- Earnings call transcript Q3 2022

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Operator

Good morning, everyone, and welcome to Lowe's Companies Third Quarter 2022 Earnings Conference Call. My name is Rob, and I'll be your operator for today's call.

As a reminder, this conference is being recorded. I will now turn the call over to Kate Pearlman, Vice President of Investor Relations.

Kate Pearlman

Thank you, and good morning.

Stores; are our Chairman Joe Chief Executive Executive President today Officer; Chief McFarland, Financial me our Vice Boltz, Sink, Bill Vice of Officer. with Marvin President and Ellison, Executive our Executive Here Vice Brandon and and President, Merchandising; is which website. I like can on Investor Relations statements be you our press notice regarding that found would in our release remind forward-looking to included this morning, Lowe's

for result SEC are During XXXX. this expressed be on will may in including factors, and XX-K materially Actual important fiscal call, risks, our the expectations differ making comments results report MD&A discussed Form and and other forward-looking, or our filings. that including implied of we from of uncertainties sections those annual other risk factors, those as various a our

we'll GAAP earnings Additionally, to of Relations items measures. discussing the financial quarterly in non-GAAP be of Investor section A these reconciliation certain can our found be U.S. website.

call I'll over Now, to the Marvin. turn

Marvin Ellison

and school. Kate, increased X.X%, you, nesting travel sales children the better-than-expected X%. by comps increased demand improved our U.S. sales to supported slowdown comparable good These quarter, as DIY In Thank return fall driven company while by total morning, trends everyone. were and third

We our improvement the the resilience continued demand. in of success also saw Pro Pro reflecting home momentum of initiatives and

tenured and we and wage are frontline and last associates. XX our points in operating as important the season. because compared work our a to drove addition is investments critical $XXX very our increases for more XX% of in in awarding million substantial In further is ensure that basis dedication, million associates. make increases frontline on of investment performance again effort associates. $X.XX, year. focus wages. we diluted in pleased associates tracking $XXX improvement hard Lowe's, to recognition most margin I to our associates bonuses bonus of holiday the receive And an strong share permanent sales our our At award outstanding outcome These for discretionary performance of with able market-competitive us for incremental that share results improved ahead of to These of to adjusted In we our once persistent continue a once quarter, ensure to this again earnings success, financial an growth, enable that to asset, to productivity every are our our increase expectations. for our our associates ahead we win-win and shareholders designed hourly in true the Company, per operating am announced and This adjusted make our are hourly

our their of invest Lowe's. support associates we these investments our to become retail, the efforts grow commitment careers in reflect All in continually choice and families where our of them help and their employee and at

Pro. basis, driven to delivered turning a and Pro consecutive of growth double-digit XX% on growth. We that we've the Now tenth quarter XX% two-year

enhanced over Pro penetration more even what's a had rate, into Xx growth with this improvement with Rewards proof they and their resilience new point demand XXXX our U.S. optimistic provides XX% this which over work on will expect they the of than on in On that just hear our home to encouraged and survey, Pros business partnership that Pro future We CRM, product even on of of the we're XXXX. greatly in XX% another This is sales representing in macro grew saying which environment. Lowes.com call. opportunities, uncertain service minds the they Pros improved sales our XX%. real-time remain are our program quarter completed our later MVP our view We Pros and Joe of insights discuss Pro and recently offerings annual and building how

our We we strategy. as critical user focus initiative enhance on driving online within well continue this capabilities growth experience as fulfillment our home total to as the

to us riding centerpiece in next position of model for transformation Atlanta, us delivery chain Georgia. Southern and regions will Southern the to Turning year. end more our in our model our strides We've profitable quarter, appliances we're with other covering new a big leadership big converted the than expanded an to of products bulky Illinois in now our of and technology. by seamless by like reached this further from spanning position the milestone and supply powered delivery experience a as half supply enable omnichannel also on market customer improves growth This eight the transformation. industry bulky vanities. products chain through cabinets country significant This our our options to important the track stores for and the to shopping complete California rollout geographic is fulfillment and We've grills, and Lowe's stock to model, market mowers, experience consolidate rollout made

We opening port also just a the coastal of Virginia. holding in we facility announced be new that Suffolk, will city

because mitigates heard discuss address our some market. network distribution specifically like the macro up flexibility avoid not need to we stores. markdown improvement us product that also coastal hold which us product the flow the capture the centers, in is about to needed. we and stranding This expanded helps environment to only to where capacity upstream quickly home I'd And when creates sales, Our misperceptions opening for now facility but unnecessarily and products is risk I've holding and from our

