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Lowe`s Cos. (LOW)

Participants
Robert A. Niblock Lowe's Cos., Inc.
Richard D. Maltsbarger Lowe's Cos., Inc.
Marshall A. Croom Lowe's Cos., Inc.
Michael P. McDermott Lowe's Cos., Inc.
Brian Nagel Oppenheimer & Co., Inc. (Broker)
Eric Bosshard Cleveland Research Co. LLC
Christopher Horvers JPMorgan Securities LLC
Seth M. Basham Wedbush Securities, Inc.
Matthew J. Fassler Goldman Sachs & Co. LLC
Michael Baker Deutsche Bank Securities, Inc.
Scot Ciccarelli RBC Capital Markets LLC
Gregory Scott Melich MoffettNathanson LLC
Michael Louis Lasser UBS Securities LLC
Call transcript
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Operator

Good morning, everyone, and welcome to Lowe's Companies fourth quarter 2017 earnings conference call. This call is being recorded. Also, supplemental reference slides are available on Lowe's Investor Relations website within the investor packet.

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

During this call, management will be using certain non-GAAP financial measures. include most these measures. directly slides reconciliation and reference the to comparable supplemental information measures about a The GAAP financial made Litigation will in call during statements Statements defined as include the Act Reform forward-looking Securities of XXXX. Private this those correct. reflected and can assurance and no subject will they company are in expectations to statements Management's prove give that opinions risks, the to be with the are earnings release filings described its Commission. Exchange in company's the risks and Those in Securities and be: will Mr. conference today's Hosting Executive Officer; Chief Niblock, and Robert Chairman, Mr. President Chief Maltsbarger, and Richard Operating Mr. Officer; Financial Croom, Marshall Officer. Chief

will Joining Please Mr. during Mr. the Mike McDermott, Q&A remarks. turn session ahead, go will Chief be Customer the Officer. now opening to over program sir. Niblock for I

Robert A. Niblock

earnings and in our In your experiences. interest history. strong thanks delivered represented the integrated Lowe's. fourth morning performance, quarter, the compelling customer sales through for holiday exceeding our and X.X%, in event growth of and we company's XXXX Good messaging, net consumer comparable expectations, Fiscal highest sales omni-channel

completing Canada, comps. double-digit business comp posted single-digit further positive home built comps supplier affiliated building in appliances to operating growth and tools of online XX double-digit to a electrical, years. product significant for Canada achieved essentially we year, dealer conversions, driving our view, out and strong U.S. flat. currency. strong comps in partnerships efforts. category profitability for product one rolling with XX We've on high in business, we've category track by regions. materials. another both XXXX. Appliances we're quarter in the We're a five another X XX while made quarter in positive lumber believe with sales improvement big-box its product posting comp comps Internationally, double rough delivering Mexico local We RONA, in plumbing remain momentum growth of procurement with in shared mid-single-digit of positioned and continued above-average in RONA throughout integrating Our culminating was and growth hardware, comps We quarter, XX approximately and and From optimizing XXX and locations, in we comps delivered highest RONA the the growth, that strong delivered pleased with well in categories, led X.X% progress and

For our earnings share recently return the further $X.XX. to program shareholders, authorized million billion on commitment excess under directors in an share repurchase we commitment. repurchases, quarter, $XXX the cash stock delivered board to adjusted our of repurchased we share per underscores diluted and of quarter million paid dividends. incremental And our $X of our in which $XXX Delivering of

our serve multi-family of growth provides improve for compelling to efforts, management XX% On year. for saw and experience expand Maintenance remains property Headquarters of strong and marketing customer track the our Wholesalers with sales progress proud Turning rate enhancing of inventory, assortments, now breadth full Pro both of and strategic The and our portfolio on depth to how I'm outpacing of customers and with integration a our our Central by localized we DIY opportunity enhanced response against XX% brands, quarter the on particularly and as year. LowesForPros.com, we've customers. growth evidenced quarter focusing comp Pro the Lowes.com, to by and fourth to and shopping priorities, grown our for ability Supply the

efficiency more and customer the program, to And ability a continue online. request enhance for for greater quotes, providing in-home services our are centralizing our providing We consistent installation allowing customers now to experience. selling we process

the and in customer. to recognize improve serving still to management greater the project we we future. Richard moment. our the project improve a pleased strategic a we do-it-for-me conversion, to year, represent in opportunity a were Our critical inventory margin, and DIFM we for milestones in or element differentiated capability an have our with gross specialists achieved omni-channel Though in to offering demand speak and that will this success execution efforts ensure capturing

see to expected pressure incremental in near-term home opportunity strategic including both solid tailwinds, continued of household priorities, supported growth, should including the industry which on drive accelerate to and macroeconomic expect increases people. income spending. on investments by in cash to tax see ahead, plan our gains, In Looking and flow much favorable despite housing strong and an XXXX, from trends housing the invest availability. capitalize we disposable job to consumer we this improvement is corporate environment income reform formation our And in

in will focusing together on we're Richard a areas reevaluating serve our focus we our to and performance our And project additional be to the customers. competitiveness leveraging look our relevant in what team let most Pro and entire we and will with it leadership how But In urgency on: improve on the are be of position omni-channel instrumental results. authority. matter and expectations, with that to is moving focus targets. me forward continue moment. We business moment. our are the will as strengthening and we a resources These provide making, improving are better; working along will with engage; each that and additional focused further address of analyze to in we long-term investments options; Marshall employees our our know to the compelling course, those XXXX, board experiences; changing clear results at details these as delivering our investment warrants customer customer; and need to our enhancing strategic focus customers on moments with capabilities expanding to product sales growing the areas engaging analytics of fulfillment the our differentiating services.

