 2.4 percent to $14.5 billion, up from
$14.2 billion in the second quarter of 2007. For the six months ended August
1, 2008, sales increased 0.7 percent to $26.5 billion. Comparable store sales
for the second quarter declined 5.3 percent and declined 6.7 percent in the
first half of 2008.
"Our sales results for the quarter, while better than our forecast,
reflect the realities of the continuing macro economic pressures on our
industry," commented Robert A. Niblock, Lowe's chairman and CEO. "We saw
relative strength in our seasonal sales as homeowners welcomed back spring and
restored lawns and outdoor landscaping following the effects of last year's
drought in much of the country. In addition, we believe our second quarter
sales benefited from the economic impact of the fiscal stimulus tax rebates.
Unfortunately, weakness in bigger ticket projects continues, particularly in
markets most impacted by the housing downturn.
"Through disciplined expense controls we delivered solid earnings for the
quarter," Niblock added. "We are encouraged by our results and our continued
market share gains, but the macro economic factors pressuring consumers and
the ongoing challenges and uncertainty of the financial markets suggest a
cautious sales forecast for the balance of fiscal 2008 is prudent. We remain
focused on positioning the company for long-term success while managing
through the near-term challenges of the current environment."
During the quarter, Lowe's opened 23 new stores. As of August 1, 2008,
Lowe's operated 1,577 stores in the United States and Canada representing
178.6 million square feet of retail selling space, a 10.5 percent increase
over last year.
A conference call to discuss second quarter 2008 operating results is
scheduled for today (Monday, August 18) at 9:00 am EDT. Please dial
888-817-4020 (international callers dial 706-679-8762) to participate. A
webcast of the call will take place simultaneously and can be accessed by
visiting Lowe's website at www.Lowes.com/investor and clicking on Lowe's
Second Quarter 2008 Earnings Conference Call Webcast. A replay of the call
will be archived on www.Lowes.com until November 16, 2008.
Lowe's Business Outlook
Third Quarter 2008 (comparisons to third quarter 2007)
-- The company expects to open approximately 38 new stores reflecting
square footage growth of approximately 10 percent
-- Total sales are expected to increase 1 to 2 percent
-- The company expects comparable store sales to decline 5 to 7 percent
-- Earnings before interest and taxes as a percentage of sales (operating
margin) is expected to decline approximately 290 basis points driven by
the cycling of last year's $112 million reduction in self-insurance
reserves for workers compensation and general liability claims in
addition to payroll, fixed cost and depreciation deleverage
-- Store opening costs are expected to be approximately $34 million
-- Diluted earnings per share of $0.27 to $0.31 are expected
-- Lowe's third quarter ends on October 31, 2008 with operating results to
be publicly released on Monday, November 17, 2008
Fiscal Year 2008 (comparisons to fiscal year 2007)
-- The company expects to open approximately 120 stores in 2008 reflecting
total square footage growth of 7 to 8 percent
-- Total sales are expected to increase approximately 1 percent
-- The company expects comparable store sales to decline 6 to 7 percent
-- Earnings before interest and taxes as a percentage of sales (operating
margin) is expected to decline approximately 180 basis points
-- Store opening costs are expected to be approximately $97 million
-- Diluted earnings per share of $1.48 to $1.56 are expected for the
fiscal year ending January 30, 2009
Disclosure Regarding Forward-Looking Statements
This news release includes "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995 (the "Act").