You've from drive me for this building. are about heard before, different that but drivers demand home talk home improvement those distinctly

correlating important stock home a home age appreciation, Lowe's, at two. it's price highest reminder, as factors and not of improvement three the of So income. personal housing are And demand confuse disposable the to

a these mortgage in near old expected is outlook pivot maintenance cannot the not rates. interest seeing record because nondiscretionary And And markets a have is remain into equity to XX% homes millennial strong. a them worsen. in if homes, are in XXXX. even delayed; declined about of operating families would in repairs is key three And there not top home roughly buying year that conditions per or are of growth. of This projects $X.X currently million home on have from prices our U.S. that XX investment. select up home any of is repair and prime to new is either more and home developed while leadership factors, improvement particularly So market fixed years the industry homeowners amount if or $X during homes run-up let's a in XXX,XXX than supportive. of and with improvement $XXX,XXX have personal the we improvement decline than during third, highs, which home renovations very key inflation sales; start respond needs the on of mid-XXXXs, a unique their a to for meet X prices, income even the to long-term make team inflection playbook persistent rapidly investments point we of lose locked price evolving average, we've entering homes homebuyers place, And savings period appreciation. focus confident rates the supportive current the and On reasons And slowdown. homeowners million time, impact age trade own remains of first-time to in U.S. At homeowners proven Even also of disposable the their home causing a have why needed on is to steep preferring a drivers one record rising the to a veterans rather made our average years this same in combination a rising where business, invest This who X/X consumer broad-based the supply which housing home is or by boom nearly big factors second, remodeling home. are pandemic, the their more over to in a so repairs. agility spend the our experienced high remained we're to through we be investing are with in is the built business transform after homes be why of improvement under will of million have insulating for key we of home ticket low there

first Now entered and before XXXX. Canadian Canada I'd acquisition like moment Lowe's announcement XXXX discuss sell to of close, to recent our I in to to in intention regarding with take Partners. RONA Sycamore business the expanded later retail a our our

its operations, few our Over which we flows. the of on improved operating fundamentals last to brought the profitability retail focus Canadian the Canadian cash business years, and

Sycamore U.S. on executing work the profitable the of to also details their appreciation impact over home for U.S., thank the market with customers, profitability forward Canadian like for for return will growth contrast, deliver improve and to with operating banners to commitment while turn value to sustainable required would hard for we margins. business customers in to the a would incremental this the call improve the achieve team to continued our streamline seamless extend margins Bill. improvement our our and transaction invested our business. in collaborating to like This look transition. to entire investments line have shareholders. financial us the and we regarding ongoing and later call. our dedication However, with will U.S. capital the tremendous like communities. team opportunity business in the on I'd enabling simplify to serving I and and our operating our and to model, significant their that, I'd to And By my Partners capital Brandon share to transaction provide be

Bill Boltz

sales everyone. Thanks, solid and demand improvement Pro quarter, good morning, both comparable customers. U.S. In core DIY and across reflecting %, third the home Marvin,

bolstered categories, well demand. in Home fueled This Ida of in division, scale across Pro Home quarter, Louisiana that enhance core Hurricane kitchens event the Decor average. paint, Products by and experience. the In XXXX. flooring. Decor we Overall, significant slightly our and sales Ian our merchandising as at momentum drove was departments as and from performance Beginning Day cycled for strong balanced and did our standout we in down Appliance when continue interior in bath Lowes.com ratings and and not DIY with with higher were sales comps to nesting fall company divisions, Marvin we online positive flu led improve were mentioned XXXX a Hurricane with that Building Hardlines, over growth appliances, by prep prepared including storm repeat XX X the same Labor user above activities trends to comps our

working, needed customer we this displaying If quarter, just refrigerator to is highlight our to their delivery toward to is that's especially improved earlier replace process housing now Lowe's important dates helps homes example, a purchase available. quickly appliance This starts. washer new existing focus delivery immediately skewed this replacement an business next-day stopped the versus As began within feature them or attention product in as that's our options. for

we like customers continue last Pet also Pro with wash to new our hair As quarter, close to mentioned that cycle, see exclusive Maytag pet for with up removes the I which technology is Lowe's. innovation, trading from in washer

Pros Carney, John part Deere, we launched leader price Trex, we larger especially our both with Paint with premium on a All-Star this jobs. Pro remodel rather than new EGO, MVPs for program ensuring points all earning reflects across repair of Whirlpool, offerings global Owens partnership quarter KitchenAid, it to high-end these of us starting and words, business. more to center known DIY. leading our color including are and to see HGTV delivered like Miele, these are wall. Sherwin-Williams new exclusive professional with value benefits other convenient Kohler, across colors, paired purchase job cost-effective products are a who quarter, Many Aaron's. delivery colors These and brands This directly making our departments as that of across wall Husqvarna color pros from partnership ongoing their of Samsung, new upgrading positive paint And DEWALT, paint. from all and appliances. U.S., Paint Pros, also Honda, the who Sherwin-Williams Pro paint continued strong those new paint focus the their comps with commitment converts our In our painters. Pros which expanded more new for capabilities that enhanced Lowe's, high-quality a have This home work, paint LG, Moen, their rewards our site In are reset to also our and for

that so at together bringing desk. can Sherwin-Williams the all paint are We color favorite customers paint easily colors match their our

more to to new pull categories out in to paint frequently to the of for everywhere We color margin need of purchased everything have are our the roll department, the get next closer and it it to their front of project end wall relevant, converted easier this one trip. We customers of by make products some they for and higher resetting year. by plan end this the half stores year also

pleased We a in made progress are just few this the category with short we've very years. core in

are gaining We a in take and to Pro with continue plan both few DIY, update we to recent just market this ways the traction that paint. and share highlights