bonus and close, hourly the I Before live. to one-time a their help recently expand our We love employee up benefits U.S. to employees announced to would our our purpose-driven I to in dedication of where to express my $X,XXX living appreciation people for than for customers more like to serving our XXX,XXX and plans employees mission they

the them commitment unwavering employees of they success, Thanks It's company are to support future and in with investing great. turn the that, interest makes your serving are me again for let dedication our customers in where their and to we over them this for Richard. live foundation and the and, work. their communities our bright Our that reward to call

Richard D. Maltsbarger

morning, Good Robert. everyone. Thanks,

As some you actions future important identified success. achieved to we've this just heard, drive year and milestones necessary

in has strategy, continued optimized increased share digital content, successfully a refined incremental value awareness, We've campaign, mind marketing, our Start Lowe's, analog messages. improvements investments, with captured have targeted First, personalized messaging improved we've launching with Together our measured to these to robust more our traffic delivering and which campaign And we leading marketing also effectiveness. perception. critical driving our from improvements marketing growth. evolution new

we Second, We our our product season. digital assortment, with on experience assets display on seamless across and excitement connecting decorating the customer provided cohesive as solutions as for ideas a Instagram, gift Lwes.com. shopping Pinterest, delivered capitalized in-store well and Facebook, such compelling holiday as YouTube,

we advantages comps brands online, in delivery, customer services our facilitation drove of repairs maintenance. double-digit our leading fact, selection and in our and appliances, and investments experience of leveraging In next-day best-in-class of haul-away, as and as both well in-store

tools and storms were comps rough to strong winter items Combined, hit, and strategy in cold needed. in for hardware critical electrical. position plumbing demand temperatures holiday never-out serve and a our drove our customers and strategy that above-average As and performance ensured never-out we strong

to comp our XX% of continued customer the also enhanced shopping of response growth strategic on We on result our execute priorities, online strong Lowes.com, to driving experience.

simplify spend allowing on added XX% personnel to assortment, improve relationships and our mobile re-leveraged product members, experience, by off brand touch-screen reviews. informed functionality important display X.X every used devices a In XXXX, the We to content average through capabilities, their we we've XX% because for have search deeper and million refine approximately MyLowes platform new better support members more military recognition and customers, click-to-chat optimized program, MyLowes day. MyLowes our optimized line receive our veterans non-members. purchases algorithms, and with more build drive and active-duty register platform And to digital than improve MyLowes than loyalty we and recommendations, to

actions during delivered all expectations. not on the took However, we the year

While work new expect. We to stabilize associate the inventory. must and better will We improve we training full knowledge improve value we especially were events. the better reengineer less investment the to not to coverage, also key in this continuing deliver traffic-driving need tools we our determined in while holiday that, and of highly with Therefore, products through conversion items, actions elastic customers. and the made and to an analytics by to weekend through with QX while first our rates to readiness margin conversion second gross working realize and in did recognized promotion profitability but margin half bolster payroll leveraging driving and not must while floor pricing the our managing that processes vendors improvement in growth, alone during order key pleased on we our closely rates, we we We sales investment actively competitive are ultimately year, our programs conversion across necessary, serve Earlier traffic are gross XXXX. efforts, accelerate cost. of elastic ensure improve value

required categories. depth and flooring, inventory as investments key breadth Pro tools, Finally, made the in support as we've appliances, critical such to as well and categories

execution accelerate a plan that ability our and the efficiency. XXXX to challenges rapidly must customer working our with greater we these Now evolving capital drive expectations. We improve enter and address investments serve will to

As strategy. to six Robert are outlined, there this planks

actionable help customers this together and on capabilities, an to plans talented platform, different and terabytes bringing to solutions level, many data working supplementing information, journey. leveraging our understanding of we into navigate insights. translate designing integrating points their analytics and with know customer to our We're better workforce their project that information global First, data, our throughout connecting their homes deeper omni-channel touch are even third-party

went more through with our with by in significantly of QX, management, changing our engage, of refined efficiency messages messages. in-store improve associates and our a staging deliver marketing year, management our associate order that better devices processes. which of to the we'll daily we'll inventory associates and and Later serve we're user-friendly will to beginning And the button. through to QX. relevant allow functionality interfaces, our customers connectivity, touch customers more associates customers point-of-sale tasking, our and in personalized better improve Second, tools connecting live expanding we enhanced in deploying upgrade empower platform how We'll with a the handheld

for proud announce of demand our and Today, to arrival. national we customers And increased as pick brand, with Minwax, be continue service advancing half the become five to allowing capacity right a set will paints, be options, installation a partner compelling experiences. U.S. the outlets and experience of and products partnership, Sherwin-Williams serve select of for to needs. We're only product to Sherwin-Williams. and the by choice in Lowe's both fulfillment and faster expanded supplier deliver operational during to to we're brands product in same QX for Home Thompson's expectations. in-store most HGTV will we're top-selling exclusive brands, center, for the respected to supply be national allow to design for customers Third, of minutes now well shipping. investing project, and demand. offering will of announced personalized their recognized Paint as U.S. we're line of make an improvement top introduction continues closely in We're pick-up-in-store Under and transforming brands. Sherwin-Williams homeowners top strategic parcel expect broad partnership new in-store direct interior Fourth, our a the in is within better and of to a with expansion product Purdy. Lowe's increasingly investing we and paint provide We've our Sherwin-Williams expanded to online home including needs providers to of previously the and delivery and one highly fulfillment paint, our Valspar through WaterSeal, chain our simplified XXXX, in as the also their third customers which will quality quarter this retail it home online the inspiration the we'll painting the Craftsman to to offer up easier deliver exterior second experiences XXXX. brands center product combination strategic differentiated meet Cabot, pros. brush