Statements of the company's expectations for sales growth, comparable store
sales, earnings and performance, capital expenditures, store openings, the
housing market, the home improvement industry, demand for services, and any
statement of an assumption underlying any of the foregoing, constitute
"forward-looking statements" under the Act. Although the company believes
that the expectations, opinions, projections, and comments reflected in its
forward-looking statements are reasonable, it can give no assurance that such
statements will prove to be correct. A wide-variety of potential risks,
uncertainties, and other factors could materially affect our ability to
achieve the results expressed or implied by our forward-looking statements
including, but not limited to, changes in general economic conditions, such as
interest rate and currency fluctuations, higher fuel and other energy costs,
slower growth in personal income and consumer spending, declining housing
turnover, the availability of mortgage financing, inflation or deflation of
commodity prices and other factors which can negatively affect our customers,
as well as our ability to: (i) respond to adverse trends in the housing
industry and the level of repairs, remodeling, and additions to existing
homes, as well as general reduction in commercial building activity; (ii)
secure, develop, and otherwise implement new technologies and processes
designed to enhance our efficiency and competitiveness; (iii) attract, train,
and retain highly-qualified associates; (iv) locate, secure, and successfully
develop new sites for store development particularly in major metropolitan
markets; (v) respond to fluctuations in the prices and availability of
services, supplies, and products; (vi) respond to the growth and impact of
competition; (vii) address legal and regulatory developments; and (viii)
respond to unanticipated weather conditions that could adversely affect sales.
For more information about these and other risks and uncertainties that we are
exposed to, you should read the "Risk Factors" included in our Annual Report
on Form 10-K to the United States Securities and Exchange Commission and the
description of material changes, if any, in those "Risk Factors" included in
our Quarterly Reports on Form 10-Q.
The forward-looking statements contained in this news release speak only
as of the date of this release and the company does not assume any obligation
to update any such statements.
With fiscal year 2007 sales of $48.3 billion, Lowe's Companies, Inc. is a
FORTUNE(R) 50 company that serves approximately 14 million customers a week at
more than 1,575 home improvement stores in the United States and Canada.
Founded in 1946 and based in Mooresville, N.C., Lowe's is the second-largest
home improvement retailer in the world. For more information, visit
www.Lowes.com .
Lowe's Companies, Inc.
Consolidated Statements of Current and Retained Earnings (Unaudited)
In Millions, Except Per Share Data
Three Months Ended
August 1, 2008 August 3, 2007
Current Earnings Amount Percent Amount Percent
Net sales $14,509 100.00 $14,167 100.00
Cost of sales 9,527 65.66 9,284 65.53
Gross margin 4,982 34.34 4,883 34.47
Expenses:
Selling, general and administrative 3,014 20.78 2,839 20.04
Store opening costs 21 0.14 26 0.18
Depreciation 381 2.63 332 2.35
Interest - net 69 0.47 50 0.35
Total expenses 3,485 24.02 3,247 22.92
Pre-tax earnings 1,497 10.32 1,636 11.55
Income tax provision 559 3.86 617 4.36
Net earnings $938 6.46 $1,019 7.19
Weighted average shares outstanding -
basic 1,455 1,490
Basic earnings per share $0.64 $0.68
Weighted average shares outstanding -
diluted 1,473 1,518
Diluted earnings per share $0.64 $0.67
Cash dividends per share $0.085 $0.080
Retained Earnings
Balance at beginning of period $15,835 $14,968
Cumulative effect adjustment(1) - -
Net earnings 938 1,019
Cash dividends (125) (119)
Share repurchases - (658)
Balance at end of period $16,648 $15,210
Six Months Ended
August 1, 2008 August 3, 2007
Current Earnings Amount Percent Amount Percent
Net sales $26,519 100.00 $26,338 100.00
Cost of sales 17,371 65.50 17,195 65.29
Gross margin 9,148 34.50 9,143 34.71
Expenses:
Selling, general and administrative 5,738 21.65 5,524 20.97
Store opening costs 38 0.14 38 0.14
Depreciation 757 2.85 656 2.49
Interest - net 145 0.55 97 0.37
Total expenses 6,678 25.19 6,315 23.97
Pre-tax earnings 2,470 9.31 2,828 10.74
Income tax provision 925 3.49 1,070 4.07
Net earnings $1,545 5.82 $1,758 6.67
Weighted average shares outstanding -
basic 1,454 1,500
Basic earnings per share $1.06 $1.17
Weighted average shares outstanding -
diluted 1,477 1,530
Diluted earnings per share $1.05 $1.15
Cash dividends per share $0.165 $0.130
Retained Earnings
Balance at beginning of period $15,345 $14,860
Cumulative effect adjustment(1) - (8)
Net earnings 1,545 1,758
Cash dividends (242) (194)
Share repurchases - (1,206)
Balance at end of period $16,648 $15,210
(1) The Company adopted FIN 48, Accounting for Uncertainty in Income
Taxes, effective February 3, 2007.