low and gaining once Allen for busy to flooring and orders. strategy. by STAINMASTER. traction led STAINMASTER, we up for as another across in brand in + bath, for returning like momentum largely popular We also our again we're Roth gaining this durable, are maintenance Total trade And in-stock Home and flooring versus as custom our improved quality options waiting and portfolio, Pergo comps to of that had driven homeowners strong flooring, Origin the higher way brands is with private available just kitchens Within customers positive larger, indication vinyl in-stocks opting the especially Cobalt cabinets in XX, cabinets

to Turning in Products Building performance division. our

millwork, balanced project-related building DIY see demand. rough continue broad-based in by to electrical, growth and and lumber Pro materials, across We driven strong plumbing,

double-digit detachment they of in comps positive by We in quarter innovation. previously hold our increased as engaging on trend building quarter. lumber that the in our related improvement as like products home leading strong so fasteners categories are put we Hardlines leading to customers In hardware, strength projects lumber demand demand encouraged for the lumbering this in also continue as emerged in DIY to see division, comps investing a to had

fans. trimmers powers leaf products in growth with battery-powered seeing, now traditional to XX EGO power it's to everything blowers we're that that power and products outdoor pack lead generators misting the equipment And battery outdoor mowers, like the EGO camping accelerated tools, lifestyle Our from different equipment. like and surprising not in continues battery-powered

we our shift XX-foot of a to in concerns with strong have Halloween some is mummy in in the no. early if Given this seeing this the point marketplace, over a to And discretionary tree season is off Halloween One we're what sell-out typically purchases, indication macro $XXX. this the sets from highly trim which We kicked discretionary items at straightforward with softer asked a of the positive price away argue And one discretionary you year sell-through animated of an of the We the we quarter. expect most consumer. that answer a is, environment. a see a had could us with of the continues our lighted sell. and in being in give holiday our total category, early strength

up. taller, on trading consumers discretionary seeing both and higher-end example early artificial sell-through which are trees, of We is purchasing another Christmas

like the I'd partnership call and our customers partners products to Joe. the the for thank continued our Hurricane their chain and Ian. you vendor support they as our in from turn the hard recovery close, they need we team now Thank to efforts to provide and I'll supply stores continue and work I over Before as that with communities our merchants,

Joe McFarland

good morning, Thank and Bill, everyone. you,

thank Let you associates. heartfelt our me a begin to with

customer means comprehensive direct At build a focused and of is reflection stay That's good, stable core, employer of to are in its benefits, work wages providing we performance and strong competitive quarter on bonus this choose service. retail hard Our providing jobs, their opportunities. to associates becoming dedication so that careers. where excellent to choice the their why

permanent the million we in $XXX up ahead and up $XXX in awarding million announced associates. eligible to associates for to our wage full-time part-time increases eligible we translates season quarter, for this and of are $XXX holiday hourly This mentioned, Marvin for bonuses As frontline associates. to $X,XXX

this understand can type As improvement, as how someone I recognition be. an meaningful career who started hourly home associate in of financial my

about the customers, in serve. of and which demonstrated and leadership both we Our our executive we in in people communities rewarding make taking is care the associates passionate our our team investments is

Another our command these support over Hurricane years, communities ability which dedicated response action the Ian. example investments our few Lowe's of to has now Year devastating through supporting round, transformation of center in the improved to a like last response storms capabilities is disaster dramatically our disaster cross-functional efforts.

In the fact, that capabilities respond it so was enhanced us these enabled to to pandemic. effectively

their refueling volunteer the their families, associates home hit lead giving to We hardest emergency the Lowe's also help dryers and to stations relief go focus response colleagues stores, disaster to their washers, a deploy impacted employee These meals assistance in and financial we a our on teams showers, deploying areas, further and the impact with chance mobile and areas. through associates relief fund. by offering to trailers step our our

need thousands demonstrating In able shipping like our another to our PPI We continues Ian to it of homes, we the more their wake partnership Shifting these our to Customers our to storm. be thank quarter, to that of perpetual fulfillment XX,XXX items help once option close value on This to who are disaster the deliver homes. and importance for X,XXX water, same-day the times Hurricane protect pounds outstanding leading to we Earlier leave Pro the in our shipping the of to hardware supported many of helpful our stores In our customers by improved having meet nationwide And on on sand, And support scaling journey were same-day fulfillment to stores of with we rebalanced Instacart. and Lowe's decreasing a supplies critical ensure again customers. located the we are our the to they and delivering our in to technology addition step our quarter, get XX than needed storm, just for tenacious and prepare buckets Ahead enhance XX%. their up these orders batteries the XX% a days stores omnichannel are have received Pro, Pro items without of expanded delivery rolled focus upgraded to XX% options. driving us response hubs, capabilities, track out team in now our capabilities. stocked to our like over the in in for that omnichannel to optimize stores also up allows of weigh many examples or by network a faster few two-year results to network I'd this basis. productivity and optimally to continue goal of over fulfillment. to and improvements time. parcel comps across our are quarter over QX, holidays, important our spotlighted parcel