model their consumers excited our stain for to trust project. are bring We also across service more the the and of project. investing or entire the they associate We're brands paint customer experience top in next paint paint improve to

a XXXX. of to nationwide for updated display with new second for a We a product simplified well in rolling desk select rollout are streamlined work improved first half and have we're even with over make plans in to quarter, associate share. penetration last have it a end, our out include experience. quickly service further opportunity to improve or stores begin paint pick model to our an while The and we experience that as investing stain, Fifth, and the the as paint in sales the the project. to find the color, it customers selector has will beginning the to To experience Pro a easier five Pro mixed, expanding grown continue customers Pro market growing years,

second to of to skilled workforce in trade are launching year. innovative select skilled generation the the the that We our out by development product we with as of are for nationwide testing Maintenance this our order financial trade. spring, initiative business, also strength in new rolling a building job Trades later program, alternatives employees year. catalog of they our markets, Track expansion and optimizing concepts MRO a expectation support space launching in followed We're pursue And Supply in provides stronger a best Pro an by professionals, half on urban a build the career our improved beginning delivery branch this the Headquarters site streamlined

recognition planks augmented model the XX,XXX and proceeding note six for project forward our differentiated offering, as over services this we billion in-home week. project testing Across has we sales continues us this augmented your you use Marshall. to build Finally, Pro grow, a Through complete through delivering all DIFM to positioning foundation feel Together, in specialists, space, grown Vision virtual Fast and project the with commercialization healthy we team solutions and will most confident which types, in each And are we're their on to competitiveness, improvement reality. where these $X upon push approximately over installations call with home to currently our platform, to I innovative now the opportunity continue Lowe's we proud kitchen the work, strengthen or Thank recent Company of project. customers have other reality sales are in in annually. to project as our turn providing our strong continue capitalizing to further by to visualize completes installation and interest in-home their and our bathroom in-home allowing demand. earned Lowe's, company services

Marshall A. Croom

Richard, good morning, and Thanks, everyone.

you extra Let approximately had contributed contributed last Sales also ticket increased quarter million average billion total X%. fourth fourth basis negatively quarter, XX Total compared that comp offset billion, to while by me by reminding sales X.X% Supply transaction year's results of but by transaction year's year, were X.X%, impacted a $XX.X week, on approximately driven of this an stores shift no Maintenance an fourth quarter included points or of extra decline week a start a $XX.XX. which X%, count $XXX new contributed increase in growth $X quarter. the X.X%. which partially impact sales That calendar for sales. were in sales, Headquarters by average decrease total X.X%, ticket last decreased Comp the XX while growth to X.X% of basis points. caused

of the basis the net the country quarter to weather Louisiana Matthew was which storms offset Looking quarter Florida efforts well the year. of in last were approximately the in as across December, in estimate and at comparison XX and the that January. flooding aided November, and Texas points. quarter cold X.X% and We comps, comps in our monthly recovery temperatures in in the latter Hurricane Hurricane fourth X.X% X.X% impact part winter of as benefit trends,

were margin total X%. to the $XX.X mix sales Gross of XXXX, Two-thirds for was quarter and XX sales a sales, shrink. last the and billion quarter decrease of comp the of rate, to while fourth attributable XX.XX% the were balance basis decline was from year. For points was

been mix impacted appliances, a in margin market and gross both rate As our we've share has perspective. grown from

points recorded year's take the which changes, which XX.XX% for results SG&A as continue of items hourly quarter employees deleverage one-time XX we basis these actions, pricing quarter, demand early leverage growth benefits points. last year. leverage XX related compensation related basis the XX we this fourth basis in to due XX increased costs points delivery lower was of for from basis levels from as for eligible were attainment of as experienced efforts. quarter well basis the deleverage, due offset were of also competitive in points resulted In sales, from which to value XXXX, the to partially as appliances. costs bonus to optimization cash of points to severance-related We improvement basis points deleveraged employee insurance last well to fourth versus U.S, of and XX quarter. in leverage Offsetting which In continued organizational drove XX incentive in the by

bonus quarter. points the of approximately XX Operating was to week of lastly, consumer year basis year. deleverage this in compared XX for the last was which XX% in remeasurement fourth amortization last Depreciation a in result deferred fourth earnings a We deleverage change earnings resulting X%. our XXrd our our Earnings the extra rate The per earnings or tax quarter while earnings compared $X.XX, $X.XX for which quarter share and to messaging. impacted X.XX% share year. in sales. of share quarter leveraged contributed the $XXX effective liabilities, was growth the X amplify to approximately to XX of was $X.XX The points. was cash year's million, in X.XX% drove drove the last driven tax fourth federal per Interest points negatively The basis the decrease also to to sales, Adjusted week the quarter. $X.XX, $XXX one-time XXrd Tax share triggered rate XXXX per tax was $X.XX. fourth expense had of flat deleverage impacted declined efforts approximately by quarter, this this basis year's earnings per this for of XX.X% in income advertising, basis of assets rate last quarter. quarter the the million, $X.XX. year The per of quarter. Last basis for points reform And negatively XX and by charge our primarily year's of week quarter points by per higher adjusted reform. of by XX.X% reduced share adjusted year statutory last share

