- Fourth Quarter Comparable Store Sales Increased 7.8 Percent - - Fourth Quarter Diluted Earnings Per Share Increased 35.9 Percent to $0.87 -
MOORESVILLE, N.C., Feb. 27 - Lowe's Companies, Inc. (NYSE: LOW), the world's second largest home improvement retailer, today reported net earnings of $695 million for the 14-week period ended February 3, 2006, a 36.8 percent increase over the 13-week period ended January 28, 2005. Diluted earnings per share increased 35.9 percent to $0.87 from $0.64 in the fourth quarter of 2004. For fiscal 2005, net earnings grew 27.3 percent to $2.77 billion while diluted earnings per share increased 27.7 percent to $3.46.
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Sales for the 14-week period ended February 3, 2006 increased 26.4 percent to $10.8 billion, up from $8.55 billion for the 13-week period ended January 28, 2005. Comparable store sales for the fourth quarter increased 7.8 percent versus a comparable 14-week period. For the fiscal year ended February 3, 2006, sales increased 18.6 percent to $43.2 billion. Comparable store sales increased 6.1 percent for fiscal 2005.
"Our strong fourth quarter and fiscal year results represent a focus on execution and a culture of customer service that solidifies Lowe's competitive position across the country," explained Robert A. Niblock, Lowe's chairman, president and CEO. "Amidst the challenges of a weather-affected 2005 spring selling season and the devastation caused by the most active hurricane season on record, we were ready to serve customers and provide products, services and solutions to meet their home improvement needs.
"Our Installed Sales, Special Order Sales and Commercial Business Customer initiatives continue to deliver great results and remain key drivers of our performance, helping us achieve 2005 comparable store sales in excess of six percent for the third consecutive year," Niblock added. "As we continue to monitor the changing economic environment, including housing-related metrics, employment, real wage growth and demographic trends, we have confidence in our future performance as the outlook for home improvement spending remains strong. Our more than 185,000 employees and over 1,200 best-in-class stores are a true competitive advantage, and part of the reason Lowe's was recently recognized as the Best Managed Company in retail by Forbes magazine.
"We will continue to invest in this advantage with a focus on increasing employee expertise, enhancing our easy-to-shop stores, and improving our compelling merchandise offering."
During the quarter, Lowe's opened 63 new stores and reopened one store temporarily closed as a result of hurricane Katrina. As of February 3, 2006, Lowe's operated 1,234 stores in 49 states representing 140.1 million square feet of retail selling space, a 13.2 percent increase over last year.
A conference call to discuss fourth quarter and fiscal year 2005 operating results is scheduled for today (Monday, February 27) at 9:00 a.m. EST. Please dial 888-817-4020 (international callers dial 706-679-3245) to participate. A webcast of the call will take place simultaneously and can be accessed by visiting Lowe's website at http://www.Lowes.com/investor and clicking on the icon for the Lowe's Fourth Quarter and Fiscal Year 2005 Earnings Conference Call Webcast. A replay of the call will be archived on Lowes.com/investor until May 21, 2006.
Lowe's Business Outlook
Fiscal 2006 annual and fourth quarter comparisons will be negatively impacted by a 52 vs. 53 week and 13 vs. 14 week comparison, respectively. In addition, our 2006 quarterly comparisons will be impacted by a shift in comparable weeks to 2005. This week shift positively impacts the first quarter and is offset by negative impacts in the second and fourth quarters. Our 2006 guidance contemplates these factors.
First Quarter 2006 (comparisons to first quarter 2005)
- The company expects to open 24 new stores reflecting square footage
growth of approximately 13 percent
- Total sales are expected to increase 19 to 20 percent
- The company expects to report a comparable store sales increase of
5 to 7 percent
- Operating margin (defined as gross margin less SG&A and depreciation)
is expected to increase 20 to 30 basis points
- Store opening costs are expected to be approximately $18 million
- Diluted earnings per share of $0.92 to $0.94 are expected
- Lowe's first quarter ends on May 5, 2006 with operating results to be
publicly released on Monday, May 22, 2006
Second Quarter 2006 (comparisons to second quarter 2005)
- Total sales are expected to increase 13 to 14 percent
- Diluted earnings per share of $1.22 to $1.25 are expected
- Lowe's second quarter ends on August 4, 2006 with operating results to
be publicly released on Monday, August 21, 2006
Fiscal Year 2006 - a 52-week Year (comparisons to fiscal year 2005 - a 53-week year)
- The company expects to open 155 stores in 2006 reflecting total square
footage growth of approximately 12 percent
- Total sales are expected to increase approximately 13 to 14 percent for
the year (52 weeks versus 53 weeks in 2005)
- The company expects to report a comparable store sales increase of
5 to 6 percent
- Operating margin (defined as gross margin less SG&A and depreciation)
is expected to increase approximately 20 basis points
- Store opening costs are expected to be approximately $130 million
- Diluted earnings per share of $4.03 to $4.13 are expected for the
fiscal year ending February 2, 2007
Disclosure Regarding Forward-Looking Statements
This news release includes "forward-looking statements" within the meaning 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, 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, rising fuel costs, and other factors which can negatively affect our customers as well as our ability to: (i) respond to decreases in the number of new housing starts 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 develop new sites for store development; (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 matters; and (viii) respond to unanticipated weather conditions. Additional information regarding the risks and uncertainties which may affect our operations and economic results can be found in our filings with the Securities and Exchange Commission.
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 2005 sales of $43.2 billion, Lowe's Companies, Inc. is a FORTUNE(R) 50 company that serves approximately 12 million customers a week at more than 1,225 home improvement stores in 49 states. Based in Mooresville, N.C., the 60-year old company is the second-largest home improvement retailer in the world. For more information, visit Lowes.com.