Pros leveraging long-term and new are partnership by demand this We purchases MVPs capitalize Pro and incentivizing our on to engaging and Rewards program continued building loyalty.

presidents to because and join. a Pros to find for that to challenge sign be loyalty our the once program business Pros can recently do eager succeed, our Pros already them feedback Our on with talk know who understand why, paying off vice asked their approach This positive we because so higher-than-expected that and from grow are is real we not adoption Pros. but up they is helping all want overwhelmingly building We our laser-focused we here Pros succeed. to benefits, rates when regional to program partnership-based proved of

our So will success. ongoing be awareness key to and the continued execution

to customers. results not be we like associates would once this again their strong that possible. quarter our for would Lowe's I and delivered them, to our the close, thank commitment Without I As

I'll over Brandon. to turn it Now,

Brandon Sink

like Canadian details intention this I providing our announcement additional to our Joe. recent to by regarding our you, business. sell begin Thank would morning of

over years, operating growth, our and retail making in mentioned, progress has lag our return few to capital. and continued Canadian meaningful Marvin despite on operations U.S. improving As it the past business sales profit invested

$X.X outlook. full business represents recorded during points a operating of of this we the basis dilution the to billion quarter, on fact, business. Canadian And impairment margin In approximately XX year pretax charge related non-cash our

line clear return sales on U.S.-focused long-term in gives productivity, this and operating us sight makes and of a our transaction ahead, to Looking margin invested of particular. us meaningful a business improvement capital

to excited upcoming our are December. at updated our We conference financial in and share targets analyst investor

generated Turning year. $X.XX of to diluted GAAP share per earnings QX We to our results. $X.XX last compared

certain Now my point forward comparisons from include where will comments non-GAAP this applicable.

share allocation. charge, quarter management XXXX. the generated to of capital with $XX.X QX impairment represented of increase Comparable X%, billion billion This combination Excluding basis asset basis $X.XX, top by diluted growth, was product XX by sales XX to of commodity consolidated average inflation FX $X.X XX% an sales. driven we driven inflation, comparable and up compared Of point disciplined per line P&L increase sales pro X.X%. ticket higher comps. points adjusted of of earnings third were increased strong headwind and note, a a

year many QX. partly USD, comp Our as by XX transactions attributable than XXX sales basis over the improved average more of also On QX X% consumers note, lumber to in X.X%. in move declining the sales QX XX.X% dollar. than Lowes.com, to DIY ticket in sales comp QX down transactions partly quarter, Canada Of trends we project-related was up sequentially categories demand increased have significantly in were time at sales. with strong as were offset increased a activity. higher half were home the the comp following and decline stronger quarter, categories. through in DIY lower due improved all from points roughly points and U.S. XX% with higher while by driven Pro the basis across core summer strong up quarter performance spent appliance across prices. travel sales home driven by with strength broad-based sales XX%

over Ida the year. cycled Finally, storm-related was flat prior as we Hurricane in that net estimate the of sales year-over-year relatively effect we

of Gross shrink. sales the comps in comps August, points prices margin as on units was costs along by in in note both X.X% freight roughly are Higher last of a margin, $XX October. basis, third based decline prior and from prior cycled reflects by this August, XX same of $X.X higher The year higher we approximately triggered September billion, billion, was three-year morning, on trends. Please basis will impairment year. was quarter network, over Adjusted that and the flow-through quarter EPS year. XX.X% the well and last with basis XX.X% driven supply leverage. comparable X% domestic a third billion steady SG&A comparable September year at the and note financial in in X% and chain flat DIY XX U.S. prior October. asset up up by versus XX profit XX.X% outlook to to continued invested and up improvement margin to was adjusted rate pressure to largely year-to-date. X.X% our expectations XX.X% $XX.X return sales XXX retail points $XX from are driven and points, billion, the effective up Our was basis in quarter last ended midpoint million rate. of in Adjusted increased points and full strong as inflation Canadian diluted the offset margin as This sales for product XXXX, tax compared with that quarter, pressure SG&A as the XXXX that of adjusted fourth XXXX substantial a costs versus in sales a of began outlook performance below flat with transportation which decline associated implies XX our increasing were our to Pro sales Product positive. X% in in monthly XX.X% higher business. U.S. transaction lumber import expansion basis year. our Please higher leverage year. be by $X was from the rate partly quarter July. margin product slightly On range, Operating by XX that stronger-than-expected steep of margin the operating related levered of year of This we rate of of and of points costs basis the rate our to productivity. year sale up sales operating exclude margin prior We gross basis now at expected points XX.XX% sales prior capital representing of Inventory expect driven of the all XX.X%

outlook sales. our includes XXrd As $X to billion sales a to reminder, XXXX approximately a $X.X which in week, equates billion

to compared to continue slightly expect We gross as margin year. the to rate prior up be