For XXXX, adjusted earnings $X.XX, $X.XX. was while earnings per share share was per

Pro Turning Inventory to And of last million. in negatively the The turnover over of across end flooring, such of or of acquisition turnover the X.X% as of $XXX quarter XX XXXX primarily was balance by basis approximately driven impacted at sheet, Richard year. part last was appliances, store cash inventory at is cash increased investments week categories. by as times, MSH extra and points tools, categories, well key the the X.X and equivalents also $XX.X fourth decrease billion a investments This $XXX was as attributable quarter year. in the the new to basis and as million Inventory points. versus mentioned, increase growth. X

invested Accounts year. of lease-adjusted debt-to-EBITDAR XX.X%. capital X At basis of last a increased fourth Return $X.X was to was X.X of turnover $XX the million Asset the or end X.X% fourth X.XX on payable quarter represented times. quarter, over decrease points billion times.

Now shares the market. we cash in paid we operating cash approximately and of stock In the looking through the of million open flows, free $XXX fourth and million billion million for quarter, billion. of $X.X dividends of X.X $X.X we flow cash nearly repurchased generated statement at strong $XXX flow

$X.X the stock expiration share In approximately billion $X.X have Therefore, program. we billion dividends no in our the year. $X.X new repurchased program, The authorized paid has repurchase of billion. we For a billion our directors new share and repurchase January, for authorization total year, purchasing combined the a board of power of $X under program date.

Looking ahead, the detailed several like business I'd items outlook. of to Lowe's address in

progress year meaningful Richard and priorities. our this we've made strategic against indicated, Robert As

milestones, strategic greater While we in opportunity an recognize do improve we are that we ensure pleased to execution have to the future. with success the

on improving focused margin, are We inventory conversion, management. gross and

and reform are expectations customer the retail provides landscape addition, tax In evolving, incremental rapidly corporate cash flow. and

our of our we In to ability taking the empower to and result, supply expect investments experiences. deliver a compelling approximately associates, a approximately by product a basis enhance anticipate continue better be our total chain, to necessary do increase are We margin points. a expecting our As stores. We'll XXXX, On XX GAAP increase serve XX of X%, driven approximately we decline basis, accelerating operating primarily to customers. actions transform opening are approximately we sales comp of sales X.X%.

pressure we we are flat for Factoring investments year be margin While the which million associated incremental $XXX the tax XXXX, reform, is benefits the to our expect in approximately as effective SG&A. gross of with in expected tax improve expenses execution, will rate strategic XX.X%.

For $X.XX the year, to on earnings we basis, a per $X.XX. of share expect approximately GAAP

This flows of cash We of forecasting cash $X.X are free approximately result And expected is guidance assumes capital share in approximately operations and our repurchases. for $X.X approximately billion $X.X billion. flow estimated billion billion XXXX. from approximately in of $X.X to expenditures

look on our provide applying to are targets. our at reevaluate a as business long-term December. conference long-term like analyst strategic we We to our time, some investor share at I'd we're parameters Until plan full long-term we in and with accelerate outlook to decision targets. that reevaluating update strategy along our we our our As that results and investments,

outlook First, industry over few the years remains improvement the solid. for home next the

we average of X%. such, annual increase As expect an at continue sales least to

in order after Second, diligently operating to we continue targets to we to plan in business. confidence improve provide even to operating margin in to communicate greater margin the we improve while XXXX, are we the And in working productivity invest expect December.

distribution current questions. to we're target, returning for through billion approximately now to XXXX. committed ready our remain shareholders we Finally, $XX shareholder Regina,

Operator

Please Oppenheimer. Our Nagel first question will Brian from come go with ahead. of the line

Brian Nagel

good Hi, morning.

Robert A. Niblock

Good morning, Brian.

Brian Nagel

couple questions. a So

go out plan on those you XXXX, other think and as call, along should the laid we respect the should about, the we or lines line off, through sales of the investments First investment those how up? the terms benefits strategic How in and potential plan cadence of with to metrics?

Marshall A. Croom

I'll higher year. take slightly would first. in first This Marshall. about half and think our the the Basically, expect is to sales progression we comps, sales the we line as top of be

first XXXX, we our be recall, first sales headed comparison you easiest half. was into slightly so the as quarter As second half will than higher

as we that capital throughout we year, the some and far manage year. capital of as leaning stabilize do these gross As expenditures expenses put associated the SG&A. to investments expect, the with be but But we'll throughout margin, initiatives expense that pressure will not only on the

Richard D. Maltsbarger

experience noted the And, well in a such that this Brian, hands of associates as some during the nationwide back-loaded. is rollouts we the service the tools my to of enhancements of the as have digital our comments, as paint Richard, few are as

Brian Nagel

middle. was weak the second weak you start then – cadence so follow-up, to it something in what end, you more through basically there that if And the exclude and in of as that it. question, quarter, that, the saw Got if to the a we look Is quarter? the comps explains at stronger

Marshall A. Croom

holiday Yes, function of sales a experienced. it's the that largely we

as our be to delivered; appliance So not growth. sales appliance mentioned, were of majority take-with. we with are A scheduled sales they're we pleased

and As delivered Friday possession period takes sales those holiday lot and until over December, they're in customer delivered a of result, revenue. or not were a that that recognize we it's that Black

the X.X% comp of December. in X.X% lumpiness in November So the that to some created

Brian Nagel

with shift with just piece, between those it quantify two Is there months? the can one we that a way

Marshall A. Croom

about Yes, Brian, it. way there's think another to

As roughly progression, December. you the including the roughly mid-X% November mid-X% comp it deferred impact look in comp sales, not and comp at was of January in and

Brian Nagel

good a Got it. luck. Thanks lot,

Robert A. Niblock

Brian. Thanks,

Operator

Cleveland ahead. from the Research. Bosshard next Your line of go comes with question Please Eric

Eric Bosshard

Thank you.

