Earnings call transcript Q2 2023

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Operator

Good morning, everyone and welcome to Lowe’s Companies Second Quarter 2023 Earnings Conference Call. My name is Rob and I will be your operator for today’s call.

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

Kate Pearlman

Thank you and good morning.

and are our Chairman Joe Financial Executive Executive President, today Officer; Chief McFarland, Officer. me Executive Vice Boltz, our Bill Vice Stores; with Marvin and and Ellison, Executive our Vice Here President Sink, Chief Brandon President, Merchandising;

included can I is be Lowe’s Relations remind website. found forward-looking to release press like that our on our would regarding this notice you statements in morning, which Investor

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

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

the Marvin. call Now, I over will to turn

Marvin R. Ellison

morning, Thank you, Kate and everyone. good

For the sales comparable second X.X%. declined quarter,

online of we were deflation. an with experience. investments importance growth strategy are X.X% continue by basis helped growth investments which positive recovery, Pro Spring DIY and omni-channel in reflected driven also our from paying strong combined online, continued offset to our comps and pressure our lumber as ongoing uncertain spending total of with sales and and points home softer comparable discretionary off XXX in improve despite macro, these QX in Pro the to results Our

rewards XX% project with Pros continues to recent survey, consistent national our that our online Pro to Pro resilient remained lead We're brands, program, backlogs and of midsize nearly tools. enhance expanded our volumes recent In to small healthy to and quarters. most core reported and pleased MVPs Pro customer respond remains

to leverage app deliver sites of our consumer to plus This last time quarter, saving drivers This footprint a job lowes.com make option job hours. to Pro to sites XXXX our matter us XX their needed tap directly allows homes into network store in new much to of OneRail, them mobile launched same both minute a deliveries money. us and delivery Pro by million and powered and new capability those day on we to enabling

Our customers. than geographic the examples market the rollout expanded supporting now faster capability same how model delivery they and year. the for our more both and of making of are initial is We're the home many customers making day we're delivery on to meeting rollout track regions products, and big of strides for also XXXX latest and more are end DIY shopping Pro of by improvement with convenient we in a stores the XX and bulky complete where

in perpetual remain our in As disciplined we drive we productivity growth, what invest or productivity initiatives future through our PPI. improvement will improving

leverage expense stores unique. of the sales is base with our In new the basis earnings on the as for to needed reality operating the this productivity. But to We we $X.XX. leading and in system, the of rest that gives lot productivity scale conversion XX-year-old our of omni of ability screens, our capabilities is channel and journey future. to margin in benefits We're low And also opportunity operating growth we of to generate penetration is, our close stores quarter outsized second operating A leverage we've to these and green diluted points, this misperception significant per margin hear common expanded be driven end, productivity we must XX of Lowe’s operating build touchscreens ahead. our to the using instead and phases run portfolio quickly to to drive intuitive navigate ago. transformation final five have our since still beginning foundation sun-setting, years us continue addition hard modern leverage a sales the share margin

product with for expansion initiatives our rural assortment, company. the combined of in advantage of the stores implementation most our our rule competitive Specifically, PPI a our make

the hand. process, focus we cases faster, productivity executing And against five as are to margin work is times productivity our all underway stores. in streams leaders efficient as continue stores, our we're to supply often functional One emissions and sustained it initiatives replenish which example across Beyond our improve damages. improvement. applications new driving piloting PPI XXth we and leverages dozens recently in we pack chain zero in with investments path are our along down areas sustainability our with a of break to Responsibility minimize of to on to we with go maximize spotlighting net also associates to drive And this where published deliver greater in automation new automation and And Corporate combined productivity, to our mobile speed, brake throughput making hand far robotics more Report, they communities. operating

we below interest but the the rates. has over been with long-term note, concerns elevated realign and has linger. baselines, growth a still quarter has many But disposable surpassing inflation as real and Consumer questions and your have home And are strongest pre-pandemic growing drivers past price XX% positive trends most time when are on there two our on in pre-pandemic, with supportive while reminder, wages versus two Home the of income to by environment. pull started income disposable As macro inflation for real tandem. investors, and inflation speak first slowed, centered demand business improved personal disposable appreciation, with in sentiment of improve but in the and pressured years. of price persistent up remains demand it's they slightly appreciation a real income, also

translates must a of consumer However, improvements be spending. that typically in to sentiment for period time before sustained

are projects. with shoppers a improvement purchases, and in for with trends year, the half of down sales and consistent basis with to a second continuing XXX the focused remain our by especially XXX expectations repair our As ticket market outpace outlook the reinforce spend points. These discretionary more and relevant their to cautious smaller mid-single-digits big result, home our are on maintenance be market to

medium Looking trends consider to projects demand as persistent in as The and for average, is spend formation, home stock that repairs will aging percentage historical also positive improvements typically term consumer millennial cancelled. home sentiment than with below ahead, a and improves. favorable home the remodel indicator household work. And improvement a equity place, aging rather remote draw other it's housing combined of like are postponed encouraging

term mid industry. All of these factors long continue outlook to our us bullish on the for to make

focused while investments execution, to in continue we make ensuring environment. also In daily closing, right on centric the remain a we take company share to our macro customer any

are with total Our confident is customers strategy resonating in long in home Pro our deliver short alike to ability term. and and and we the DIY our

thank hard with As impressed And Lowe's that, Bill. to I'm each out frontline I'd over call to continue visiting turn like by working the of for stores associates. communities. to their be week I commitment them will to each I And their and

