LOW - Earnings call transcript Q3 2019

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Operator

Good day everyone and welcome Lowe’s Companies third quarter 2019 earnings conference call. This call is being recorded. Please note if you press star, one to enter the question queue prior to the start of today’s call, your signal did not register.

You will need to press star, one again to enter the queue. Also, supplemental reference materials are available on Lowe’s investor relations website within the investor packet.

as be to to the facilitate and be not slides slides, company’s will following to meant document are your used management speaking the directly these results the While call. reference a review of

defined during certain and Act forward-looking directly in management prove reference the of The measures. Securities comparable the give in information these to the opinions company’s GAAP Those XXXX. Commission. using in include statements reconciliation no Exchange Management’s a made financial measures expectations measures. financial During and this and release Litigation described be this be can to to those Securities risks, non-GAAP include its and reflected are Reform call, filings about company will subject statements will the as call supplemental risks will materials are with the they correct. assurance Private Statements that in most and earnings

Chief Ellison, Mr. Dave Hosting today’s Joe and Vice Stores; conference Financial and Merchandising; President, President, Executive McFarland, will Mr. Marvin Executive Mr. Denton, be President Boltz, Vice Bill Executive Officer. Mr. Chief Officer;

sir. I for opening ahead, Mr. will program Ellison turn Please go now to remarks. the over

Marvin Ellison

Good morning everyone.

total For sales the company grew quarter, X.X%. comp

and our second online for was continued transformation XX despite comps comp our divisions improvement These deflation. home U.S. U.S. on Our higher positive low growth single geographic quarter. generating the than saw growth all plan. X% all results across U.S. with progress three digit consistent and regions We lumber expected consecutive reflect the business

outdoor and by geographic division, project strength appliances, regions pro, Four were of service. in driven performing in-stocks, our category, customer improved western top in five the

Nashville, total outperformed regions geographic quarter in west, Houston. the to and Tampa the that company the Boston, comp addition In were

however, XX approximately impacted growth in quarter; remains unit deflation on Commodity the basis strong. points sales categories pressure in comp of exerted

and drove success Let a take in me our QX. what now discuss moment

start with Let’s pro.

the and quarter U.S. different new with very us. receive and we for pros continues their positive be at Our a from continued business customer is during pleased pro growth, and focus on what sales to catalyst feedback to willingness Lowe’s, our to the firsthand grow with experiencing pros’ the we’re

they the Our in responding investments in these pro reflected of our department in not The to supervisors, result improvement is quarter positively very job and pro comp XXX in outpaced quarter. improved third our delivered investments are scores basis a growth, only customer in-store our pro customer sales lot the positive pro in in third DIY quantities, significantly service point and the also experience.

are this pro we ahead focused will customer, the on better detail later planned customer and have success, early XXXX. QX of in for the the to we this in strategic serve Joe and work the Despite in some investments very call important

retail add on we focusing have delivered In historically fundamentals our Bill departments our and the on to drove will comp average, merchandising sales shortly. performance In in performance success again underperformed. also positive performance total, above merchandising company pro, as additional evident addition strong the is merchandising departments color that eight

negative posted changes, more profitability. business comp below and of review strategic total exerted In on detailed pressure quarter, our Canada, significant sales Canadian on third the of we a comp. execution a initiated in expectations to the quarter inclusive we our our improving leadership focus Turning third which company with

results beginning such, QX in long take improve Canada. we to As steps in term to plan our the following

and that to QX. XX underperforming substantially process closing expect stores in We’re complete

a process complexity undertaking business operating Given banner legacy banners five back operational we’re that reduce multiple and the drive to systems, simplification office Canadian is with synergies.

to marketing, assortment strategy across present simplified customers. As us in will and gain the a more simplified our we coordinated part banner to to allow merchandising. Implementing plan efficiencies SKUs simplifying operations, our of to banners rationalize supply a chain

Canada duplication. across IT structure unnecessary support plan technology corporate our our to and the to platform to efficiently to U.S. inefficiencies and reorganizing serve migrate eliminate more also we Canada stores We’re

market We’re will improvements customer SG&A Canadian the profitability of we’re decisive while a committed take Canadian through operations to provide experience Dave and and these the in taking improving you reduction. financial moment. improve and margin actions through actions anticipated a impacts better to

Later profitability. to lower call, sales our management, we Despite took share improve will than our expectations, the in pressure merchandise outline Dave category from by continue expense the to delivered growth third $X.XX expected which earnings enhanced we execution, in Canada, and diluted supported exceeded for of improved per in comparable leverage. the steps the quarter adjusted process quarter,

and comp delivered Lowes.com platform. quarter, business ecommerce and the legacy X% with repair issues under noted third last growth approximately addressing we we of the as During is quarter, our are

of first agility. Cloud from stability. increase a decade-old of and in the by business improving our diligently online is Our improve is critical the end, Google creating our entire that improving we’re to ecosystem Lowes.com the To working step our This site stability re-platforming foundation to to work platform.

the in Lowes.com have on the the to expect first entire cloud XXXX. of We half site

architecture With and to basic provide stable address customers functionality a modernized, with our ecommerce ability legacy we have the in online place, capability gaps.

four you slowing of we’re things examples fixing we’re our while dot-com growth. temporarily give me Let

First, freight costs our we’re taking price improve to competition. perception separate from versus product to steps our

from These SKUs more us on-boarding improving enhancements add processes are rapidly assortment. we and to reduce expand systems allow to our online drop-ship our and will months time quickly days. to Second, vendors to

a know to and SKUs website, supplies, ship to map lithium with the these sell road a allow talented checkout. improvement Fourth, page, gaps to how we’re Third, search like on sequencing. delivery, all we’ll an home and of simply certain improve dynamic building items with will fire capability extinguishers It cleaning detailed deep customer We us home requiring batteries, basic will product take exceptionally we capabilities and experience. one-click have a handling, time and repair proper combined omnichannel ability schedule team online. navigation, the ion and special simplified our which including to experience

accelerate growth to of see our in to expect XXXX. back We rate start half Lowes.com the

sales can upcoming am I we ecommerce from have benefit the benefit only we comp when that meantime, business deliver the with quarters the no the in X% speaks U.S. pleased repaired. in upside very quarter is This third virtually to Lowes.com. In

supply support to we Transforming will our look also growth our a as build omnichannel acceleration chain ecosystem. true of

supply Lowes’ and improvement over from our infrastructure We’re transform billion Part model five two can a the next be in new store-based delivery $X.X home model. a of to of chain to year. our key centers opening reflected this years. investing this terminals bulk transformation to transitioning distribution This three will cross-dock be market-based

improvement performance. capitalize project on strong at enter operational season while strong demand with excitement we Lowe’s for We robust plan as and believe the fourth expect holiday top quarter, We and bright to consumer driving line efficiency. future the we and our execution to is holiday event margin deliver

week I’d the best the visiting a take I my moment to days our of to men visits, company. thank work stores when during close, like continue I’m Before commitment a represent to continued and out that women The associates basis. and daily be for proud to their of and are hard on our I these company