Robert A. Niblock

Eric. morning, Good

Eric Bosshard

– you, about that sorry you. for questions thank that, about Sorry two

I XX the margin all, guidance ago. of First had below days XQ the given think was you

taking of the summarize tax moving I'm talked investments you and I grow wondering incremental if hear about XXXX, could the curious if the to in that you're the of the incremental about XXXX. the savings, you just with excited making just but investment the And then could to $XXX So was pieces math. quantify again business advantage you in million, amount secondly,

Michael P. McDermott

fourth I'll touch significant question. market Mike we this appliance the meaningfully in expectations the is Eric, In growing McDermott. quarter, gross margin exceeded category, share. the our on

that, both of margin that on our a and rate result impact an perspective. mix a from As had our

the were price optimization to more advantage The competitive initiatives, our and as we're in drive perception innings early we other XXXX, our make thing yet first we vendors the capabilities by tools and analytics and on did, we that the in fourth quarter rolling our on and of sure take actions quarter, with to value market Those that available of second getting the continued you cost improving could recall, focused only value some partially in as closely improvement working offset early of optimization. out benefits, opportunity.

solid As we look a competitive into in the new year, we're I think position.

through of And we'll impact I gross the margin ultimately those moment that the our offset with to any of in work on to value actions XXXX. tools continue vendors, pricing rollout mentioned competitive continue a ago. delivering flat We improvement

Marshall A. Croom

this is Eric, Marshall.

some gross we accounting going quarter Just with harmonization in impacted through have margin margins, one other factor gross quarter. the for we fourth did integration RONA, process that our as were

small investing be second another we your that question, tax XX% the a as just the was XXXX. on factor that that experienced there. for So about of To spend we in will we of reform, incremental pressure in plan capital result to XXXX

XXXX, in billion So in of we opportunity. $X.X that in billion we're from billion we $X.X $X.X recognize XXXX. expenditures what XX% spending as our capital initiatives. that, be think an where this you That's roughly of spent largely on strategic about will going XXXX, And as triple almost

customer lean to build to six opportunity to expand capabilities the Richard to reach to and that the again, planks we So the earlier. into need omni-channel further and that drive relevancy spoke

Eric Bosshard

at you last the if performance? the the to Great, How circle promotional one spending just could the Depot at more and to relative is Mike it. about you balance bit do a performance? back But look that incremental think getting then know incremental the just you market question, market share on aggressive looking and then with I between look way I how and at And one Home price and McDermott. share spend do effective

Michael P. McDermott

approach traffic awareness Eric, spend, a well incremental our had the with price through look, look relates at when better look engaging customers traffic. well our through optimizing at as digital and media sure engagement our our we balancing make and as and as the customer And efforts I awareness improve take we're both marketing right to that drive to right spend I mass at performance incredible as time as it some content. to

to we both promotional drive optimization The continue opportunity focus. simply be ahead and pricing XXXX. see we to have and us of that to is in what it to As our relates spend, is competitive,

Robert A. Niblock

is pleased this Robert. things. of the it's the done we're driven, on types promotions that have from standpoint, think Eric, traffic add work that those additional team I the I a Mike with his just consumer and would awareness,

Richard greater I what both his were drive and conversion, is and on. Richard our working outlined, and As take team traffic to that opportunity that's and

to then for have in have daypart were focusing on hours, converting that the of capability, tools, associates the investing he the right traffic the about the to make we're coverage that some sales. sure strategic into all our type they for of we things And ensure talked that investments those that training,

Richard that head we that's area are as XXXX. team focused and big focus So a his on into

Eric Bosshard

Okay, that's Thank you. helpful.

Operator

ahead. JPMorgan. comes Please question of the next from Christopher go Horvers line Your with

Christopher Horvers

you category? than the closer of talk Is Thanks traffic of that category. drivers did quarter. down What and well fourth extremely quantification related growth in is? do were? that, you sounds the Any you down to what double-digit the to to like in about traffic Can XX% good It further appliance somewhat XX%? And think the the that was morning.

Michael P. McDermott

I'll good our assortment, the our to resonate just reinforce we double-digit well of product that partnerships, very combination in appliances with our messaging, had our and comps that feel offering brand customer. and very, the continue

with of We associates. space as leadership and are that a great position drive continuing the displays leverage in leader fantastic to engaged that and result

we see the that runway continue the in lean market into to So I for exists. opportunity space that as appliance

Robert A. Niblock

Chris, Robert. this is

not traffic was down. was it that Just was clarify, were that transactions down. to It

driving we're labor there. And on there, his traffic my labor as the ensure investments, we the Eric transactions. in the that traffic. we Richard It's the comments, follow-up labor to incremental the in put an I that we question, As we need mentioned, to conversion so just investments we've with of earlier into as made indicated the said than that convert we and put to more realized make got into We transactions. just

Christopher Horvers

that's Understood, segue. a great

system and changing whether So last that that changes versus labor, with full-time forward? put overall model strategy think year, you've you allocate about algorithms going it's the how labor a are the does how shift part-time? as you you thinking structurally you in labor the new place The made, about