William P. Boltz

good Marvin everyone. Thanks morning and

seasonal growth start these Our hardware well DIY points QX outdoor above seasonal second in offset slightly These sales sales of more mentioned XXX paint, than and pressure We Pro building demand. saw quarter of the comparable anticipated. to recovered continued garden, XXX deflation, million factors as were and down from as and sales basis million captured spring, solid on demand and earlier. plumbing, that rough base XX materials, as to we lumber to lawn big Marvin partly late discretionary living, continued Spring broad see ticket successfully expectations. due X.X% delayed We

an cobalt in last improve and months. outdoor the Garden affordable In a smaller, drove instant helped us We of Lawn as was stretch in also projects than move living hardlines, pleased the our and our a into outdoor at we And where powered price products strength in saw equipment, we broad the half. partnership the pre-potted standout to like we weather recovery, stronger second spaces recovery. increase the that sales riders gratification craftsman. from achieved category from seasonal into driven growth effectively changing Seasonal live patterns strong with vendors, our Aaron's, plants. and and by landscaping putting with along based year with equipment specifically our us an summer respond power good Spring expected spring projects and Deere better in we battery ego, than position sell outdoor strength through with benefited are John inventory the momentum saw from of and exciting weather in who

after nearly units #X launch tool tools, and to was as the top We're years. Tools, GRK, brand with brand, Facia professionals. category which this the attachments like leaned associates rollout Hardware lumber Lowe's returning number and HVAC and Master. higher fastening into Klein excited the key drove for In we Specs, one Pro performing Power is quarter the of of this brands alongside started our about XX another electricians

paint part delivered largest the and in and advantage Paint of are our of anywhere our to performance site who between these electrical Within retailer safety increasingly new paint. we Pros. Klein paint and rewards specifically Pros comp this home traction online, in the products As loyal storage, for channel brand this home us improvement customers. assortment positioning handtools, retail the store go the offer launch, as will taken These Right as MVPs gained we strongest decor, paint of with designed delivery, Pros for quarter the program, Spec job Tools

in vendor market. We've promotions leading in seen to rebates, momentum the return continue fueled that model, One are U.S. through trend funded appliance online our once the tickets increase pre-pandemic sales customers appliance and was the was Vest focused Red retailer pressuring we the appliances, by supplier experience. of that with traction across reflected auto the I'm purchases. as our market to selling, fulfillment growth, Pro industry. quarter. the a in Turning gaining delivery improved applied again associate average levels gains, we're share customer market outperform and unit about our excited bundled But this encouraging the faster our to This

Now gears building shifting products. to

see strength to pressure in from continue offset Pro deflation. lumber the categories, We key year-over-year helping

line category deflation basis unit the company our comp comps quarter, by lumber strong highest our Pro once in delivered the again Pro reflecting XXX top basis by this XXX the points, demand. and While pressured points,

growth in by is healthy and of backlogs plumbing mentioned small another Pros to supported building resilience the mid-sized of materials rough indicator continued the Our positive earlier. Marvin the

Kobalt several anniversary. drain first powered one this This products, rough plumbing, of private Kobalt auger. celebrate is XXth added we as year of we In our new launches brand’s our expanded this Specs assortment battery and

equal brands our to are ensure than quality specked quality and brands out see we value. quality tested that are respond great to customers private Our to their they to or and continue better and national comparable

lineup Scott's. and balanced Rubbermaid Bosch, brand with increasing Our DeWalt, is of private a penetration trusted strong nicely brands like national

within store a we schedule localization, concept dedicated designed this to to a our This expansion all with scaling completed Petco Shifting store of provide for rural ahead space stores things quarter. our to pet. XXX includes roughly

it's While they increasing see need to stores ability still are early, in to convenience and stops encouraged customers basket appreciate the size that to the an they the we're of reduce make. number and saying these

broader to our stores market to As margins. Marvin is one productivity our localization work gains, of mentioned, strategy piece increased and designed our rural optimize share drive

Another continue highlight as to we've increased digital improve the is conversion. we online quarter this the and growth driven experience shopping

Our launch nationwide app lowes.com resonating day mobile on is of same customers. our well and delivery with our

online sets a Will refrigerator a also customers and better into are And with will This jumpstart featured space, customers us categories. get introduced to available our capability if experience Fit digital holiday filters, helps decorating. a want and search their who already new We determine nicely that for recommendations, on Halloween a refined positioning and fit

results also increased Network, the driving suppliers. industry is for are to to our see that Media better average lowes.com traffic expected than exceeding performance One We're Lowe's Roof our generating which encouraged and for

to one commodity team as Media cost have Our suppliers to PPI to prices transportation and stores enhance spend XX,XXX our take more We've and is frees to find and centers, time Lowe's. working services Network at Vest our our Red serving of ways to associates initiatives with costs across and underway is expanded constantly pricing. come merchandising down to customers. many up our The garden our continue we processes out team also over technology MST associates which optimize or merchandising and

better the on year is work while sales providing this for focused are our per their improved leadership be service MST store a assistant square centered critical we adding store foot does. driving for productivity the Through in This on experience New managers. this our dedicated team that team customers. squarely creating stores, role will shopping

the I'd now As to Joe. turn merchants vendors partnership. like I appreciation call for extend to I'll And again once close, hard their Thank you. work to and my over and our