I’ll turn that, to over Bill. the With call

Bill Boltz

demand we sales. which with in sales We posted capitalize morning the robust which traffic to and execution along customer to convert drove quarter improved stores, growth X% of comparable our continued good strong to Marvin, traffic in-store everyone. into helped third on as U.S. Thanks that

event. within best-in-class our over terrific had appliance Day execution the sales drove which record also during Labor offering We

we average. merchandising department below millwork, delivered electrical, but Turning décor, paint, tools. to building average positive comps lawn our rough were hardware, and above company the Lumber and appliances, and comps performance, in plumbing garden, and materials

for underperformer serial a been company again us, had which average quarter. this Paint, outperformed the

QX last in Previously our need for average however, to continue or continue to had comps suppliers such a comp our to double-digit we larger who to offering a closely performed department consecutive we serve by for blinds remodel. As refine growth XX repair mid-single quarters; paint décor company complete project, will the the quarter, as and an of company pro work shades. above the the to remodelers improved business, led the performed second introduce our better average kitchen with digit strong bathroom XX paint décor paint with in below

the another merchandising for department second which is millwork quarter, underperformed. had average. In performed QX, company Millwork the above historically consecutive

a Our is that departments gaining indication traction. improved is retail our implementation of comp performance fundamentals in clear the these

quarter, drive Lowe’s. the the strong of customer to response in Craftsman historical led strength department comps also we Tools for areas strong our a continued continued reset. For with to merchandising growth

We exclusive share iconic are drive be this destination key channel proud the to in home for to the brand, categories. gains tool within continues center market which

sales our DeWalt, drive as one programs, power with key continue industry. also in brand such the to tool the We number

quarter, launched XX-volt more During line weight and tools lighter power compact in smaller a DeWalt focus delivering of which we exclusive tool. the on an

continue to our line new new Bosch, introduced we Spider, Metabo innovative and HPT we tools. from products innovative exclusive In products addition, as and and Cobalt of in introduce

we during Labor delivered and drove great and mid-single sales further digit Day, increased buys. solid with refrigerators record our special comps values and comps freezers high in share single-digit and appliances, In with market

posted investments of and pro lot roll-out We One, by the GRK, drove in categories job and demand. comps double-digit growth Pro also our in fastener supported hardware coming from above-average FastenMaster, full with quantities Power which

drink launch double-digit with our average comps Within Yeti, company seasonal position garden Yeti landscape outdoor national leader excited are innovative and improved and business, delivered brand season. goods our an with coolers, providing products, The above about the with products. offering and we customers relevant, expanded the benefiting the from we our comps our announcement Lastly, in ware. with lawn extended in product live center a to commitment and of equipment growing again living best-in-class the in-stock highlights and home in along

adjacencies cross-merchandising As and improve aggressive continuing further part to our a to process are of and in our merchandising stores. category our we to implement efforts steps ongoing taking productivity, effort are drive management

We project. a it are for typically make the in to products their are together optimizing complete located project that efficiently shop layout to used the to customer same ensure easier whole to aisle our store

upcoming QX, compelling with gift Looking excited about the Black are we our along ahead very events Monday plans holiday center. Friday for driven season, by Cyber a strong tool and to

across the and great store, Lowe’s home values a for showcase best-in-class and with We Bosch deals products card improvement receive and ideas the values to great highlight as select this exciting brands the the will to We’ll special including and or most pro continue holiday appliances. such get our customer. across more strong offerings buys in major showcase buying gift buy appliance one after Craftsman, Cobalt, and two season both one, opportunity sought gift and select values DIY DeWalt, when

with possible Cyber fire this We initial fast are to on of smoke to discover let pellet growing pre-order retailers the Lowes.com introduce be Weber grilling. their product Weber’s into grill to of on launch entry new pellet grill is built as users category the pellet what’s part grill one Monday. also excited first the is and

partner We to are exciting proud to new with product. this introduce Weber

Friday, Bowl lifetime turning This NFL win to we of the a at chance our into plan XX. to Super Black leverage partnership, holiday a shopping experience

NFL, two official tickets Super home customers Friday Miami. Lowe’s offering the year store improvement XX sponsor to the of enter chance win the this each its to on U.S. As first in-store in XXX is to Bowl Black

that year our drive NFL leveraging focus on that building As sales market and fundamentals solutions close out our confident the productivity Overall, from we initiatives the are partnership. significant response we expanding enhancing foundation our driving message look on exclusive are customer home productivity to with and grow we we brand upside the and the will our see improvements, share. focused pro, to retail strong and and continuing strong, margin we underway the improvement to sales to Craftsman, provide that space continue are remain by our

turn to call now Thank over I’ll the Joe. you, and

Joe McFarland

Thanks Bill, and morning good everyone.

service our the in-stock provide customer improve better in contributed and advances strong serving levels U.S. in Our customer, the with to to experience, execution a our initiatives along pro quarter.

year build the to our engagement benefits to taken to we’ve date. upon associate improve from continue and saw operations store actions our work and simplify the compounding throughout We further

floor allow the terminal. performance mobile we our a to and smartphones. to Throughout store to drive year, associated standard step our to without as a optimize this more productivity functionality such to access by new and we’ve smartphone year, devices Earlier associate. strategic for by walk access by our managers applications time giving by them devices efficient sales called store data store evaluating a the The their empowers application added performance off deployed real stores associates, department the store These review to scorecards process. having

continue we to smart quarter, to our the In new applications third add devices.