Richard D. Maltsbarger

happening is is states, couple are that Richard. to a The different I are opportunity directly areas. And This it reality over associates, speak emphasis I've with stores challenges the across five on last the of few our every weeks, the aisles in go into our would understand the had some put day.

programs right work we focus done as hiring labor customer tasking about First spring go and to foremost, to getting second the selling serve? to How during reinvestments stores on, in taking Robert to associates the The ready is day it's every knowledge be and having time we really now the our our associates mix of actions just so our training enable our have red-vest in necessary. are hours that necessary, in to serve ready it's as area. that when the front is the of bolster and through do our Having hours. to noted, and be stores we

associates up our on Third, to and more associates upgrading a productive and to out allow staffing experience QX experience, get speed by Robert's, with with to in and the them example, opportunity giving customers model invest time every physical upgraded as going finally, our day, processes, process that both training the in in-store the an comment well and in tools, greater tasking. we the key as that the of chance our our our as, as reengineering support an them in well more layout management are Robert's as to some for an hours for serve we centralization centralized my our then pick-up-in-store comments have noted digital to during as quoting,

with into we focus right to look key the move the as the are some of readiness, associates tasking investments, reengineering areas you selling, our better our to tools, to those the midst empowering initial year. across to associate when processes, those from So of

Christopher Horvers

Thanks very much.

Operator

Securities. from Your Wedbush next Basham ahead. comes line question with the Seth of Please go

Seth M. Basham

and good a lot morning. Thanks

Robert A. Niblock

Seth. morning, Good

Marshall A. Croom

morning. Good

Seth M. Basham

follow-up My on a question is the conversion issue.

If to Thank something biggest you and that programs the Is expect of knowledge driver a is give an the what of training could, sense how much and and us just how or you be. you. trended going it improvement conversion in XXXX through else? XXXX of

Richard D. Maltsbarger

for as just the throughout have as I steadily we a have year. challenge the noted, Absolutely, move we been conversion had challenges

fact, In an opportunity. it is really

in what to the bringing There As we is grown as that the traffic for conversion customer the know has is we've Really, grown. grown has the interested marketplace. we're the our the challenge traffic, offer. demand

payroll simply We the ensuring are take to it have the to a that more now in of action field steps back associates that we it begun the to our in address necessarily in year. is ready half of that had the And traffic. matter

Seth M. Basham

a And is for of or weren't in terms that that, the wrong that or qualified had jobs fact you the of lot trained weren't a the their for follow-up places? jobs their in were on readiness, employees quite

Richard D. Maltsbarger

from the with that able improve and focus now who's has conversations to the greater of the understanding biggest greater being and going right of cycle particular The is what teams clarity our aspects come in that. of field field role my execution project to

Seth M. Basham

Thank good luck. you and

Robert A. Niblock

Seth. Thanks,

Operator

Sachs. go line the next ahead. from question with Please Your of Fassler Matt comes Goldman

Matthew J. Fassler

lot, good morning. margin. a want Thanks to I on up follow gross

agenda fact gain probably at this as the with the in market moving been has else mix while to for the the a down at there on four value confidence the and all up been achieve coming to done desire can time, I continue of margin a some here? gross mix comp mix gross some have against Canada the that deliver know margin you And of that's earlier this pretty improvement been with issues, strong year. everything of commitment moment that quarters you given backdrop get the you're part given quite But the impacted well. you've and or to So I share, trying was into stabilize what and why that think to level putting hold

Michael P. McDermott

is Mike decline quarter of gross XXXX. this seen of put we the margin throughout actions Obviously, Matt, XXXX. we in McDermott. Most the have Hey place in second started

our our So and ability our to effectiveness those the traffic. spend through make supply while any we're in sale. the And that and we focused sure effective an minimize the new the the at to some the good time to pretty offer efficient Value give third drive in the going competitive so. while that results of impacts we've lumber same experiencing, way chain to to value way optimize promotional with improvement some is most have and moving partners primarily activities. there. promotions promotional We've making building inflation been the got materials and vendor seen all improve the we've We've us really the that working to got ongoing we to quarter space, closely on and that fourth year we're to us and prices and the initiative spend remain deliver customers, do working that the reduce to close continuing our sure to to to offset then lap throughout our price tools ability optimization

me flat all of margin that XXXX. in those give think So combination the confidence gross of I we'll deliver activities

Matthew J. Fassler

has And quick faster gross inventory just follow-up a fairly inventory than growing on be to healthy any a doesn't factor improvement. sales margin obviously, And make here. rate potential drive I the know a to easier that,

and will your you as measures expectations well? that any impact the growth margin would inventory for sales of the can year down whether over about require to So course relative talk gross growth working that

Richard D. Maltsbarger

seeing on made I'll and our of support the going then investments actions We our the of the in is But guidance, allow such Matt. in strong Mike the tools. to focus inventory impact. about inventory weigh some noted if with categories he are manage as Absolutely, we system in Richard. our management. to taking further wants to talk and the in as we're we're sales inventory estimated appliances to improvement growth This we've any believe in

during necessary demand up is the changes chain what that Now the inventory teams onus to shoppable sales and changes what a between our I in get roughly than our for come inventory in having continue manage role the XXXX. in position chain, supply supply specifically when understand working to customers is slightly to in rate our changes they on interactions our in flow stores, a continue of to with our to purchase at are the the me into as growth less to of what and flat

Matthew J. Fassler

appreciated, guys. Much Thank you.