Joseph M. McFarland III

morning, good for during associates are in work hard we bonuses frontline by $XXX their our and the recognition in and I'm Alright, over pleased that thank you, everyone. quarter. Bill of hourly announcing really to million begin second awarding dedication

in our to the compared in engagement we're a to continue staffing ongoing customer through point continue our associate University. Pro quarter as elevate improved basis are paying we service invest development strong scores wages investments we Our to levels improvement off DIY and Lowe's last with in as and seeing as customer associates this And year. both and associate experience XXX

As Marvin sales store. of picked those comp the and in mentioned, our are quarter, X.X% half online grew a up orders in roughly

our picking with We approximately omni as of by our many carts staffing investments, these get orders include to are our one to we've associates with order customers they what pick tools get reducing demand. in, our channel customer workforce the back to faster. to unlock enhanced management to their get levels devices These the leverage by printers, productivity initiatives enhancements process. align continue mobile need, through which and to streamline time and projects PPI better mobile And allowing XX% our

Looking of staging end pickup an a and stores. front desk further our includes improved we area, that technology enhancing transform our the signage, both dedicated with expedites are ahead, new experience the we process. as expanded This

track Pro, generate comps new under deflation, the lumber will part business to them allow as expand Vance, and positive rewards deliver tools MVP this quotes to our despite that Now shifting continue to easily online quarter Pro of orders and leadership to our Executive Pros Quonta program. of the President, for Vice we we continue

ways the buyer crew to store away we store. launched line could time purchase the an designated to tool, and this their save associates serving need to it a the other pick the be from As away newest to order, our their This consuming member the would now to Until we Pros time find Pro continue team time, from month, and checkout the the online up process, call job authorization. order taking sent site, to authorized time have from confirm by Pros when customers. the

in amount online see QR adoptions This already Now expectations. that's runners to desk. for a can many up and encouraged customers associates resonated scan our suite point our a the tools to Pros, pain wait line Pro check without desk is addresses having the solution pre-authorized and and we're out code simply at specified a that leapfrogs with our to Pro competition and of Pro and exceeding

managing a like environment. Now any which for big I'd in to this especially spend moment discussing how is retailer, are shrink, we responsibility a

As until expected theft. was protection in identification, wide developing embedded power makes by leading program, tool penetration radio solutions, solution This scanned frequency RFID but tech customers, be tools challenges prevent inoperable will a to or invisible largely to results with purchased. it technology driven and stores. industry of customer line our rural it is proactive asset industry service, We're our shrink driven in year's despite last and

series will company. for exciting our PPI perpetual productivity roadmap store deliver continue on productivity improvement. a initiatives operations, we have for In that of the to to Turning

the faster. the expenses freight, customer sales with investments in type environment. with These have levels to a staffing addition improve service enhancements stores. how channel also getting upgraded flowing match we distribution Through our from we centers flow better associates continued the our and our to into into scores into the freight combined mentioned visibility onto in I product our our control In This stores better us the onto for our us process to helped technology, freight and that omni the our shelves earlier, enables have now improved floor. of is initiatives, inbound PPI selling shipments down

I'll my Before it flood York, to are shelter, the our the help our and I'd our to to above who New release grateful and frontline Kentucky, teams beyond those extend associates to I those island we and associates going efforts in food, are and appreciation emergency Brandon. provide and in Vermont for With in over to recovery To $X who support wildfires. like Maui, devastating supplies communities supported and that, are the responding on turn recovery affected close, relief donating cleanup. Hawaii, frontline to with million to their to for in

Brandon Sink

Joe. you, Thank

Let QX were results. me earnings generated our per of $XX begin with QX share diluted $X.XX. We billion. sales

generated sales we XX-week a our cycle a $X.X As included in reminder, Canadian to billion prior as reflect in year sales year. business. Results calendar headwind also our retail and $XXX fiscal shift million due over a the

comparable was sales by seasonal from a late start X.X%, $XXX a QX down of benefit or to sales to includes which points pressure XXX of This mentioned, approximately As offset million due deflation. Marvin basis lumber XXX partly were Spring. delayed point basis

shift on weeks calculated XX the to had sales total pressured comparable based in impact fiscal QX, sales Although XX XXXX. it calendar are no growth comps on as in