As we cycling the fourth keep margins. benefited which in to inflation quarter, ahead the second over of you mind look that round XXXX, product are lumber in

also quarter. continued pressure shrink expect We next

for diluted disciplined adjusted XX% of higher-than-planned we our Given our raising $XX.XX. SG&A better-than-expected are reflects management, year. focus activity. leverage $XX.XX full now This to on $XX.XX approximately margin And the per our for of from we to expect range for operating year to expense outlook adjusted as $XX.XX earnings share the updated well as share repurchase

of this year. billion up expenditures to expect capital $X We

XX% in expect And expect our repurchase XXXX in above we on had the offering invested for finally, our year. share to repurchases this capital year. into to larger-than-expected billion share originally billion planned we given accelerate $XX return notes adjusted we in activity raising QX, $X.XX XXXX. for now Additionally, of that outlook are We

Company and through And billion shareholders. to a turning $X.X of In returned allocation cash combination strategy. flow. generated share to the best-in-class free capital $X.X our our QX, billion Now repurchases, both in dividends we

During repurchased XX.X $X for we shares the quarter, billion. million

in per X.Xx to we the EBITDA to continue high-return and support growth maintaining rating. at X.XXx debt XXXX also We adjusted the that ended We Capital million dividends our totaled reach leverage while we projects of our also quarter focus well on in $XXX share. objectives. $X.XX million quarter on as track to are expenditures at paid target $XXX in our BBB+

point allocation inclusive XX.X% recorded while we shareholder on deliver open of strategy capital business impact related quarter. to in growth. closing, And questions. the value to return investing In asset will for that, I'm our with XXX associates invested drive and our impairment long-term sustainable continue delivered the we leading capital through our we'll Finally, it of confident that up a basis third in to

Operator

today comes question questions. Simeon from We're Gutman Morgan question. proceed now [Operator from Stanley. Instructions] first Thank ready your the with our you. line of for Please And

Simeon Gutman

idea Marvin, up devil's a I second to long This catch these pressures maybe play for for to the on advocate wanted just taking housing. it's a all to time the in segment. that, consumer

For product all labor shortages. some been the there's cited, you reasons plus and

of debate Curious eventually certain depreciation a and So that price much you that's to home on this there level weigh is going how customer. that

Marvin Ellison

the some the in markets increase what other When performance where appreciate aggressive those of during markets at at question. markets. would are Those same of home see pandemic, the say. I saw country rate we No, start now prices to as I prices fall. And look we performing around can the here's you an

trust we're pandemic, understand already homes prepared homeowners. trying U.S., in appreciation non-discretionary a the business declines been house But II. The have facts of like million stores still every like. signals accounts home than the is current that's seeing And X at but just was bank levels, demand thing you in commonplace. our of day record get data. price are, a primarily are not but look I because per we're And and have home we quarters that it and X/X every virtually code life And remains to in income lack X.X That's years macro due more the than that great in that today average, said cycle future. of to crisis the kind on still coming home. are had of is appreciated facts prices older home of are comments, the homes look of So, that in of War break. months, in personal broader sample and the The your size what since also the older the state about every in under spend ZIP vantage of building we financial pretty things from the like as XXXX. what my $XXX,XXX fact trends of have price the million XXXX, World may before around disposable different and looking The we're good me, when of the I home because they've out point, demand you to patterns. trying currently to what's reality future mean, kind this happened, may at operating

look are to ask and what when those one data data business, what for demand just simple that's Historically, at the to correlate And you we just question. demand we So to that points are forecast I points at. patterns closely to our correlate and try have outlined and Lows facts. we look to patterns, what

Simeon Gutman

jump Yes. off back housing and of go fair to the I'll That's point. business. a maybe

it you're higher at the If CapEx, the execution put be against that things Or you executing since better, Does you process? you've maybe plans of and mostly CapEx? doing reallocation in can it place look in is joined. involve obviously, all Lowe's

Marvin Ellison

dollar Well, can a standpoint, month, of I precursor. the year. and what billion investor is to would That's say for to $X from our just a I bit next CapEx expectation have roughly you no our have year. number allocation current of conference next amount capital little go above we We'll a be give per going

a high up, month it. speak that we these And like those can Bill of allow to at merchandising to we lifetimes. tells systems. incredible CapEx and the is supply to degree fall a And level but we're achieve we'll working get all difficult again, good $X all IT units to but catch allocation to as I not be mapped dollar still arguably in of is retail billion that we flat to underway, for now, all have to things improve we at significant right have, need billion out, and we that have execution? where feel transformation We you we things that's next and have to whole and all supply pricing more you Again, continue want So improvement, things our as you collaboration specificity us what chain I that you New We and environment year those still more working investments but inventory make. be be those within and will They're We stay things. can pleased are, the execute at transparent, amount. the that costed accomplished most be. But of also company, we say the ability yes, can are are manage global tell in on to and with you of that is, We at have a CapEx of very be that out. execution negative our and could York. high so on couldn't dependent a of chain, a still understanding $X you process level. billion Anytime we to I'll basically we with I look made will within $XXX current can CapEx.