Robert A. Niblock

Matt. Thanks,

Operator

question Your from ahead. go of Baker the with Mike comes Bank. next Please line Deutsche

Michael Baker

metric measure guys. conversion traffic Hi, how you Wondering if over and some share the us could tell you trends year. that and on

Richard D. Maltsbarger

video of the Richard. the Absolutely, able the We against our leverage into we of our movement registers and transactions analytics measure stores that of Mike, this our is up through activities to rest and customers. and are that execute customers tracking the with

Michael Baker

saying in data that? Frankly, of in see terms you're it So up. metrics we transactions. of So can don't that number the you on traffic was you the share provide some

that also would how and help that us in confidence So conversion, has imply again, the give could for year. that throughout if what you then metric, changed

Richard D. Maltsbarger

Mike. this Not at time,

Michael Baker

ask quick the billion $XXX initiatives. then Marshall, Okay, $X.X XX% you follow-up. Then the going or $X.X XX% just total on you I'll that XX% to is about of $X.X of billion. one talked Is said more million CapEx of from billion? incremental that

Marshall A. Croom

XXXX. billion. proportion going benefits tax reform the XX% was we're it's that of Sure, in see to the the total The reference XX% $X.X to of

Michael Baker

Understood.

last CapEx so year, tax of of So incremental total, that if the that's the most the up and XX% and XX% of versus accounts reform... it's for then Xx

Marshall A. Croom

Correct.

Michael Baker

number or on expect X.X% that then to guess there is I otherwise is, basis you'd get? with XX growth or points where SG&A leverage X% typical an you SG&A the component? up question my down a would sales be that Why comp be

Marshall A. Croom

of of these initiatives, initiatives lot components to strategic on a the deliver XXXX. some are have programs our expense going there that With in we do and

SG&A. noted that's that we expect just pressure So would in

Michael Baker

in CapEx the and investment beyond tax Above from reform? the

Marshall A. Croom

and expense component. CapEx a is an component There

Michael Baker

Understood.

you. thank Okay,

Operator

with Ciccarelli ahead. of line RBC Markets. comes next Your Please Capital Scot the from go question

Scot Ciccarelli

Have Good understand you little made I'm bit changes with guess of any payable-to-inventory in to the ratio your vendors? a better. morning, any your guys. I trying terms

Marshall A. Croom

year. towards part at process it's still where to terms end But comparing have of we matter and ongoing of it the it We're But we timing, seasonal value was to expect XXXX. part buy terms do balance looking really timing sense in a changes, can. year the improvement last of where just to some to that significant with build of our just of all and No of the due negotiations. that vendor was improve this year. We and the this makes extend

Scot Ciccarelli

things important some I with the margin change targets, is between that know thought So one regarding to or coupled aspect metric any a if negotiated in and kind is more of pricing retailers gross Lowe's? terms. will, process vendors of the gets that Is there what or payment you

Marshall A. Croom

vendors. beneficial for Not our this think we what in for at relationships point always it's ongoing time, in us and with we'll net-net the factor beneficial

Scot Ciccarelli

Thanks, it. got Okay, guys.

Operator

Gregory line with Your from next the comes Please MoffettNathanson. question Melich of ahead. go

Gregory Scott Melich

tax that Thanks, right. the maybe And like be have gone portion questions. billion more anyway. Hi. that $XXX I million It tax increase two savings, think to which statement, there's of way reform then about to a bps hundred least CapEx Is the reinvestment sure make CapEx, was just probably to is XX the because of would the that One given income a But up money. would just sounds guys. at from the it? of million. on $X.X on I you several billion, fair has about had got $X.X

Marshall A. Croom

the our the that to is be and business Yes, the so improve in is first and and as capital strategically foremost, always about business, going first think to philosophy we run, to invest enhance allocation maintain, pillar. first

able we were enhance we capital and good and to where accelerate ramp So provided one we're get we the This our be need on reflecting into investment to in initiatives the marketplace, XXXX. is backdrop lean a to as underway.

Gregory Scott Melich

sounds like anyway, were maybe half year, and that these of that a things been of Is the tax this it, just And have $XXX it, a to you would you're was CapEx portion that of coming. in doing it so related of fair? million reform, increase things lot accelerating

Marshall A. Croom

the of spend see we're accelerating initiatives. benefit after to the CapEx. get reform our was have But strategic yes, to is helping in going XXXX Correct, we the CapEx it would that it. about Actually, fuel incremental that accelerated tax XX%

Gregory Scott Melich

perfect. Regardless,

So on then second the RONA. question is

I corporate integration think, RONA still for guidance year is us margins four in the beginning what goal the mentioned much improvement? is this Robert, helped you that improved year next five well and doubling RONA going in XXXX and years how or the help Could in at profitability over of your had understand is in the there. or you XXXX, last terms

Robert A. Niblock

well things are I We're from in how the pleased at going said, from Like performance RONA. it a standpoint, with blends margin Marshall?

Marshall A. Croom

minor We again, should a we acquisition. the But be did standpoint cycling by that quarter. or trajectory from the are on pressure some good We of fourth in anniversary XXXX. margin put Canada gross cleanup RONA we have, the profitability to some as doubling a

Gregory Scott Melich

just And it. make understand... I last, then sure to Got

Richard D. Maltsbarger

to this margin Not too old was improvement removed to significant yet, planned from be. job a is far it Greg, RONA the not nor Richard. was in operating XXXX, being

significant movement see to more on However, operating the begin XXXX is margin. we when

Gregory Scott Melich

quarter. the That's second It to the year, you And first this flat sounds investments SG&A hear. the the think won't guys until like gross third on last, great half standpoint, margins stronger. build then and sales or really

Marshall A. Croom

But half. the capital accelerate we higher slightly just are year. expense again, to investments It's trying in throughout from standpoint, the a our first

Robert A. Niblock

the of because about sales we last is part year. strong – spring didn't we think have And a

weaker numbers. cycling against we'd slightly be So

Marshall A. Croom

Right.