which associate already has with added the that pricing driven quarter, which labels a that any per The application complement new price it. to creating printing a the pricing day, application per has test, the this per store of solution. aisle, do the company We’ll printers hours in driven the to associate new of associates will standardizes in in process, such pricing mobile During of process the per efficiencies two equate and and quarter over for the allows hours application week price to print update week XX,XXX out XXXX. update mobile additional plan the can we an pricing store associates efficiency our efficiency to new company. over prices will We to simplifies allow in complete XX,XXX mobile first printing roll mobile this hours associate In aisles the for company. of

and new of stores tasking. we day and and with less end associates of of towards system to are allowing which devices spend our the the time customer completed customer a on roll-out quarter, time labor our with more us smart Our customer significant step the by operational of to in day, Near productivity department, scheduling week, driving align hours better peak the predicts traffic. time national our allowing demand our

labor while efficiently ensuring expense. labor reducing we’re service new that coverage our scheduling and to and allows provide payroll system us better customer Our department hours using

non-customer also the hours. associates cross-training and selling our team for to allow One tasks non-selling team is Task one over our in evenings will more overnight to that execution, improved stores programs. new drive completing during centralized work and team This centralized payroll, tasking task expanded shifts consistent initiative We for This X,XXX responsible from facing streamline quarter.

our again store and the expense technology quarter. scores. in our overall to evidence in store off on investments payroll XXX an points customer increase while by third basis This Our process ability service quarter is leverage paid this driving of

pleased We and on very are both efficiency customer the results we will seeing are far. commitment experience, continue to improve and deliver we store our so to with

retailers. Newsweek to customer in more big box in the one among way a measuring example are of improvement home stores. our customer This fact, recent commitment survey recognized recognizing Lowe’s service improvement In one number improved home as customers our service is our

our noticeable QX Now pro business as willingness promotions. to their were in pro us Marvin the our competitive with very moving customers’ and a indicated, onto performance pleased business, grow increase we in with despite

retail As I customer. fundamentals previous pro on strategy this been year, very important discussed on calls for has our this have primarily focused improving

job executing a We pro the consistent have loaders, focus basic supervisors, service lot levels, winning on improved consistent quantities, demonstrated and department dedicated on volume by pro fundamentals like pricing.

Our the fundamentals commitment focus to continued our with event. service retail significantly and see to improved which customers again Once comps, customer and pro drove Pro in DIY Appreciation this invited pro significant another scores in successful experience comps. outperformed we improvement quarter,

strategic we are Although fundamentals QX, in we from pleased are now pro more to with transitioning retail initiatives. performance

for a want pro keeping our sales we to Our this and goal In we - grow is deepen our customer. simple to pilot quarter more important launched relationship approach, program. strategic this with our continue very this with loyalty

plan in us XXXX marketing calls. wallet our more management to future updating look launch pro grow share of the pro deploy through results program launch loyalty our our program a half of with expectations the pro improved first exceeded suggested selling. We our Our to and test forward and CRM in on on markets. surgical, nationally to will which account early allow to have our you integrated strategic loyalty I

quarter, no to not, solve of with service. fourth we the purchase in it point for a in-store pro improve roll-out our for convenient, at to the pro experience Believe this We’ll sale allow plan our stores more to today way pro QX. the at the product dedicated In terminals most of problem desk. desk or have of pro faster

first for November the pro to also excited very dedicated pro with We’re compelling Black offers for event our drive traffic.

Lowe’s. All renewed initiatives importance at reinforce the these pro-related the of of customer pro

Thank you, the call over to and I now will Dave. turn

David Denton

you good everyone. and Thank morning Joe,

the charges quarter review the I go-forward business, the taken Canadian to Before our let operating related business. during underlying the the pre-tax discuss briefly performance me and, expectations importantly, of

up As taking set to long-term actions and our outlined, we are profitability. Canadian improved for Marvin growth decisive both business

evaluated plan assets fourth complete impairment to resulted closing locations our inventory rationalizing support and of the simplification liquidating in third review, strategic remaining As part inventory certain banner to locations the for our million In in charges the stores, substantially quarter. which XX non-cash in $XX of the in pre-tax the we of we those quarter, Canadian strategy. our

in of other As incur are depreciation reflected related XXXX a and and accelerated million cost result charges million these pre-tax GAAP severance are business to and These business liquidation, between operating charges in QX amortization, $XXX will XXXX from adjusted actions, impacts of consist to we inventory our the expect to Canadian of restructuring. additional financial QX costs. our anticipated outlook. These and excluded $XXX outlook

we allocation approximately I’ll nine free ongoing In both through cash share our capital a the over review now the the four $X.X dividends $X.X to shareholders. third a XXXX, our In in over of in months of quarters. XX% quarter and first dividend repurchases, of paid turn at alone, million combination generated our stands billion currently to program. we ratio and trailing dividends flow payout $XXX we’ve and returned billion

repurchase a agreement, In million we accelerated entered into retiring approximately million QX, $XXX shares. share X.X

$X.X an open the for market shares a $X million This the billion to also year-to-date brings repurchase with in our million. We $XXX repurchases for X.X repurchased plan year. additional billion to share

billion $XX.X current We have share on approximately authorization. repurchase our remaining

In million. capital to with just on drive to designed core $XXX continue shareholder of We developing long-term focus over business value. had QX, a expenditures invest in capabilities our we

comparable point forward Now comments during earnings diluted applicable. will the $X.XX. we GAAP be My turning basis, where this QX share per income a on generated non-GAAP statement, from to of

diluted of share in per of an due exceeded gross we favorable solid This $X.XX, of QX, to a performance earnings adjusted last compared large rate. tax part increase to trends, share per earnings strong management, year. In XX% expense margin and improving adjusted delivered diluted expectations

third to closures ticket decreased was offset $XX.X by was grew Orchard the X.X% X.X% the of by impact Total as total Supply exit of a offset decline Sales the transactions. quarter $XX.XX. average in billion and store for X.X% previous sales growth comparable This partially Hardware. to

average an X.X% by X% of X.X% a transaction of X.X% average Consolidated U.S., In the by were by U.S. growth transaction comp increase driven X.X%. comp increase partially an was sales increase comp slight sales ticket decrease a and of of X.X%. ticket comp offset driven

were in in X% and August, monthly September, looking trends, comps total X.X% Now in at X% October.