Ticket pressure Comparable our of offset Comp merchandise X.X% discretionary recovery. average was offset lumber deflation up in X.X% DIY appliance continued by promotions. ticket year. declined transactions majority driven more seasonal increases categories to partly purchases, normalized by and our prior were in by the

transportation associated with benefited last from was network Our June, chain as of first supply points initiatives, in our by May, recovery year. of in from in margin and monthly margin was our the in PPI as X% year. X.X% the benefits half the X.X% was prior expansion sales XX the were offset lower Gross Gross in down concentrated costs. quarter. and up with were favorable line somewhat shrink the basis ongoing in quarter, second comps XX.X% mix, product of expected, July These and seasonal costs

that in shift onetime our legal benefit of sales basis also to fiscal due XX calendar. points of delevered sales settlement. largely lower a the note the includes Please XX.X% it related SG&A of to

align Also, service. appropriately initiatives, PPI the ongoing portfolio customer impact of while Joe, and our Marvin, create with tightly offset momentum with from which and still all are sales. our lower the manage experiencing from expenses, improving as significant are Bill value continue We to the adjusting demand, to you organization heard to helped for pleased we spend across we continue

with line to at we $X.X U.S. than sales were of units in billion levered compared year trends. of effective the the XX.X% year was year. on replenishment margin manage Inventory XX Operating sales lower consistent last tax in $XX.X rate prior The inventory quarter. our last points, basis line outlined continue quarter the rate down X% XX.X%, call. billion, with we to prior ended as expectations the with

capital let in free $X.X Now QX, me shareholders billion $X.X to through flow turn we to and billion our returned allocation. share repurchases. In and generated of a dividends combination cash

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

high-return In increase announced in Xth. per to we X% we share million $XXX as at paid projects totaled that million per on dividend for addition, continue support focus we a $X.XX on dividends growth objectives. paid August $XXX to the and our expenditures Capital share, $X.XX

our line credit Our at balance rating. our of adjusted as BBB+ with stands X.XX X.XX target remains we debt-to-EBITDAR times healthy, sheet times stated in move towards

capital XX.X%, XXX we point transaction the impact costs gain associated our related QX. with basis delivered inclusive retail invested discrete Additionally, we on a Canadian and to of in return sale of reported the business of

XXXX Now turning to financial our outlook.

this outperform market relevant we by mentioned, market digits points. to XXX the Marvin to to mid-single basis expect continue As decline XXX our year and to

full outlook. As XXXX such, reaffirmed financial this morning, year we our

down in continued DIY year, $XX the includes from comparable the online, reflects XXXX from billion million basis a This pressure for X% down Pro offset range year. to impact and of X%. outlook expect deflation discretionary sales in of for $XX full representing lumber ongoing by This strength to XXX We point to continue a purchases. sales

the we sales will comparable toughest in QX delivered of as plus Specific be last expectations, over the year we to cycling X% U.S. the year. our comparison

difficult sales the expecting our lower full these comps, QX Given we guide. towards end of year are

in We sales of offsetting reaffirming per PPI are continue margin and earnings our to lower to adjusted And to expect share disciplined full partly of volumes. the $XX.XX. management year a initiatives, $XX.XX expense XX.X%, of we XX.X% diluted adjusted operating outlook for range impact with ongoing

excludes EPS continue retail to year sale business. reminder, year. a margin And associated of As diluted we billion $X our Canadian this up for expenditures operating with our finally, expect and adjustments the full to outlook of capital

In Total up the are we closing, with environment continuing in will are I of to open share strategy while our we macro value. us it meaningful that, remain questions. Home investments to positioning regardless deliver grow And long-term market making the for our confident shareholder that

Operator

Instructions]. [Operator you. Thank

Our first Please J.P. Horvers Morgan. Mr. proceed comes with question your from questions. proceed please Horvers, question. Chris with your with

Christopher Horvers

morning. good Thanks,

still first you question discretionary get expecting we quarter the difficult that my in then top year? categories, change of do line. not we drove how think So about to on that DIY you are or businesses, this comparisons those the And to third baseline that ticket level the starting the deteriorating? bigger those as you're grow is see is rate from, a spending in can pattern What

Marvin R. Ellison

I'll take this two Chris, second the years, Brandon Pro it's expectations two you Hey the for different part of let different year, first take sentiments, look DIY I'll two consumer of and customers. different different Marvin. is macro now, sets sets and two last at environments, Look, when part.

the home think what basis is outperform point that points, of macro about XXX environment, that's to to the have the feel Regardless we're market we we're share. improvement XXX grow focused we to steps a by market the and plan good I key taking on.

the So let of answer question. part second I'll your Brandon

Brandon Sink

is Yes. Brandon. Chris, this

on a second into QX and me Let half. get little detail

until weeks that First, adjusting hit spreads quick down exit period. saw comps July. across fall noise at to as before those seasonal shift traditionally one Labor Also, QX, care given calendar experienced. let There's we August, last item look they're and are spreads Day in X% in that, I lighter after roughly to July And we when the we the year take compare we housekeeping rate. volume me QX some to of comp do the that relates QX it

question and QX. across of plus that puts takes plus different at And from our comparable of the QX are your X sort cycling specifically, we quarter, last then August, year So quarter, the looking X. on ahead toughest toughest in

won't get of level As benefit. the see same seasonal into QX, we we

we forward, and which pressure XX continued to pressure about experienced million that from out expect And outpace the DIY. DIY flip modest QX, QX. there business side, $XXX we to growth and at we More discretionary Pro momentum in continuing then spend. Going the lumber the in then sized called expect in deflationary as basis on points

are you just some we give and to at as those -- look transition insights we So QX, how QX. in

Christopher Horvers

Got year. gross then sense. I first some on issues you in it. this price half the Makes margin of And know line, the had cost

you ahead, to behind relative As how you freight the the that given going is look margin Thank -- improve you. inventory, and should as half back you the gross is roll performance think through to about first in to start half?