Lowe's Companies, Inc.
Consolidated Statements of Current and Retained Earnings (Unaudited)
In Millions, Except Per Share Data
Three Months Ended
February 3, January 28,
2006 2005
Current Earnings Amount Percent Amount Percent
Net sales $10,808 100.00 $8,550 100.00
Cost of sales 7,010 64.86 5,561 65.04
Gross margin 3,798 35.14 2,989 34.96
Expenses:
Selling, general and administrative 2,303 21.30 1,834 21.45
Store opening costs 57 0.53 51 0.60
Depreciation 273 2.53 236 2.76
Interest 36 0.33 43 0.50
Total expenses 2,669 24.69 2,164 25.31
Pre-tax earnings 1,129 10.45 825 9.65
Income tax provision 434 4.02 317 3.71
Net earnings $695 6.43 $508 5.94
Weighted average shares outstanding -
Basic 782 773
Basic earnings per share $0.89 $0.66
Weighted average shares outstanding -
Diluted 800 805
Diluted earnings per share $0.87 $0.64
Cash dividends per share $0.06 $0.04
Retained Earnings
Balance at beginning of period $11,586 $9,157
Net earnings 695 508
Cash dividends (47) (31)
Balance at end of period $12,234 $9,634
Lowe's Companies, Inc.
Consolidated Statements of Current and Retained Earnings (Unaudited)
In Millions, Except Per Share Data
Years Ended
February 3, January 28,
2006 2005
Current Earnings Amount Percent Amount Percent
Net sales $43,243 100.00 $36,464 100.00
Cost of sales 28,398 65.67 24,165 66.27
Gross margin 14,845 34.33 12,299 33.73
Expenses:
Selling, general and administrative 9,014 20.84 7,562 20.74
Store opening costs 142 0.33 123 0.34
Depreciation 1,025 2.37 902 2.47
Interest 158 0.37 176 0.48
Total expenses 10,339 23.91 8,763 24.03
Pre-tax earnings 4,506 10.42 3,536 9.70
Income tax provision 1,735 4.01 1,360 3.73
Net earnings $2,771 6.41 $2,176 5.97
Weighted average shares outstanding -
Basic 777 777
Basic earnings per share $3.56 $2.80
Weighted average shares outstanding -
Diluted 803 808
Diluted earnings per share $3.46 $2.71
Cash dividends per share $0.22 $0.15
Retained Earnings
Balance at beginning of period $9,634 $7,574
Net earnings 2,771 2,176
Cash dividends (171) (116)
Balance at end of period $12,234 $9,634
Lowe's Companies, Inc.
Consolidated Balance Sheets (Unaudited)
In Millions, Except Par Value Data
February 3, January 28,
2006 2005
Assets
Current assets:
Cash and cash equivalents $423 $530
Short-term investments 453 283
Accounts receivable - net 18 9
Merchandise inventory - net 6,813 5,982
Deferred income taxes 127 95
Other assets 104 75
Total current assets 7,938 6,974
Property, less accumulated
depreciation 16,362 13,911
Long-term investments 294 146
Other assets 203 178
Total assets $24,797 $21,209
Liabilities and shareholders' equity
Current liabilities:
Current maturities of long-term debt $32 $630
Accounts payable 2,839 2,695
Accrued salaries and wages 424 386
Other current liabilities 2,652 2,008
Total current liabilities 5,947 5,719
Long-term debt, excluding
current maturities 3,499 3,060
Deferred income taxes 735 736
Other long-term liabilities 277 159
Total liabilities 10,458 9,674
Shareholders' equity:
Preferred stock - $5 par value,
none issued - -
Common stock - $.50 par value;
Shares issued and outstanding
February 3, 2006 784
January 28, 2005 774 392 387
Capital in excess of par 1,712 1,514
Retained earnings 12,234 9,634
Accumulated other comprehensive
income 1 -
Total shareholders' equity 14,339 11,535
Total liabilities and
shareholders' equity $24,797 $21,209
Lowe's Companies, Inc.
Consolidated Statements of Cash Flows (Unaudited)
In Millions
Years Ended
February 3, 2006 January 28, 2005
Cash flows from operating activities:
Net earnings $2,771 $2,176
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Depreciation and amortization 1,051 926
Deferred income taxes (33) 109
Loss on disposition/writedown of
fixed and other assets 23 55
Stock-based compensation expense 76 70
Tax effect of stock options exercised 59 33
Changes in operating assets and
liabilities:
Accounts receivable - net (9) 125
Merchandise inventory - net (831) (1,389)
Other operating assets (29) 31
Accounts payable 144 483
Other operating liabilities 620 454
Net cash provided by operating
activities 3,842 3,073
Cash flows from investing activities:
Purchases of short-term investments (1,829) (1,180)
Proceeds from sale/maturity of short-
term investments 1,802 1,799
Purchases of long-term investments (354) (156)
Proceeds from sale/maturity of long-
term investments 55 28
Increase in other long-term assets (30) (12)
Fixed assets acquired (3,379) (2,927)
Proceeds from the sale of fixed and
other long-term assets 61 86
Net cash used in investing activities (3,674) (2,362)
Cash flows from financing activities:
Long-term debt borrowings 1,013 -
Repayment of long-term debt (633) (82)
Proceeds from employee stock
purchase plan 65 61
Proceeds from stock options exercised 225 90
Cash dividend payments (171) (116)
Repurchase of common stock (774) (1,000)
Net cash used in financing activities (275) (1,047)
Net decrease in cash and cash
equivalents (107) (336)
Cash and cash equivalents, beginning
of period 530 866
Cash and cash equivalents, end
of period $423 $530