Operator

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

Michael Lasser

early what -- the Your talked about think seeing in of signs? you deceleration stack big do like And seeing competitor three-year are basis? some drove monthly October on separately, any on business those you acceleration monthly grills, yesterday the of in signs areas similar a a in

Marvin Ellison

relative certain certain year, of you all let the to different have take to some Bill don't come in provide look when the into of perspective. changing red lights departments, we I'll Obviously, we have start concern really that. certain blinking Michael, demand. get So of customer But and on part I'll we're to across categories, first items, going based of when any Boltz times performance our merchandising SKUs.

our anticipation was some or that but So, of like seasonal we tends there categories, of not anything some are more we not in in believe degree grills the do quarter, trade third lot consumer feels we would a seeing of last these detail or we be discretionary down wood pull-forward looks didn't a category the in have of the for news It spoke sequential strength to to same be as an And top-selling business. this saw all in And us year, saw be health and the of best mean, we contrary, for third year. Pro was the DIY the I first to we kind to segment the continued the the Pro, overall on has DIY. good quarter time our customer improvement performing that quarter of strong year. tends been indicator pullback. And quarter. patio. that a is

to are right strong gave I'll really three-year stack is Bill the that confidence to product really what talk categories us things that the that well that relative that mark. two- performed headed So, for a us quarter let direction. something about third in gives in

Bill Boltz

things. some We I then our we on all Pro do our of I and We see Yes. from we DIY prepared online do the -- typically weather Michael, sets those the categories kitchen paint, said saw seasonal indoor, well. QX, Thanks, Products and and like away of to see shift And as Marvin. into well. perform and trim the continued both go in well, categories. continue bath, was Pro-related and a strength businesses, business just in side a the see be QX. as think we our as we And then were our in heavy then And QX see, to QX. to in had across couple then business continued business we And a to in early you holiday, of reliance tree seasonal Yet Halloween with what flooring, as appliances, there favorable. continue perform us a remarks, -- shift really that still was to Building as my QX, helped to and on well

Joe McFarland

MVP And that rewards I'll this Pro add additional new our point. have discussing. just program is Michael, Joe. been that's we

I along look strong business gives well. than when the then combination us with a at rates of Pro just credit CRM adoption our of way that a lot offering our being as better so, and expected, confidence new loyalty Pro And in platform

Marvin Ellison

Awesome.

Michael Lasser

follow-up bit is now. little pulling your messaging from forward the risk at couple of a of My of a question weeks

few Your there in home is well of a that have market. be structure the a demand, to just cushion SG&A housing over cost weakening downturn doesn't quarters, its the that that improvement as very because leading maybe in or labor could Lowe's have been wrong? the either dollars last much in idea contained Why event

Marvin Ellison

would the have it's your in for see late place still we I the was point, as data that performance you that the quarter. we QX, of in yet, margin anticipated, Well, levers agile. leverage top an wrong based We what broke line operating not example say, we as be that the on use now to season

sitting got prepared we a in comments, said have There's we've table. my of experience around not lot things this that few I As very seen.

really playbook think have the anticipate, to pull ability and developed. turns we perform really negative we market levers if We a than may the those have more then And strong that we well.

really and month you giving of we're so levers investor be of conference bit to conditions. any to As the react is spend Brandon built to market swift the outlined we a next fact, matter details, time we a agility at that the not going of really, those can some

Operator

Your with proceed the of next question Brian line comes question. Oppenheimer. Please your from Nagel with

Brian Nagel

and business, his first initial of I My want trends don't again. I question, -- when just guidance risk to through sales quarter QX, with year, the and out guidance? strength sales. for then Why mummy the in basically pointed the the accelerating lift mean earnings have as Nice Michael in given the Congrats. a in you're you the especially nitpick question, again, not the strength lifting seasonal the about talked

Marvin Ellison

the financial I'll you give perspective. the let you and philosophical give I'll perspective, So, Brandon

a of there's there. Brian, unknown know, you lot As out

going be we're not no reason. to for overly so, bullish And

candidly You had quite been still a midterm election hadn't determined. that

from You Fed. have aggressive action the

happening. geopolitical global have events You

into the have it a just in conservative. there's and was we felt appropriately absolutely. just quarter season the just Do holiday we we're we what be where year. an you describe And much plan balance our think to macro. as environment concern in so have Do conservative. great being, confidence so, what We this for for business, going in do. we But we're to -- in appropriate bet we I'll of going And confidence next the have deliver

has lack asset lot micro on where not nothing about decision and being to being more do a live aggressive an our guidance not of of with there's our overly environment confidence. just It's to So questions. in prudent

detail. So I'll some add additional let Brandon

Brandon Sink

Brandon. is this Brian, Yes,

And remarks, flat the QX to mentioned point if QX. a benefit specifically As across guiding positive moved volatility to I of year were it points prepared end improvement commodity to the as QX to full strong. in see bottom three-year The is, recall to into we improvement XX at down August, impact basis XX down that of sequential expecting QX. a of drag. basis runs flat The for slightly we quarter. you With Bill exit and midpoint we're will the lumber my looked the rates indicated to out implies range a QX, to of comp the categories. which actually in interior the in DIY-related I back actually one, our were X%. pricing we cite actually flip seen did guide we've comps is the where that

basis benchmark XXX lumber and prices perspective a and that about point that's year. that swing. comparing So where we to taken where round two inflated last of about out from of below $XXX Again, running that's are

lumber, excluding to Pro and are differences in, and all the comp to through mentioned I expected just momentum continue continue cited, So that the expected QX. DIY Bill the is trends