Brandon Sink

Chris. sure, Yes,

product cost we the So flowing expected. margin expected. back transportation relief bounced we year The benefits, prior margin you as comparables margin gross is mentioned, easier had timing. From QX, as to now due as through

shrink continued neutral, We with offset all delivery. tech product as margins market and drive look benefits and benefits chain full being of the by year. expect year, industry-wide across across manage are continuing to supply continue on we we some And We there. also benefited in expansion to from still merchandising flat in, we roughly mix, out Those portfolio. gross challenges the solutions the to our called at as the see investment Joe mentioned, the great specifically momentum PPI

costs, across back lower the across year QX, like private backs, just of there, takes the we the half penetration, growth continued and benefits transportation supplier puts claw pressure and then chain initiatives continued pricing expansion, Pro initiatives, brand from of the portfolio. supply expect some seeing that we're from and So

Christopher Horvers

Thank you.

Marvin R. Ellison

Chris. you Thank

Operator

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

Simeon Gutman

I then the also Good you and halfway the year. to and quo, versus housing, consumer. playing it's but it Marvin, the diagnose wanted expectation, stock take hoping the morning, takes out puts or that, everyone. of both on point status the at to sides? hear We're how was feels mentioned Curious your macro

Marvin R. Ellison

summed Yes, up well. think Simeon. you it Look, I

the of for sentiment, seeing in of us, we that's we spend. us second know see the at mean, overall the year. pullback And For discretionary DIY theme when really a kind that look of how half consumer I we the we're

I market, and view this the retail mid in. bullish that mid but is us and just can points I really improvement matter, mean the give we for think home really long-term it's news is we to one healthy. of sectors think the only to you for remain the think very we term, on I that still matter home best good think traditional to not going be improvement data the the they're long we to of in

an XXX basis where to look of had And that You years, DIY. we X feel and can brand, home we XXX we really drives improvement you to can is our for our of XXX mortgage marketplace demand, age than XXX confidence as sale, available we're doing that and brand number have up. outperform Klein HVAC we rates XX for by have points. that, to homes we homeowners the almost Lowe's with DIY, a and what's that electrical relative we bring going we're of strategy to about home share believe at is a outperform the back take half. examples outlet of key Pros fixed from when gives look know, going to going Tools But XX% we discretionary across brand of for be overall that big basis to to market Pro Pro comfortable really, irrespective on the But that back million the at fewer continue grow the the ticket why homes, concerns DIY for working, think retail X that absent the largest about in And for points. even modest environment had when macro environment that rates, us and we the we're that you all and lot home like are improvement things pullback

Simeon Gutman

helpful. That's

is on more question irrespective maybe is of margin, second sales. what and to The this happens

should it So performing where talk both the spending you than where any as going think matter general less the Can thought, guy in you hindsight that you forward? and as on have for SG&A we per in is foot just better a or and just about is about PPI levels. then there spending in areas even and progression you PPI more be then is, good GM, margin

Marvin R. Ellison

of So, PPI I'll is I typically, areas. chain, begins entire always the spend, in philosophy you additional amount Brendan around supply it environment. store the we first company, interesting functional store and in and mean then execute the how store to context. in take the our of across merchandising, think because payroll about X,XXX-plus the started operations. expense, any started But those let add What's that we I'll part all permeate

and because built so road understand time that could map investments and will based that tech driven we and on Brandon look that, and we frame, expense multiyear investments. productivity can a those reduction be at over the I making we're of a the And the

don't again, driving remote us and that. in big think to term in in part of ways mentioned bit addition I addition in believe putting this little want understate I it's in mentioned going importance Brandon. Bill to a PPI, to we a identify localize benefit stores, margin In disproportionate improvement. role we over operating And is give PPI to that, our his. comments and in as simply to continue my the prepared of as long implementing technology a to the We

Brandon Sink

more to second with the first around half private in really in transforming Yes, efforts half. within good implement then the on store momentum revamped improve of there. new mentioned selling. improved and continue with areas, of couple merchandising. store the actually the expecting that as experience. A to capabilities expansion we new self-checkout, end are look the chain enabling to build news earlier, supply foundation, saw architecture going back and PPI in I term and claw good also get XXXX, front BOPIS the the tech like we what we other sure. omni Simeon, than the back we channel the as half And within across efforts stores the we of automation modern We're are brand process when short continue too, pricing, then more the in

So pleased the all in, really progress. with

across move to our They're in. the of expectations. second continue captured half We accelerate going we and have to the those factored year, in as are those benefits

Simeon Gutman

you. Thank

Operator

Suzuki Please Our is your of of questions. the from Elizabeth next question with with America. proceed Bank line

Elizabeth Suzuki

you. thank Hey,

couple Just a guidance. of the about assumptions the of questions

at So low down end about for but assuming the the about you're comps half, X%. down high end, the on second X%,

scenarios I'm the end then curious high on just the seeing end up you're low or think And on continue, do and economic you're would lower higher end for end? the you end? you what both contemplating So trends the if today