for in business X.X% and monthly comps Additionally, were our U.S. in September, X.X% X.X% August, in October.

we’ve gross for key last the quarter adjustments of management. of third units, than minimal first promotions, the XXX QX. points and basis impact a benefits targeted XX.X% including actions that and an retail for margin from promotional vendor reflects taken, Adjusted year quarter basis points improvement QX of was since price cost more to continued product aggressive XX and a greater the had from partnership activities, strategic the sales, increase to pivot better The

the but gross traction, implemented balance we’ve year. with this we’ve is there The are pleased important gaining very margin improve are to actions the to for We’re performance. progress in be done made our additional work this of

inventory last approximately was cycling positive basis by quarter, rate XX pressure. basis year impact of from points improvement. XX our points we The offset This experienced partially rationalization tariff of event of

margin coupled to basis full capacity, negative to increases shrink We’ve of facilities on exerted are points network chain in for basis ongoing expected, customer added still of costs. ramping with costs. quarter. pressure experienced XX supply from points we new the approximately XX also gross the delivery pressure As approximately Inventory that

QX. mix point in XX Finally, shifts a impact had basis margin gross positive product on

of the points basis Adjusted XX sales, in basis which XX points QX SG&A and improved leverage XX.X% was We payroll approximately leverage through in points. of efficiencies. quarter XX basis advertising for of approximately drove levered

billion points the is quarter our to the in At Adjusted to This of year. $X.X an year lot inventory basis seasonal presentation third strategically sales. first QX. XX.X% and operating increased year earlier half Throughout begin tax of driven in gross income versus but minimums, in-stock investments down for by last of Craftsman and we the The effective increased increase expectations was strategic last such certain or to increased the versus pro. our refine XX% $XX.X load-in, compared drive reduce XXX areas $X.X X.X% billion, the as billion was and rate XX.X% will inventories job in-stock position, resets, margin. while in protecting to quantities sales investment sales, XXXX,

before Now I our business XXXX outlook. address let me close,

supports, As continue in our appreciation we’ve to supportive of the stated the home be fundamentals pace industry. increases, job the accelerating U.S. for previously analysis and growth, and tailwinds macroeconomic as remain wage price solid our as underlying

are We X% XXXX and are maintaining increase for our total increase sales approximately sales approximately year. Comp guidance sales of a X%. for the to expect expected

long points for solid adjusted earnings remainder financial year. we the QX guidance. million sales basis adjusted $X.XX our reset strong $XX last in adjusted incremental margin the accelerate to stores over term environment. expect $X.XX per share, EPS allow are quarter XX outlook projects and operating XX store per now our fourth includes to XXXX this revised Given space our diluted to us to This and season. and critical our spring $XX we million disrupting performance outlook $X.XX without in year, during adjusted EPS expect and will investments productivity key to We increase raising the to during $X.XX This operating of margin versus investment the improve existing to of of approximately share the

flow cash approximately cash we and XXXX. $X.X of flows of still X effective expenditures and to be billion billion billion. of This forecasting XX%, impact X capital tax approximately effective business for result expected and of Wave in both adjusted approximately and expected also operating the Our The $X.X is tax includes outlook to are tariffs. $X rate Wave are approximately rates free

at X.XX repurchases that and billion will share in assumes times our approximately complete leverage $X Our target we guidance remains for this ratio year.

long of the value to about In company future and closing, the shareholder remain term. ability we over deliver excited significant the its

questions. for ready now are we Operator,

Operator

instructions] [Operator

Please your Our Christopher question. from with of line JPMorgan. Horvers comes question with first proceed the

Christopher Horvers

some pressures year morning guys. you thinking earlier you gross nice saw Obviously XQ gross you talk said about flat. are quarter the it doesn’t rate margin? margin? about Can think the third you How much seem did gross the like did pricing tariffs. good for It there. that impact upside the previously margin? Thanks, in I besides How the

the get question from about we you maybe that how is, pressures the as lap think XX, through especially big term, getting investors that longer I ’XX? do high in think rate to XX% you back pricing

Marvin Ellison

Marvin. Hey Bill part Chris, this that, any questions. I’ll the add additional of take first is then additional I’ll and let Dave your to color

Look, good that talked taking QX were after QX really improvement. we lot lot impacted went the providing margin through a feel we the of about about steps detail we issues We and and is actually to better and a more we work results, are been recover a processes. effort and That’s the pleased to better margin to do. lot visibility create cross-functional there but with just a

keep time This a impacts end One pricing this to and and the will management the years. relatively income for margins Lowe’s be real creating retail year of and have is about just and view launching be consolidated this the across of we going new be later very as that’s is going the depository first in something we’re the put system. driver benefit the one going We trying that’s of to to focus things about remind to in all about be but our years those future, operating price out that out year. flat income, before key trajectory, going in good to things SG&A of of going that will think to be changes, growth and the place think we’re of a operating our feel you around we I’d

any provide more Dave let well. Bill, as additional that, insights and I’ll to color

David Denton

vendors the I the sport complement Yes, cross-functionally that we’re I’ll analyzing we team that we’re perspective from between perspective maximize it’s merchandising, the time. that, products engineering our a that near value say, been line either the one, a finance win-win a drive from costs making with that to margin of term. Marvin cost sure make cost partnering drive top think also also very to performance buying; scenarios two, lower in complement effectively or indicated, obviously understand vendors but with Collectively, to and, and working develop sure aggressively our our been as performance those here working the we we’ve over improve our both

that’s has point of significant been to perspective improving effective margin Finally, the made those point from a the enhancements very We’ve on store. sale, sale our one I items. some promotions that to allowed life in have think at rate at be which offer thus thing really of technology more come we us