Lowe's Companies, Inc.
Consolidated Balance Sheets
In Millions, Except Par Value Data
(Unaudited) (Unaudited)
August 1, August 3, February 1,
2008 2007 2008
Assets
Current assets:
Cash and cash equivalents $477 $337 $281
Short-term investments (includes $39
million of trading securities
at August 1, 2008) 377 325 249
Merchandise inventory - net 7,939 7,799 7,611
Deferred income taxes - net 275 209 247
Other current assets 236 181 298
Total current assets 9,304 8,851 8,686
Property, less accumulated
depreciation 22,066 19,825 21,361
Long-term investments 798 627 509
Other assets 381 341 313
Total assets $32,549 $29,644 $30,869
Liabilities and shareholders' equity
Current liabilities:
Short-term borrowings $189 $555 $1,064
Current maturities of long-term debt 31 85 40
Accounts payable 4,786 4,167 3,713
Accrued compensation and employee
benefits 492 414 467
Self-insurance liabilities 736 726 671
Deferred revenue 816 819 717
Other current liabilities 1,478 1,274 1,079
Total current liabilities 8,528 8,040 7,751
Long-term debt, excluding current
maturities 5,050 4,301 5,576
Deferred income taxes - net 641 628 670
Other liabilities 824 706 774
Total liabilities 15,043 13,675 14,771
Shareholders' equity:
Preferred stock - $5 par value,
none issued - - -
Common stock - $.50 par value;
Shares issued and outstanding
August 1, 2008 1,464
August 3, 2007 1,485
February 1, 2008 1,458 732 742 729
Capital in excess of par value 118 11 16
Retained earnings 16,648 15,210 15,345
Accumulated other comprehensive
income 8 6 8
Total shareholders' equity 17,506 15,969 16,098
Total liabilities and shareholders'
equity $32,549 $29,644 $30,869
Lowe's Companies, Inc.
Consolidated Statements of Cash Flows (Unaudited)
In Millions
Six Months Ended
August 1, 2008 August 3, 2007
Cash flows from operating activities:
Net earnings $1,545 $1,758
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Depreciation and amortization 816 701
Deferred income taxes (57) 3
Loss on property and other assets 30 17
Loss on redemption of long-term debt 8 -
Share-based payment expense 54 45
Changes in operating assets and
liabilities:
Merchandise inventory - net (328) (655)
Other operating assets 52 56
Accounts payable 1,073 643
Other operating liabilities 675 510
Net cash provided by operating activities 3,868 3,078
Cash flows from investing activities:
Purchases of short-term investments (467) (368)
Proceeds from sale/maturity of short-
term investments 245 524
Purchases of long-term investments (723) (1,102)
Proceeds from sale/maturity of long-
term investments 520 589
Increase in other long-term assets (37) (23)
Property acquired (1,620) (1,698)
Proceeds from the sale of property
and other long-term assets 20 26
Net cash used in investing activities (2,062) (2,052)
Cash flows from financing activities:
Net (decrease) increase in short-term
borrowings (873) 532
Proceeds from issuance of long-term debt 11 4
Repayment of long-term debt (555) (31)
Proceeds from issuance of common
stock under employee stock purchase plan 39 40
Proceeds from issuance of common
stock from stock options exercised 11 43
Cash dividend payments (242) (194)
Repurchase of common stock (2) (1,450)
Excess tax benefits of share-based payments 1 3
Net cash used in financing activities (1,610) (1,053)
Net increase (decrease) in cash and
cash equivalents 196 (27)
Cash and cash equivalents,
beginning of period 281 364
Cash and cash equivalents, end of period $477 $337
SOURCE Lowe's Companies, Inc.