Brandon Sink

Brandon. this Liz, Yes, is

the measured approach look the about the and various full potential and range our as half, variables I interest moratorium. the significant especially as still at reflects also consumer we as still back believe macro loans think think such for a the discretionary with there side. There's inflation, range cautious We is given a uncertainty student rates, on year, the and uncertainty, we we more the outcomes. scenarios practical it the

XXX and So to the believe the on Home We team mid-single be executing XXX continues we'll that be improvement strategy. going to outpace focused digits, points. Total basis to down Home is

half continue, softness second the and continue expect discretionary momentum with DIY com. we dot and see to Pro from to expect to We

half. overall second what's that's So those reflected our in --

Marvin R. Ellison

data So data we're trends. is historical XXX we at outperform what Marvin. point is Liz, is we're And looking to continue points. we're and to going market and at obviously, that the want this this mean, have But that looking available, by XXX to basis I saying trends I correlates the we're how reinforce. to a historical to

going pessimistic we're second outperform to the points. we're being that XXX half, if because to So too basis by in great that's XXX

executing we us, confident alignment what maintaining and control, focused way. our really Total But agility really our our And we controlling we're team be whatever just throws organizational a have the just company a in sure we around and so the to the year. Home make macro second half strategy, that for agility we're share to on and of that of market what environment will continue the home improvement as take the irrespective

Elizabeth Suzuki

Great, thank you.

Operator

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

Zachary Fadem

good Hey, morning.

XXXX, slipped role, a through the slightly positive. closer revert XXXX average back those that normalized here this us and risk ticket XX% if can it's say the or if back lumber little there's moving line you parts We in more talk average your is know considering played ticket think still but levels? a to you above to So you still fair that has detail,

Brandon Sink

is this Brandon. Zach,

here. of the transaction Let narrative ticket me take sort

expect we price ticket as continue from we of the the normalize on the cycle as we side, look increases at inflation, So benefits number to a to XXXX.

As expansion in we that's year-over-year more the the improvement into customers expectation and ticket second look across is But anticipating to to half, to that's driven begin average to the we to pressure. ticket. our are continue and DIY second punchline this necessarily from on healthy positive we at more Pro much in we're going across specifically QX as new that cycle discretionary currently put suppliers, some is the get at deflationary see normal pressure as point. There minimal going Pro we we're as Bill there continue increases going appliance look and meaningful cost to penetration. the not our to growth with see or from half. our normal mentioned, pipeline effectively inflation is lumber We're going then not ongoing pricing pricing, some be inbound

taking hold transactions, half the that all at overall on to we pressure of ticket over more our that look expect So back outlook really assumes the and account, into year. and

Zachary Fadem

comp. preclude margin and just PPI back in expansion meaningful changes, all past progression able of a two structural and any positive of controls commentary today the slip to recovery? on have cost through way, anticipate over progress and what considering talk And margins Got comps it. can eventually? more should And if could, think expansion we And the really host you operating show kind your nice the you as even negative been years, to

Brandon Sink

this Brandon. Zach, Yes is

focused in right We I the positive for delivering we're We've slipping our XXXX. now, laid we think, out around as expectations comp. that reference look, really question your just back on I'll guidance. today, our home deployment around have strategy. expand are are continue XXXX. continue line forward through in expand to comps, a length laid in as out feel still, back front place to our of already standpoint, perpetual building we're like that sit We map to make We've those blocks initiative confident, where in all talked we when have a at we from going margins. of total road again, various in nice here us we confident the to path top we progress we December. productivity look there. scenarios I'm We beyond going operating to and path

Zachary Fadem

the for thanks time. it, Got

Brandon Sink

Thank you.

Operator

proceed Our next the Please your is Ciccarelli Securities. questions. Scott of Truist question with from with line

Scot Ciccarelli

both locations? Good are of in country differences parts regional guys rural about any urban morning Can but to the as also differentiation different locations please you talk continue guys. Thanks. call the reference seeing as between, you heavier here it, well you

Marvin R. Ellison

Yes.

because going overall there company markets are in costs between of geographic the that differences the mean take a had home those So you to know I'd some and material to up. the costs still Scott, regional Look, in first there. where spread, time dramatically moderate there's differences, I mean of have aggressively have up pandemic real and material pretty -- rather speak ramped markets. prices home at couple are say But look I'll we I no nothing frame is country locales increase to. still around part during that housing we housing price when the starting

be localization. an those rural, indicators our ago but So internal as to a assessments, company not of made, and more think was rule positive. our have because localize little continue key to just going what And an we to. urban we're was we there's lots tell from seeing. thoughts and years have rule speak specific talk And I'll to it, obviously, of urban would lot Bill importance of are standpoint. we the excited And be Relative the to initiatives initiative kind still will I'm but progress we'll that and look days, spent we in some bit Lowe's still there's very as of early about kind we we those a material let about much it's I into understatement. we macro of because to are time one localized you share that a nothing opportunity factor at that say hope talking that around general see. five and from signs of Bill how even to It's let a what for early us him

