Earnings Highlights and Review: Lowe’s Quarterly Sales Jumped 10.7%; Adjusted EPS Climbed 18.4%

LONDON, UK / ACCESSWIRE / June 13, 2017 / Pro-Trader Daily publishes post-earnings coverage on Lowe’s Cos., Inc. (NYSE: LOW) following the Company’s reporting of its financial results for the first quarter fiscal 2017 on May 24, 2017. The FORTUNE® 50 home improvement Company’s sales and earnings improved on a y-o-y basis, but came in below market expectations. Our daily stock reports are accessible for free, and with those to look forward today you also will be signing up for a complimentary member’s account at:

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Earnings Reviewed

For the three months ended May 05, 2017, Lowe’s sales increased 10.7% to $16.86 billion from $15.23 billion in Q1 2016. The Company’s revenue numbers lagged behind analysts’ consensus of $16.96 billion. Lowe’s reported quarter comparable sales increased 1.9% driven by an average ticket increase of 3.5%, partially offset by a transaction decline of 1.5% stemming from weaker outdoor performance. Lowe’s comparable sales for the US business increased 2.0% on a y-o-y basis.

During Q1 2017, Lowe’s gross margin was 34.4% of sales, down 64 basis points from Q1 2016. The Company’s SG&A for the reported quarter was 22.99% of sales, which deleveraged 73 basis points. The Company’s depreciation and amortization for Q1 2017 was $365 million which was 2.1% of sales and leveraged 20 basis points. For the reported quarter, Lowe’s operating income decreased 117 basis points to 9.25% of sales. The RONA impacts associated with the mix of business and integration costs negatively impacted operating income by approximately 65 basis points in the reported quarter.

Lowe’s posted net earnings of $602 million and diluted earnings per share of $0.70 for Q1 2017 compared to net earnings of $884 million and diluted earnings per share of $0.98 in Q1 2016. The reported quarter results included a $464 million pre-tax loss on extinguishment of debt in connection with the Company’s previously announced $1.6 billion cash tender offer. Excluding the loss on extinguishment of debt, Lowe’s adjusted diluted earnings per share increased 18.4% to $1.03 from adjusted diluted earnings per share of $0.87 in Q1 2016. The Company’s earnings numbers also came in below Wall Street’s expectations of $1.06 per share.

Balance Sheet

As on May 05, 2017, Lowe’s cash and cash equivalents was $1.96 billion. The Company’s inventory was at nearly $12.3 billion at the end of the reported quarter and increased $1.2 billion, or 10.8%, versus the prior year’s same quarter, with roughly 60% of the increase related to the addition of RONA. Inventory turnover was 3.95, an increase of 12 basis points compared to the year ago corresponding period, while asset turnover increased 5 basis points to 1.83.

Lowe’s Q1 2017 accounts payable totaled $9.9 billion, representing a $1.1 billion, or 12.3% increase, on a y-o-y basis. At the end of the reported quarter, leased adjusted debt to EBITDAR was 2.27x.

Lowe’s operating cash flow was $3.3 billion while capital expenditures were $202 million, resulting in free cash flow of nearly $3.1 billion, which was up 2.7% to last year.

In March 2017, Lowe’s entered into a $500 million accelerated share repurchase agreement which settled in the quarter for approximately 6.1 million shares. The Company also repurchased approximately 9.2 million shares for $750 million through the open market. In total, Lowe’s repurchased $1.2 billion worth of stock in the reported quarter. At the end of Q1 2017, the Company had approximately $3.8 billion remaining on its share repurchase authorization.

As of May 05, 2017, Lowe’s operated 2,137 home improvement and hardware stores in the United States, Canada, and Mexico representing 213.8 million square feet of retail selling space.

Outlook

For FY17, Lowe’s is forecasting total sales to increase approximately 5%, while comparable sales are expected to grow approximately 3.5%. The Company expects to add approximately 35 home improvement and hardware stores in the fiscal year. Lowe’s is projecting operating income as a percentage of sales to advanced approximately 120 basis points. The Company’s diluted earnings per share are expected to be approximately $4.30 for the fiscal year ending February 02, 2018.

Stock Performance

At the closing bell, on Monday, June 12, 2017, Lowe’s Cos.’s stock marginally climbed 0.48%, ending the trading session at $79.03. A total volume of 6.26 million shares were traded at the end of the day, which was higher than the 3-month average volume of 5.15 million shares. In the last six months and previous twelve months, shares of the Company have advanced 5.04% and 0.92%, respectively. Moreover, the stock rallied 11.12% since the start of the year. Shares of the Company have a PE ratio of 24.78 and have a dividend yield of 2.08%. The stock currently has a market cap of $66.85 billion.

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