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Lowe’s Companies, Inc.
CEO : Mr. Marvin R. Ellison

Quarterly earnings growth(YoY,%)

Period	Revenue	Operating Income	EPS	Release Date
2024 Q3	-1.5% YoY	-5.9%	-2.9%	2024-11-19

Marvin Ellison says,

Financial Performance Overview

• Third quarter sales were reported at $20.2 billion.
• Comparable sales were down by 1.1%.
• Despite the decrease, performance was slightly above expectations due to strong Pro and online sales along with smaller ticket outdoor DIY projects.

Strength in Pro and Online Sales

• Pro sales showed high single-digit positive comparables, driven by investments aimed at serving small to medium-sized Pro customers.
• Online sales grew by 6% in comparable sales, with a notably double-digit increase in traffic on the Lowe’s mobile app.
• Launched initiatives like free same-day paint delivery through a gig network and expanded app functionalities to improve customer engagement and satisfaction.

Macro-Economic Environment

• The home improvement market faces challenges with high inflation and interest rates affecting consumer affordability.
• Current mortgage rates remain high, contributing to a low housing turnover near 30-year lows.
• Despite these challenges, long-term drivers including home price appreciation, increased disposable income, and an aging housing stock support future demand.

Strategic Investments and Long-Term Outlook

• Lowe’s emphasizes the Total Home Strategy to capture market share and prepare for home improvement market recovery.
• With the easing of interest rate pressures, homeowners may leverage the $35 trillion in home equity for home improvement projects.
• Long-term demand drivers such as millennial household formation, Baby Boomers aging in place, and remote work offer optimism for the medium- to long-term industry outlook.

Disaster Relief Efforts

• Lowe’s pledged $12 million to support disaster relief following Hurricanes Helene and Milton.
• Plans include providing $2.5 million in grants to aid small businesses in Western North Carolina recovery efforts.
• The company expressed gratitude to associates and partners for their support in affected areas.

Metric	Value
Third Quarter Sales	$20.2 billion
Comparable Sales	-1.1%
Online Sales Growth	6%
Disaster Relief Pledge	$12 million

Brandon Sink says,

Quarterly Financial Performance

• GAAP diluted earnings per share (EPS) for Q3 was $2.99. Excluding a pretax gain, adjusted EPS was $2.89.
• Recognized a pretax gain of $54 million from deferred consideration related to the 2022 sale of the Canadian retail business.
• Q3 sales totaled $20.2 billion with a comparable sales decline of 1.1%.
• Gross margin slightly increased to 33.7%, supported by PPI initiatives but offset by supply chain investments and storm-related pressures.

Impact of Storms and Sales Dynamics

• Hurricanes Helene and Milton boosted comp sales by approximately 100 basis points.
• Strength observed in the Pro segment and online sales, with minor projects driven by summer heat also contributing positively.
• Comparable transactions dropped by 1.3%, influenced by weak DIY discretionary projects but partly offset by Pro transaction growth.
• Monthly comps showed fluctuations with a 3.3% drop in August, a 1.2% drop in September, and a 1.3% rise in October.

Operational and Capital Management

• Adjusted SG&A as a percentage of sales was 19.2%, increasing 86 basis points from the previous year due to storm-related expenses.
• Delivered an adjusted operating margin rate of 12.3%, a decline of 86 basis points. Adjusted effective tax rate was stable at 24.2%.
• Capital expenditures reached $571 million supporting growth initiatives, while free cash flow generated was $728 million.
• Repurchased 2.9 million shares for $758 million and paid $654 million in dividends, returning a total of over $1.4 billion to shareholders.

Updated Fiscal Year 2024 Guidance

• Expected full-year sales now range between $83 billion to $83.5 billion, with comparable sales down 3% to 3.5%.
• Adjusted operating margin anticipated between 12.3% and 12.4%, factoring in PPI benefits and storm-related costs.
• Projection for adjusted diluted EPS is set at $11.80 to $11.90.
• Forecast for full-year net interest expense is approximately $1.3 billion, capital expenditures around $2 billion, and an adjusted effective tax rate of approximately 24.5%.

Table: Key Financial Metrics

Metric	Q3 2024
Adjusted EPS	$2.89
Sales	$20.2 billion
Gross Margin	33.7%
Operating Margin	12.3%
Comparable Sales Growth	-1.1%

Overall, while the company showcased resilience amidst challenging conditions, driven by storm-related sales, it faces ongoing pressures in DIY segments, necessitating cautious optimism and adaptation to evolving market dynamics.

Q & A sessions,

DIY Business Strategy and Market Positioning

• The company is heavily focused on the Do-It-Yourself (DIY) sector, especially big-ticket items like appliances, flooring, and kitchen and bath.
• A new loyalty program has been introduced to provide more control over the DIY business, minimizing the impact of macroeconomic and weather factors.
• Upcoming details about the loyalty program are expected to be shared next month, aiming to strengthen the DIY customer segment.
• The macro environment presents challenges, particularly due to elevated mortgage rates and consumer sentiment affecting big-ticket discretionary segments.

Pro Customer and Online Sales Growth

• Pro penetration has improved significantly since 2018, with a focus on small to medium Pro customers.
• Pro sales are targeted to grow at 2x to the market rate, with the digital online Pro segment showing double-digit growth.
• High single-digit positive comps achieved in certain categories amidst a challenging environment.
• Online sales increased by 6%, reflecting a strong digital focus.

Capital Investments and Store Improvements

• Significant capital investment in IT infrastructure and store improvements, enhancing kitchen and bath showrooms, and appliance presentations.
• The company boasts best-in-class shopping experiences both in-store and online.
• The ability to ship to almost any zip code in the country next day is a competitive advantage.

Market Outlook and Strategic Positioning

• Preparation to capture market share when the DIY and do-it-for-me categories see increased demand.
• The home equity market, valued at $35 trillion with homes averaging 41 years old, presents significant opportunities.
• Expectations of engagement and acceleration from smaller repairs to larger projects as conditions improve.
• The company’s playbook is prepared for potential inflection points, with more details on long-term strategy forthcoming.

Financial Performance and Guidance

• Trends in DIY performance were in line with expectations, with strength in smaller project activities.
• Continued pressure in big-ticket discretionary categories due to macroeconomic factors like mortgage rates and housing turnover.
• While near-term pressures are evident, there is an expectation of additional engagement and some acceleration into larger projects moving into 2025.

Segment	Growth Rate	Challenges
DIY Big Ticket	N/A	Macroeconomic factors, discretionary spending
Pro Sales	2x Market Rate	Market fragmentation, competition
Online Sales	6% Increase	Infrastructure and service improvements