Brian Nagel

That's separate very follow-up question, helpful. topic. I my Then color there. appreciate the

regard with Just supply chain. to

environment internally. is By So keep most in chain for -- talk highlighted improving a low that Marvin, you've shipping you measures, had the of you supply chain with getting external better that costs supply there's lot success the such. and now

the the these of recognizing issues supply yet guess question, guidance Could sort that XXXX, some tailwind external chain you the correct. several to haven't but that? seeing given be as a hit continue extent we for then I over to And quarters? are So next you

Marvin Ellison

and us into what component to year. detailed very Brandon is of front some in the of Yes. that see elements supply of is short give will going going transparent a definitely of going to chain cost are we're the yes, next next would advantages that. getting answer chain a Look, be on without it's obviously, discuss And month, supply next I big And be year. kind to is, say great Brian. very question, there that going we what

opportunities strategic it retailer still and great we supply committed for supply to supply I about in a cost a the just In excited as talk initiatives addition we've chain, to one environment doesn't going as see the as done much a great not of our chain, earlier, chain. well about as chain, supply There's we're because improve. that to we're mentioned as have great far overall in that as key we're having work to world

Operator

Our next Bank of with with line comes your the question. from of Suzuki Please Liz proceed America. question

Liz Suzuki

about and of think forward transactions going average ticket. you the makeup as comp Just between

You moderate. where mentioned that some you in inflation saw categories

it You start in that offset moderate average would give you be rate ticket does going confidence lower to in as inflation -- forward transactions. will or that decline pickup increase be Does a growth saw by subsequent transactions? that

Brandon Sink

is Yes, Brandon. Liz, this

do we earlier high quarter, the I I inflation points this think about commodity of inflation continue to inflation. mentioned single-digit on of see front, that XX basis inclusive

resilient. be to continue does consumer Our

any seen haven't significant We trade down.

In focused fact, across we've single-digit at on which categories. up at actually we're forecast, seen this the a to that QX place continue of trade high our And in point, number mark. we're expecting

the We going that to to ticket, offset being are lift earlier, to is so XXX the driver forecast lumber the QX. some and mentioned for to be it's primary relief that's that be inflation QX, pricing our related going transactions going down in to going continue of to point that But by which our comp get I net is basis swing.

Liz Suzuki

backs about remains that then how thinking going ticket transactions I'm negative, down, headwind remain would but you're starts get ticket is to that we versus push And QX, the out. that how you one and outlook mean, think of potential forward out as I looking for if about -- going that comp. outlook just to play just comps transactions that severe ticket the could curious beyond come a be forward.

Brandon Sink

and macro, hold details the into We'll on December comp the to to going to an view go we'll view makeup our within until you have give December a that plan we're comp there deep of the of there. scenarios Liz, X. updated Yes, and really specifically

Operator

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

Zach Fadem

QX So QX, to trend, million a the of the couple your in like you've in following flat, looks was SG&A notable able out been embeds question, week. and pretty dollar both a as step-up excluding even take on while of SG&A it QX extra QX up SG&A hundred and basically

flex lower SG&A of the then today. impact and understand a with to extent in up also So help what able puts little the And to line labor bit me talk just through the detail perhaps you're on and volumes down the initiatives? takes more can you the and efficiency

Marvin Ellison

I'll maybe, So, let first I'll Joe, provide Brendan the additional and take that, and detail. Zach, of then some part

So I productivity we we investments conference has that But perpetual more cultural to call question, process this the going us, become how thing that at PPI is, have for detail we're believe of your go what still week. into across have company can initiatives. we we to And the to level make think on the the key improvement some understand whole next we in technology investor specific concurrently continue drove can store done, the store what that's leverage all environment service. SG&A it's drive leverage if and specifically you're the customer But where improving just out service. and But to leverage, his up actually Joe in and team customer And easier to improved an drive SG&A pulling we really while has investments. key. to payroll we've And expansion that's payable about from technology standpoint indiscriminately.

we're project we initiatives that it those map can of your give Joe take financial in seeing how more payroll that continue that consumers Brandon question demands our if So, think the we additional I'll there's road quickly us stores. else from part rather benefits. about to the and still can adjust then to something our add relative the will and on let

Brandon Sink

an in said, are spend. as back is But add our QX. payout substantial just in continuing would only managing Yes, reminder, to we PPI drive front-end lever cycling just to add office Zach, tech to modernization, transformation, thing expected I The this store is I incentive from QX. what initiatives would XXXX Brandon. Marvin implied SG&A And a

really made, year. significantly earlier, And to expecting we'll even for have we we store of December. more sales we're full proud in as the in EBIT an mentioned XXXX standpoint we've what So in the progress declining from about you that tell outperform

Marvin Ellison

Zach, Joe model stores. in activity-based talk about the payroll drives to And that let the our I'm going system

that of don't at a a have approach. the a you blanket number to We transactions way can and generate So that's payroll we think get on we it. footsteps, best just sense based look and

can you expound that. Joe, So on

Joe McFarland

Yes.