Bill Boltz

that in the more these promotional starting front that would we’ve we and QX now run customer putting together in that the addition in QX, historically. that I in up with all have merchandising our there think, Dave, at remarks mentioned put offers opening add in helps running of in to focused the that that Joe only thing stores, offers that’s program and around to out cross-merchandising planning through of I certainly to of of place, that and puts is part addition and I that, and my I a adjacencies type products out process rolled latter the category-wide less really

Christopher Horvers

to follow-up, you well. in much. a the front, as so do about as transactions that was rate still very year, up it a were but talk on then because U.S. gross Thanks expect So there compare, XX.X% you sort easier headwind, can thoughts margin growth an transaction any ecommerce flattish and is also of last the

Marvin Ellison

our feel about in run, it put no benefit dot-com. and comp takes comments, good some a we really solved sequencing, a the experienced noted just our pressure it with Chris, drove we is overall business answer quarter problems very short a these question, have dot-com on negative last have impact yes, U.S. our transparent and that news on stores, in X% transactions. I this U.S. but under have have team in We the before, from on repair. transactions. is performance so prepared it time the as The Yes, very did that short did my We talented, good we very were

muscle If growth the got the future, comp you X% XX% that through really plan of this XX% U.S. short to again we’ve growing business puts we’ll number coming and a benefit in half and in second that take able kind get just that it. run but in in us, have north the think But We of place, good in the we map noted be year. dot-com good of to a for to a that we next road is

about margin Dave rate question. let the talk I’ll

Dave Denton

is and expectation against in we’re our objective here and think could that to fully but term expectation to Chris, QX, in was the experienced that. to our I more our making back Yes term. It in longer that we obviously that really that from margin downdraft in recover we QX recover long downdraft nice our over stable recover gross progress the a XXXX, environment not it’s get

Christopher Horvers

Understood. Have a great holiday.

Dave Denton

Thank you.

Operator

Thank you.

line Gutman Our proceed the Morgan next Please questions. Stanley. Simeon of with from of your question comes

Simeon Gutman

good everyone. Thanks, morning

quarter? results the Then clarify, it’s implied a improvement little Can to does is it compare the EPS, the incremental and that a Can in sequential of underlying below bit for You’re you below--the the how is into store the little modeling business comps that takes quarter. in the forecast? puts the the fourth you related, the of fourth street. discuss investment some and

Marvin Ellison

take I’ll Marvin. QX. is this Simeon, regarding question the

us Dave look relative internal things project X% the As and the the Consumer solid. we’ve is macro about U.S. was the above good there purchases, strong, is average really over said, We We we feel great demand trends ticket in to quarter. execution. like discretionary about excitement for in backdrop growth at business season. about talked feel our the holiday is overall $XXX

key also the Bill couple of in merchandising Joe be of highlights on do gives let achieve able that us confidence us things the confidence going our of a targeted that What I’m store couple cover to just going in provide to number. a sales QX. a is also I’ll we’re side to provides degree let with

Bill?

Bill Boltz

for plan these year in for relates to full being QX, for able to and now changed all have a the trajectory pro piece the from the the year tree think businesses, to in throughout us we key QX seeing out it did ago, able year I pro-related gift entire as as trimming well the where team from these that for and direction Yes, be categories some as for year Black we’ve and plan to off so they for were a ago, we’ve of had to put we’re has to plan what is to a are able be that November that there change pay deals for plan center different demonstrated DIY.

Joe McFarland

really happening then business. store we’re our pro about a and from Right, standpoint, inside excited what’s

launch think confident going, in, we’re QX. store we we’re continue layout, what enjoying in for the doing invite to I Improved really as excited pro store wallet. we that We share into we QX customers our feel excited about have loyalty of we’re continue we’re execution, pro that, more their in

Dave Denton

$X.XX performance to includes QX long mind Keep our in a kind in guide just and $X.XX the and Simeon, a we’re me essentially of a of that $X.XX perspective, through then the the taken midpoint from And just you investing year done. bottom We’ve term $X.XX perspective. let just that that walk from range what step to improve back up perspective. we’ve up from

this late near that store the think investing have quarter, for really incrementally company. term we but in financial as long time a at the that is both environment constructive the we investment our identified the I we’re a same term that making, managing we’re that objectives in

Simeon Gutman

for is follow-up My Okay. Marvin.

the now out downs. in You’ve been seat ups, the some for closet be now. some over should of a the skeletons seems by It year, like

labor things fair and a change years? pace about do the it a your stores few you over executing systems, in How like pro margin anything it margin in there’s - mind next new does scheduling, statement think of have that is the about few potential the and You still upside? so sounds

Marvin Ellison

new we a digging I I that since business. we unveiled did online a think when of our ever assessment for our of When on business was multiple was we complexity so when during although holiday all little business, board, we channels, season across still then. and the issues, dissecting of and the we’ve business spent a us, ecommerce look probably I back conference the and president the underestimated initial not at the level only thing we say December, the that have our mystery time the investor last analyst did ecommerce would itself been had lot bit the of mystery

a but we company not there’s uncertainty any into also are that this fact a is the hoped and one we That’s the had a of So had marketplace, be, I best and are, that taking development. about very there’s can. lot transformation. I been didn’t it we on that where great take we I in that leadership ups where did is If right clear downs, that as a make we been underinvested been we We in bones managing feel chain, tariffs. snapshot were yes, is we’ve had think and about this to that track, account potential IT, like how but to anticipate, supply of

Overall, I feel great.

business feel identified the because of the digging and and heading surprises time plan most the I we good spent quarter most and that of of lot XXXX. we the, benefit, we’ve really most into the carry think into really risk like that have we’ve deep the quote-unquote, fourth financial got a a areas financial

Simeon Gutman

Marvin. Thanks

Operator

Thank you.

question next your the comes proceed Barclays. question. Short Please Karen with from of with Our line

Karen Short

color the very XQ, because thanks left--you give of on little a on have then impacted obviously comp how color wondering won’t we’ll U.S. Hi, I doors total wondering the would the so the be be closed give will comp if if both comp, these bit could headwind great. any impacted looking Canada, versus total that and in comp, how those be dot-com by actually to was on business more you you the could little color U.S. a much.