William P. Boltz

to Marvin. they're And we're XXX about to pet do prepared quarter. got around I in for which we're to our Thanks, putting we're customers. that stuff with to Scott, we and us excited Yes. said credit our We've consumers the been some remarks, products learn able with second my also what giving hearing roughly our as about. Excited stores partnership completed listen in continued in Petco, continued as the from there. We've

use home. with vehicles, apparel, opportunities customer, there's that so rural in utility different to every around and different whether single And day that types that's related livestock their of feed, things products they'll

making in adjust And continue as continue products to the so making sure on going to sure as going that's in of types innings opportunities. around go, we whether side, as localization we tweak kind of codes those to to our can for said, learn. the we there to for urban and security areas that to adjust to Pro's and well, early that's need of the in markets, We're we're safety, continue going that continue they and markets. And adjust that needs Marvin as and urban right We're forward. those whether go the building we meet we're

So what excited about on rural. front we're we're doing what the localization doing and with

Scot Ciccarelli

if clarification, a just Bill, I can.

like side, or urban rural expectation the On wind as the the outperforming you that's areas localizing it is more? now up

William P. Boltz

to at It's expected performing perform. we what it

Scot Ciccarelli

it, Got thank very you much.

Operator

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

Michael Lasser

but quarters, Pro this leading player. better, of bit fairest performance to a there's Presumably, a outcomping as and It's lot thanks catch-up the it couple we that a Lowe's in seasonal for that category. metric, at and lot morning, maybe its due taking over largest Lowe's my doing of Good look doing if to last sales been relative more -- simply has question. noise the not it's in higher little of result harder quarter, online a into part well, competitor,

is? right measure interpretation of performance Lowe's this how you So and that a) do think b) then is sustainable that the

Marvin R. Ellison

you. We else. take honest of our attention we if is a Marvin. I'll care takes a lot This everything customer-centric. the of just we happening the care that. And pay because competitor believe be take don't of I'll Michael, ton spent We talking So of to the at about importance really time of with what's customer, being customer

we're in our our going what Those Pro to means to continue intentional our we do that investments to give I our omni this going we is market, strategy We most be infrastructure, that and although results invest our Home intentional customers a slow results to to associates work. continue quarter, that Pro appropriate a be around to that if be on think working, to we're think Total to going are channel, continuing it IT do great to that environment, then the that irrespective well, place So we're omni-channel, of difficult to the in sustainable. reflect medium-sized to important. around of things And small And stay be to going and chain down ensure via we're not the will and our stores macro very we're amount strategy. localized, X,XXX on total going going means our we're to home we're to focused our that capital initiative. our connected supply make

customer, the than benefit a to be just for to willing then accept. and outperform us, competitor, allows more of care So it's our taking that that's about all closest we'll that us

Michael Lasser

sales is prudently happening taking environment understanding question your what's on stance follow-up a view My the indicators. that macroeconomic still for half, of cautious Understood. the back given with you're

big-ticket that other grills, sight next you purchases or year? such being as starting to stabilize signs that have stabilize line of they purchases move Now are you into been ticket that to do seeing discretionary furniture, start you weak, patio as are had those said, with that might big any

Brandon Sink

Yes, Michael, this is Brandon.

up of a and year last a Just in second X% at we QX. as we're plus cycling out QX X.X% again, in reminder, positive look half, the

seasonal garden. is So by To lawn QX that in our were that's DIY into half, that definitely benefit fueled benefit we discretionary specifically get We question your on saw been smaller factored and subside. going projects saw that as the into expectations. second discretionary, ticket we to

August, very of over half. here And that on bigger, performance DIY much baseline expectations it, the our is reflected first say, I'll what in second the what's for interior some discretionary I half. call areas, similar seen we're performance early essentially So seeing we've through with would performance

Michael Lasser

Thank you and very good luck. much

Brandon Sink

Thank you.

Operator

The with Cleveland of next proceed line the question Eric Bosshard is Research. with Please from questions. your

Eric Bosshard

if Thanks. I Two could. things,

business, to probably a trying responding are for trying all, Bill, little to position are as environment, promotions? are managing you you you inventory you inventory I to position drive and and of about the you how guess how traffic, perhaps think to First and this in mix leaning are bit try more and mix promotions just in defensively,

William P. Boltz

Yes, We're question. to Eric, the first of single all, focused day. thanks for on customer every value trying the provide to

now stores, that the lots us making assortment in to think right doing things client continue from And we'll of We tools excited nice about our things, different in roll that that comes we're side opportunity launch. out channel. of for have that a we improvement the like through Pro home so sure offers do largest client the as as that we

of have set We'll week. we've this end the today. now, SKUs XXX the all stores by right got our So of stores roughly in

a than just And position we our being to came with that inventories one year able So value that's an we better ago. way Pro inventory out customer. of of side, then to from provide seasonal QX in did

that in in the gives will portfolio finish got talked harvest, access value into stores planning the you product Fall And have in holiday a excitement. excited some being to lot stuff got we're that and sets to that and holiday, QX. we types So Fall and Carhart out way entire so provide out we've things sets Halloween customer of allows roll Halloween Coca-Cola about. to we those transition new with We've then Labor We'll our consumer us. can to to a that we've go helps able and that of to the those provide about. XXX Day continue of invest stores, as as It that know, us rolling stores,