implemented have to our years, day, system several I'd department, What last last back by this our store, continued pay by series through been navigate to And And of the XX-XX investments with with in so We've then down you in is steps continue our align go-forward have activities. of the we've gone few labor a us. lot customers to a the and we dividends large of detailed, to years, day, by Marvin. tasking by initiatives confidence really in for thanks, addition, time in ability the with you associates that is is making. as tell think that we the

system IT a I from year think ease doing. transformative we're standpoint XXXX in and us what will for of be an the

Zach Fadem

maintenance it. would Marvin, in to to and activity, more color slowing remaining which and you've about tied then, business the repair housing is those are Got in or And nature. of price the and the how you that of tied characterize you home your all the perhaps your bigger repair activity. discretionary And turnover is past extent in considering there. housing recurring then do stable demand X/X mentioned X/X ticket maintenance to appreciation? business, these versus are or And current the for Appreciate what environment say sales then metrics, sales more

Marvin Ellison

is fair question. we're both guess that I strength I will it's tell What you areas. seeing in a

on see rate that their that high you I that ticket of and going when but in interest seeing just projects remodel homes fixed is that would million place, nature, double-digit keep obviously, to phenomenon low in modify existing then a also shortage Pro, that environment $X.X of talked $X are tells So growth, incentivizing because to in up in and trading We their home. about quarters the we're million is are rate call you nature. in Pro homeowners XX% growth upgrade consecutive there's XX what big the

seeing a But other a the falls the see so because to bathroom, simply upgrading improving maintenance you and a basement, of older the X/X. And you're repair cetera. X/X new the et new of to kitchen, in and combination finishing environment, that, homes that getting then

performance, things. it And the And we're different walked of embedded can department all a all those as of different Bill of in see results. through those merchandising seeing you of so, combination

Operator

question with comes Please your Jonathan Jefferies. line question. the Matuszewski next from The proceed of with

Jonathan Matuszewski

question first years. checks, been spread My they've like From a XQ. Great. our inventory. the on looks It positions inventory your the are sales bit is looks in like in in-stock sequentially it store widened best

about is the topic, tracking So cost? is of that we tied my say it majority levels at first XQ? unit increase that year-over-year think end of to That's to safe question. on And average the that should inventory inventory how

Brandon Sink

is this Brandon. Jonathan, Yes.

exclusively really So by I would feel, Balance XX% inflation is we position. a is driven freight solid overall, are say inventory cost units in and flat. up product and

As improve continue you those to all We're demand levels categories. mentioned, SKUs, feel like Pro in support make our investments we to the in-stock compared continuing reference got expected to in springs to QX, QX right early into and consistent for our pre-pandemic with levels. rates across the of specifically to high I ordering, expect 'XX. see we demand And think the that to over we build in for do inventory we

South just businesses, zero-COVID our supply But also in seeing we then unpredictability Year, maneuvering in South due and which part New of chain bit and Deep in Chinese a start at around when do setting the QX, look to a reminder, of the is specifically, China. We we latter the also January. seasonal are policy as we're

be categories. supplier based times each in of lead stock decisions we're we're that making going on and So it's for our and to health across spring, critical those

Jonathan Matuszewski

That's Pro to really up picture looks Marvin. quarter traction on the there. a question Lowe then helpful. for And this multiyear you, at great have XX%. continues like comp It held quick big

all. gains think recent have with share at Pro, if the evolved So you curious drivers about when the the

any has sales through driving talk in existing and customer seeing Pros? If great, drivers? wallet whether those from you're you could change much two Pro been would Pro That versus greater new how acquisition share be

Marvin Ellison

pro what customers is our is Thank new is that loyalty on you level is exactly Pro give tell we key I customers, credit, it's return driving a external wanted. you specificity. of and visits lot when absolutely of Xx new We customer program point existing and rewards number a new customers data will for platform a down our enrolled to question. the of they in that more shop more. of what information this, don't which driving is And Pro But

that So, key data is the point.

in ability to down the so to adopt Pro engage scripted talked he comments, they and when them to it Joe's tend adoption how the comes and really and program. the about our And them, we rate educate engage

we're more pleased back year. Pro, bit that DIY we on but really the with third and equally seen than progress come a provide all Joe let I'll we've little strong saw context So them pleased in the customer quarter

Joe McFarland

and Jonathan, to add. things a just of couple then

Lowe's outside First off, just really sales, our nice is deep experience job. Pro team of here a and inside they've at sales, full done

still we're adoption seeing. the very in program, that pleased with very, the the Pro MVPs so, we're stages And but early of

CRM Pro So, a bit little we've in spoken platform. past the about our

the no Pro and call has important we the what the ability that better a leveling really Pro's we the sales. have matter points playing to size. to needs field And earn every ability anticipate drive So, does of this so and then, is nice job what

And with to deepen so actions things different completing like relationship purchase-based them offers, Lowe's. their

continue And very here, pressing pleased so, with but progress. we'll the forward Pro

Kate Pearlman

joining all on Conference at X. forward you speaking us you with Thank December look Investor Analyst to We today. our for and

Operator

concludes Thank you. XXXX the Lowe's This third quarter call. earnings

You may now disconnect.

Lowe's Companies (LOW) 16 Nov 222022 Q3 Earnings call transcript