Marvin Ellison

question. the let take I’ll I’ll take dot-com Karen, Canada. Dave

it was think Most would typically is not in size comp business, by which that that no that argue brick-and-mortar U.S. day growth, for We growth for we I the impact sales announce dot-com had grew there that in their retail a in starts typical quarter number there’s growth retailers our that’s If impact. dot-com limited grew U.S. age. neutral by such the business. basically the our the and you with a is really dot-com the a will U.S. about this have X% XX% dot-com quarter; a was of to X%, so benefit.

we how cause steps there, get of take to the the and we’re there right root know yet, trying but issue. the not We’re to to fix

wanted sales, shut the it’s grow we right place difficult to money, correctly, year. in really we transparent in do to the currently of will rather this do my place We It’s promotions second make the of down don’t said, and place, events, have half to in so we in not I way? just we structure map that really good have be next we non-productive difficult how bunch things to basically and have it meaning a and road business dot-com coupon-y other in some than of having highlight comments prepared fundamental that a in

we is we and think day can and XXXX. Any but mortar our it full. positive half going can age business this glass is X% I total your get store deliver you brick the and we But the huge a enter dot-com see sign, priority stores a going getting Again, of as off comp omnichannel as our productivity that into a strong. very benefit time in and is our

Dave I’ll about Canada. let talk

Dave Denton

be look that will in they within the QX just clarify, $XX our exclusively to to QX, numbers. SG&A we relates it so not be I as will GAAP as million company. affect within the stores comp non-cash for Canada, they want at will that Karen, for charge non-comps cadence also was considered took closed the you

Karen Short

Okay.

some in talked we about as so to you to be think outlook obviously are follow-up, for an initiatives anything may price initiatives we going management system look that we should to can on terms execution. a XQ, other the upgrade us if be big watching need be in give track there in for update XXXX, you but that we other the the is risks of Just early XXXX? still on I on POS happening, any just but can

Marvin Ellison

pro, talk think I’ll Bill initiatives about we’re you some one initiatives really has let really and so nice thoughts Yes, merchandising some excited in on about. give exciting I’ll a I couple Joe and

network product go store-based to chain, I think centers, a we a in have we’re committing my investment supply going us etc. $X.X get an delivery to to more from and that to is market-based to suppliers design stores, our chain from center transformation, distribution to omnichannel allow billion to comments to suppliers supply being totally of that from that’s to When chain our mentioned supply about from delivery. transform over five years distribution we

delivery, transformation. That because deliver distribution steps three the us significant the really us pros’ it’s which new year we’re also opening things hub to about same to with out it’s something two out but the is going sites deliver excited homes the and This to ability year throughout this we the all foundational from chain to off stores us will customers’ are for the take helping be give going pressure and rolling being is going store. build supply constantly the efficiency bulk to job that. for to We’re terminals, we be to to centers and a that cross-dock enormous that

place year end analytics next system, retail going management in to the first we’ll integrate in boomerang but the then this half, going can that machine system by that Relative system. will the of be around the system, That’s give in price to the for get time year, functionality be and lot that combined the AI learning to we a price dynamic. and with that pricing more around so first we’re management us scraping

mention much first moving that’s next give platform agility. which The is only Cloud, to decade-old other should from initiative on a be we I’ll something that more our we’re half and fully year, in to Cloud the platform, us ecommerce going is with of Google again

Bill additional add and I’ll Joe let color. any

Joe McFarland

like a XXXX things lot we’ve we made like about, talked in there. etc., in all focus, dedicated feel and job largely of Great, great loaders, XXXX. we things fundamentals, retail which about really so have our talked throughout pro so focused we’ve staffing, the We’ve lot past the pro quantities, impact on really and

to excited, adjustments, number, out to first exceeded to we’re listen really we As we the pros’ has the nationwide in continue roll all the year, we’ll pros, XXXX. excited we to loyalty in we and pro the it, for in one, launched why that’s and had pro half forward next we’re we’ve quarter. we’re that continue mode, for test expectations make of loyalty into three in move The fully test reaction that markets the loyalty really pro third

In addition, pro In rental, continues us share of testing waters more the good in give really that tool about really pro things the like so and to business, exciting pro the there. wallet, feel space. we their

the I’ll merchandising. let some talk of Bill about

Bill Boltz

up bringing roll-out we the in of end work signage allows wrapped up merchandising easier. on navigate to close stores we and us the categories early the last We’ll make our give to year, started customer finish bring easier our and the minding up, and us the QX, at wave wrapping power departments our the to stores, the also to allow our which that to it refresh that in January-February in Just QX finish we’re in addition the side, cross-merchandising on we’ll for together. together categories departments holding of work we caps product which shop customer to and need to will kind and that end

So to to all have make easier our the real stores done shop. about work that merchants the excited

Karen Short

very thanks much. Great,

Operator

Thank you.

line Securities. the Guggenheim your proceed Forbes of with Please Steve with Our question. next question comes from

Steve Forbes

to year, Good then relative to to how labor third to leverage chance on would given as get out completion focus the and payroll into expectations throughout the wanted there’s to XXXX, and system a quarter, the leverage we for live remain on sort seem like and regarding commentary of at in that. remind first discuss quarter payroll the the around payroll thoughts end a look least the run leverage, it updates how would of were to just half maybe the scheduling many the so the of that rollout. Maybe in I at in the just rat current regions fourth your appear potential morning. us because XXXX, phased or

Marvin Ellison

Joe and off I’ll additional insight. some provide it let kick then I’ll Marvin. is this Steve,

and think I years, from very trying shift service stores. to at you payroll just out trying basic the philosophy, as is we’re we’re tasks a look the to what do in to it’s