Pro. some that the in about there stuff new have that and out both area And Halloween DIY enthusiasts. excited Halloween the we're for spooky for we'll the So getting then for

of that over try to to XXX,XXX in to approach. provide day, want provide you appliances in sure relevant customers offer them and every all And offers of try have in value it ways. promotional make manage a of lots those to we're different appliances out portfolio our break like and we there, all So single because to then that

customers position a stuff it, of lot and year of next a give and back ourselves through drive to year. We're into way excited will to got the going. we the for our us we've So value half think about nice

Eric Bosshard

could. then I Okay. second question, And if

all past you've job price increases, there's As you years curious The when? from the has about volume perhaps just more cycled how you volume for couple price what and -- than how and price been of of Brandon about did a that, I'm a here. explaining been think path think I'm down. that the you no a up, as math turning curious longer has from the and goes that of makes through negative of to positive, good kind happen up just minimal

Brandon Sink

Yes, is Brandon. this Eric,

XXXX. focus again, now I on right think

a call It's kind and when better move a pre-COVID there's put As obviously, of we we on I is convergence going in a across frame do I'm lot the to down to the do across similar have XXXX to time of going ahead of ticket pressure earlier, as bunch I are early not a of long-term. ticket to on balance we as as of in probably the do to transactions variables, it, broken start backside balance the transactions But what think we expecting of I too ticket. like. mentioned for think to a look on year uncertainty. transactions we us levels get this, look expect We hold.

Marvin R. Ellison

our build thing from retiring a agility it operate of the in system. us omni operations There's gives mentioned infrastructure. The but I to a a making incredible our capabilities. hard doing in we're easier still This more that call would stores of overall make will only things is not to technology channel channel what operating Marvin. the it the innings only I've we that lot today, that XX-year-old lot of and I'll early on does, standpoint, localization, is in in platform to what modern top just a we're add that business are way. best-in-class technology area, And for omni

And I consumer because so sentiment drive have day, of drive can to excited yet that's can hopefully a to out of to improvement, and continues get bed see list long get improve. line going I and every we will get as drive initiatives top space that margin I to operating productivity,

in confident we're of performance still a the like, other we've we what not areas have know relative because we've even there, and cycle world journey that our Pro, on are reached space business: get that early innings. there capabilities, know to productivity we're fulfillment online, but we that the know still investment a been we we're peak places, So that looks of point we to that class

just have we have. we work make one do question. exciting, for the that's to And so that and And we can expectations Rob, we have to time more achieve sure the

Operator

final The you. Please questions. with Citi. Thank from question Zaccone with proceed be your Steven will

Steven Zaccone

business me on of the you for about it what circle bit to squeezing for are expectations your in. much wanted a very thanks morning, the back sounds new, promotions, commentary to your the promotional, the Good weakness appliance how can this be to half side elaborate that follow-up I think just could it more, year? then question needed promotions earlier, continues? if do a And seems long has like discretionary the on not big-ticket of second industry you the last in that

William P. Boltz

Yes.

is Bill. this Steve, So

a what prior returned So to just on you the normalized with specifically, to seen what has the industry is kind the really, we've appliances similar appliance pandemic. go-to-market promotional offering, of to side, that saw more

we've comparison this seen my is this think, business. we so apples-to-apples essentially, in with and into as average get selling get has appliance put excited price we average I that and industry. feeling QX. normalization, we the get our ticket more impact. But I But to strength cycle we And as said an that QX, about we're remarks, the pressure on across when into of Everybody,

quarter that First indicate quarter. data share we the in track took line would first

question, it's radical trying consumer. a driving to is, single units sure It's promotion. that to make we're meet shift the promotions. But can appliances break to of said, day, I and our heavy a of Eric's XXX,XXX our consumers normalized more we've So be there we in not like got needs every for

Steven Zaccone

And then margins you, Got back half for it. Brandon. the just question on

terms sales anything of Given same-store mindful quarter, be the is fourth commentary about or the there third cadence of in SG&A versus third in gross quarter in to the margin quarter? the

Brandon Sink

And Steven, benefits to say, would The then I'll one $XXX out, year recur. still thing to I is basis half. over expansion. cycling we're the call second to bonuses XX of points XX out the million PPI thing mention that we No. paid over expect are that not were would that I the expect I expecting we build last of associate discretionary second mentioned

I out would items the as half. move we So the big those that call second are through

Marvin R. Ellison

the bit performance of space. for I environment support a seeing XX about just remiss margin we the little how little and if and shrink most this that shrink and the in our for half I be difficult we're Joe about would retail let to Steve, And hope year. that years my I talk back in forecast the just to talk successes didn't continues want a bit our gross

Joseph M. McFarland III

got platform The line with XXX% stores. we best-in-class we've to for that shout in class. the the across a on a next end year. awareness our have supply best out a let replacing whether front transformations participation have that look high-strength self-checkouts they you rate. And and just we the And taken, operations protection team our move as front-end really in And program, it's execution quick new into sight store proprietary Marvin. chain, voluntary me Thanks, we've where that's whether of are we I the asset the as give our identified a XX% team. actions MCRs, of you believe it's

so really by and the team. feel job a just confident And I great

Kate Pearlman

speaking with on earnings forward for us all our today. We in look you Thank call quarter joining you to November. third

Operator

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

now disconnect. may You

Lowe's Companies (LOW) 22 Aug 232023 Q2 Earnings call transcript