Joe’s our we other payroll be analysis and to the team looking is the the serving majority service than the of three-year a that had store years customers at you so we categories out addition to in in that leveraged is that technology, first of this technology, across starting in but why and of and statistic payroll in and vast a hours something so third driving in gave total that’s see arrived store quarter, Our selling one interesting in improved when hours, business do an or doing reduction Joe reasons a really the sales, but service Joe are surveys, environment. plan shift is we That with and a all going that you’re investment of and out right payroll to gives a built implementations technology way project - us we’re that the in oriented working location. internal external. The all feeling putting do-it-yourself customers, types really what was more the and the that pro, good, comfortable

year. That’s let about the done I’ll we’ve out Joe so years. this far talk what

Joe McFarland

for I give just quarter, mentioned prepared of a you quick and the remarks. in third things I’ll the my some snapshot

in on of store being versus As schedule to so versus moving ahead of facing far first group, Marvin team tasking. and spent was it evaluated a of percent our when as we we’ve arrived terrific said, assembled of customer a payroll we’re completely inverted, operations needle more service task, balance the as the

every that are division, region. you this sure regions listened we customer-centric we we the this remind the out quarter. northern scheduling wanted quarter, and of were the U.S. as kind making we pressure successfully customer-centric additional test validated quarter, to the the to three In Just were of new the in region the day across third beneficial. second more in of sure to first have of the I stores hiring. out our rolled year and our percent the launched that rolled to on we hundred the In to associates talked and changes system, scheduling make make the our seasonal, third and fourth about spring we to quarter the One one quarter to the schedule customers, alone, we so first

Task One tasks One centralizing in took team Task the quarter our we on just team. X,XXX like the In action in over expanded things addition, third We stores.

our took our that the our execute like In assembler list third notice to day janitor, against, on continue addition, sure in-store that outsourcing the action and and initiatives the at party, that laundry moving e a associates apps, that to the end customers things appreciate. of making we and pricing expect there’s doing things the of so new we’re

Steve Forbes

quick purposes follow-up just Maybe here. Dave for you. for a Thank modeling

to three between breakdown more If or buckets margin detail million around you cost that of can, you and a don’t know various $XXX SG&A I million can split provide you that $XXX mentioned. the into if gross - at buckets the the it little least, of

Dave Denton

That’s of gross look and quarter at the so perspective. will margin level of are costs would the and the of SG&A this way say at come think liquidation non-GAAP. within to to a that, this, would modeling able I certainly have about within back is all versus QX, you’ll probably the of best it. those inventory be I Yes, the detailed to the the due XX% level. therefore Keep they remainder fit over at give year, I the a end that in mind reconciliation end from of that would

Steve Forbes

Thank you.

Operator

you. Thank

next Your your with Seth line comes Credit with question Suisse. the from question. of Sigman Please proceed

Seth Sigman

was you of a offset know a you up how call about were the feel the lapping Obviously shift think start call follow any there whether the to anything and quarter quarter? you elements wanted out in would seasonal I was the good don’t there out. of and also I I morning. extended good to general if so season the guys, in on Friday, and that. Hey cadence Black guy were there exiting hurricanes,

Dave Denton

We about Dave. a neighborhood the XX probably very of was this perspective. benefit bit basis little plans weather cycled sales for points. a QX, feel into solid as There QX we in Yes, is our from of

week impact We basis so Black think week I point that’s on also Friday us. very nominal, earlier, did XX run one probably

As confidence sales pretty from a we cycle give cycle into improvement QX looks would some good. into you we QX, that comparison the perspective that

Seth Sigman

Canada to a in restructuring that. terms Canada, there, for and drag better can Then just would could quantify help us of understand helpful. has margins then so if had year that you understand next just way on wasn’t that there’s we this of year, over Thanks. a what be XX-month the the the or in thanks working just Okay, the period, into I think opportunity sort course of

Dave Denton

start. I’ll Maybe

us As can has to that from down and from even the performance the an the average. It’s that you given perspective down to this the quarters of top line company average, over lower performing more charges, you include well so the struggled. year, is Canadian operating perspective us company three we’ve first the performance important so if the articulated certainly it in is below business just certainly also imagine, a profit is understand were the dragging than dragging without model charges it the

With that, to I’ll turn Marvin. it

Marvin Ellison

customers ability their the Canada. them a inhibited will to Yes, associates only gave thing well. complex business look that serve I great Seth, just we model is in add We have very

think associates We’re we announced just in legacy position underperforming complex. doing merchandising, to a to all are infrastructure, we really process decisions so can banners that, marketing, We forward addition with part what good give all give the operating simplified to a put going integration in operational the so back even so process five manage. a systems initial to is February our that stores look we today us just and more simplifying expectations It do and a in us systems, actions IT end some in position back provide create we’re think ensure long degree to here to today put very we closing are color it in sourcing great to in business systems, wholly perspective, from term different our to we really that the and was of around we with made going growth. announced call for our Canada, how that difficult our are these customers XXXX of experience and a and coming model restructuring synergies

Seth Sigman

guys, appreciate thanks it. Okay,

Operator

you. Thank

with Melich of ISI. questions. your Please Our comes Evercore with the proceed next question line Greg from

Greg Melich

questions. charge, up but year’s want I this about If once XX on I last gross I are guys. Hi, follow from margin I baseline we’re thinking XX year on I a to just we progress improved to right? gross first sequentially the sure year, numbers you BPs thanks wanted margin. two Dave, the quarter, the right. that like-for-like and had inventory get understand was add make it’s last XX.X% down or the back on

Dave Denton

you help to give this few I’ll maybe so Yes, a numbers model you out.

about from clearance kind looked chain XX, improvements supply at that event basis perspective. you we add overlapping points rate, We at margin of think had last in a at gross which of pressure you both points, gross We’ve and XX, improvement us just some-odd mix product about if on from of you will, XX at tariffs we tailwind, margin performance, from XX about points. shrink XXX then the XXX improvements If basis have if basis basis it, gives so have of year, top a then point our

Greg Melich

quick charges a we for million, just $XXX on guys Then Canada think maybe about in payback business? XX what the the the of if that’s helpful. changes take total, bit, we that get super the it, to it Got effect does expect the you take do profit follow in next years? in up months, really to on be? How that back three terms Do do these

Dave Denton

modeled we of tough present a clearly period, is changes of the but we’ve this but to period. going over business and we to these that the obviously Obviously at decision a multi-year take are decision make a that. economically, value over effect cash right the quickly, at of looked look which and make this pretty flows multiple it’s year Well, way the is net to

Greg Melich

make Canadian transitioning stores to the accelerate the got where that on to up--am come that bit, comp. there, fourth the far quarter trend a full-year I business X.X the of make is comp, November? want that X% should the or so seeing I missing or it X to just about use if guide something into you’re sort and out I guidance right the of is, comp to the I Understanding Last the sure or

Dave Denton

No, your math is correct.

Greg Melich

rate? in we running that November are And of kind at

Dave Denton

I the place will we’re comment quarter. it’s to say have approach a early that things biggest our we little in we’re performance. to Black in our on at and drive we so about very weeks Friday, the about frankly, of that quite the strongly probably programs year, feel one store executing into the level as to too We’re

Greg Melich

guys, and holidays. happy luck, Good great. That’s

Dave Denton

you. Thank you, same to

Operator

Thank you.

proceed Michael your UBS. of with Please with question. from next the Our comes line Lasser question

Michael Lasser

Why taking business your the to of ways, question. the piece that your that quarter a decelerate looking a of you do versus a we biggest did business big recognizing quarter dot-com U.S.-only step lot this this four-year look bit my morning, compared from competitor, those performance three, think the on measures is for it did second basis, quarter, Good stack in reverse back the businesses. last take quarter? your of triangulate we respective of a and progress at a thanks quarter; the if spread the did two, to a third they If in on one, couple at U.S.-only the

Marvin Ellison

we actions based a around really year-over-year only were QX about lot to the and performance we We good we ton on our really about interesting versus Remember, based don’t are inventory of honest, a on business question. fair expectations. we so that thought to our quite My business, us Michael, expectations, versus U.S. time overlaps. be closures, our compares our liquidations, it’s a feel performance year-over-year was where took should competitor, spend versus year really quarter. and of we internal answer the store be thinking tricky. for our a investments, our is Relative last

exactly operating where really level, actually business certain we the exceeded the to we mentioned, and expectations we a about our planned QX appropriately landed, for at U.S. good we income. So feel we as relative and in

the business, about feel good about good trends, plan we feel and we a our dot-com. repair to We have fix

to quick not trying We’re rush fix. a

the we fit well. foundationally that’s end steps and to us term taken going year strong we’ve to long the think give growth potential, and We’re about feel we it as going to good

Michael Lasser

that becomes grow their a in noticeable business remarks, My follow-up, to pro customers’ willingness on is competitive provide that? in despite will--the there Who promotion. where Lowe’s more prepared detail just was promotional more Can and successful you and Lowe’s and there from, more seeing environment where as makes us comment you of promotions and Marvin, increase competitive more the to because case is is overall success? going a customers are more as those a higher progress, become that the

Marvin Ellison

getting can invisible a think one room competitive public, we comments well are I large of bid very through for our marketplace. driven were process. going you large for submit a period a that my in more more over aggressive, over XX and of competitors projects, volume pricing discounting large seen prepared from on than based additional consistent a commodity for specifically this general area the a there purchases customers is in to discounts I’ve in business. with This years was threshold, but that certain The really time discounting perspective,

in changed want just we It that going and and to our run that do. highlight continue prepared is just QX. QX to compete, strategy, neither wanted cadence continue that there. we’re But We going dramatically we’re which what to to be here is see competitive we something happens to to in nor to

Dave Denton

please. take more one We’ll question,

Operator

you. Thank

the question question. your Wells Please final Fadem of Zach comes Fargo. proceed with line with Our from

Zach Fadem

this site, dot-com the a expect fitting uptick Cyber around your Could Monday about holiday, in you and offerings, just given online, sales similar for expect QX? growth specifically talk on acceleration me in. and re-platforming seasonal the demand thanks Black or for temporary Hey, you versus and should Friday the we do

Marvin Ellison

I’ll give really comments have. exciting dot-com. give the we some Bill on I’ll of you you let some deals

period performance two quarter, dot-com, going we the are so we’re that quarters. seen that not we’ve to what don’t a but last define better expecting to in performance the see holiday season and have we have that we so underwhelming to relative pretty entire dramatic holiday does For an within growth had holiday period, last expectation QX dot-com

the to Black period. expect during performance stability do more we better However, and have Friday

a lot caveat The year. gave online is only that to we product of away last

a promotions of site-wide it provide gave We’re any and the the shareholders perspective, be not QX, growth to of be no than value from to couple good last a different to online to customers--well, to value this but profit the didn’t going going but not the we’ve really lot we’re of We year. dot-com to any had so but robust we’re sense, customers it value of seen quarters. no give aggressive we’re what business a didn’t model, make running expecting company aggressive that from lot away the in the appropriately a going standpoint to in

selling some exciting to going Bill of highlight let I’ll the in be we’re stores. the things

Bill Boltz

the to able of but where of going Black so starts excited excitement the to we day, about it drive busters remarks, deals got, were win as going ran for a that’s folks November. Black with lot a Black Super got Bowl, just and a values We’re lucky We appliance on kicked super said then going. Friday to with we’re out prepared a just Black there as Friday, a special you my that trip roughly door having what’s door off for event the about to we’ve got for Black so so on for pro plan for this be Friday, Black year’s the customers to year team and we’re super excited I November, we’ve we’ve to number Lowe’s in some really able do November, Friday, chance know, the to for

Zach Fadem

the on with it. and repair curious category overall whether just and of thoughts overall about think expectation as home the you of remodel sales your you on XXXX. have to particularly hear enter improvement demand improving, Got curious how Then data round we any latest environment, and points existing

Marvin Ellison

the Zach, about macro. great we feel

prices our rates well. our home to so indicators continue the in same pause, is We all have confidence us feel provide direction strengthen, to macro There’s that about we the that horizon - be low, we’ll interest any for going and appreciate, continue pointing for of in really the continues goes to time when we gives right confidence, our that as moderate. guidance that confidence macro to QX, business hope consumer period the looking indicators. that important the to positive are nothing XXXX, on All into and low unemployment are wages

Zach Fadem

the appreciate time. Marvin, Thanks

Marvin Ellison

Thank you.

Operator

Thank you.

you end reached and of of today’s have and our conclusion We session your call. the Thank question participation. answer for the

wonderful You day. and lines your a have may now disconnect

Lowe's Companies (LOW) 20 Nov 192019 Q3 Earnings call transcript