Gregory Scott Melich

Thanks. it. luck, guys. Good Got

Robert A. Niblock

Thanks.

Marshall A. Croom

Thank you.

Robert A. Niblock

we one more time question. for I think have Regina,

Operator

will Michael with from go come UBS. the question of Please line ahead. final Lasser Our

Michael Louis Lasser

a for Good morning, taking lot thanks question. my

So and the several quarters last arguably you like over in results. areas investments mixed made produced they somewhat and some promotions, labor

you produce you accelerate attractive a investments? investments be areas. do you're how different you P&L accelerating Now those But that in your ensure that as to will return suitable

Robert A. Niblock

promotions. couple start, mentioned Certainly, you and I'll of labor things, a Michael.

we're made, pleased I Certainly, a working mentioned, have I from things. I challenges driving brand conversion we as think awareness, been think traffic, we've investments those type that with said, standpoint the promotional we of have the the from the aspect, we as on.

the can and we've further investments elaborate, labor. in Richard made As mentioned he

to Now to tools, associates and other in we they in that sure the have investments are the we've let supplementing that And, when make the Richard, have customer made are the front you... the it ready training, we is I'll so that buy. of necessary going those components

Richard D. Maltsbarger

level since Michael, last get currently actually that had success. be all slowly rollouts have to it QX. that year handful team over great several the of iterating pickup-in-the-store of the August that I is example we out the to way going We've approach we along rollout. had ensure of would the and the that experience add to testing getting the to for in to that under that going A we're the to further in in back the and going to months about, things that's investment of rolling to of stores, investment to a value a And we're maximum dedicated signs able take. nationwide a test talked we're nationwide the is make prior of past that several greater really investing going or early half the a to weeks is

a the we're of to from iteration rollout processes, to during sure of test nationwide latter the fact, dedicated the and six the the is March training we that part the the it all take do how that, iteration the reengineering the change, is that the maximizing past in return already components, fourth labor in of and April. we of shift before associates, space In make decided order that to the in roll the months currently physical out going to

Michael Louis Lasser

follow-up... my And

Marshall A. Croom

clear and focused the to to on I'm call. more the on it with want aligned going pile team is the leadership we've on make that I areas highlighted just comment. that

after want sense inventory planks, to You we gross getting urgency from improving management, that's are something margin, conversion, stabilizing do along with fronts. so of that those I that it just six of reemphasize a along strategic think the think about all improving with I working

Michael Louis Lasser

longer-term is was you commentary guidance, appreciate My follow-up made I your question helpful. it and think around that the all we

business are, gross the flattish sales little operating your leverage place the to a the with the business are or give rate It's sales of in become is, us years? environment, last expenses the different changes different taken you growth. a over all to now have the that can leverage changes normal on harder your assume of in sense we going all run of where grow remain they how where fast understand relative that point margin, if and few the the So rate

Marshall A. Croom

just we're really X%, At the levels. this and total in time, margin sales of growing distributions, billion improvement giving a point from high operating of level at XXXX the $XX shareholder sticking the to there, least then

where We updating in investor target setting to from plan get guidance we expect analyst we're That conference. when on December do said, that to improve we and XXXX. longer-term those being our

Robert A. Niblock

And, Michael, on. I add would just

then spoken, Richard working we've making investments that As you think of on together, those, and we're and ensuring Michael out into performance made in better we're get about: the investments the business; we we the head year, XXXX. we into of can test the how before rollout doing learn out one, some investments that two, last as as figure to diving trying working as made, they're the has and him

be to for to commit and in give for longer-term understand we to go we have be prepared we we'll to guidance improvement, be additional them that, to to great Before you want confidence really the the get targets in. opportunities to as we out provide into and time like December position to a think continue that able business, dive

ourselves. point, get this just don't to at want so And we of ahead

Michael Louis Lasser

at And you you're the pillars grow take are ask the to investments over looking maybe as makes be in that maybe you could if lens a more That and leverage changes and the efficient these sales? looking I time produce sense. more business do more with six qualitatively, to all Robert, then

Robert A. Niblock

supply to have yes. Absolutely, we've that we're move, got some expectations We the we've investments about to has know chain making. talked continued moved. We we know as got that certainly make, the investments business as consumer

making And in so got chain. investments supply our we're we've

those of XXXX. pay in will Some dividends

do point we're into That's further the be yes, at that to points with the be people want investing in front diving we get exactly but XXXX going on in getting them the in operating future, after, the what to can in able we're be of where to that when it be provide leverage business, December. will our you supporting of a so right in customer we're improved and making focused going future. absolutely. to with drive that right to the have margin delivered conference in we we're that is time, to sure the greater what chain, technology into after that analyst it get supply That's supporting good we it's Some to how how

Michael Louis Lasser

Thank you much. so

Robert A. Niblock

Great, thanks, Michael.

always, We you interest Lowe's. great for look we XX. your in Have forward to report May Wednesday, As XXXX when with thanks first a continued speaking results quarter our again day. on

Operator

for and gentlemen, conference. you today's Thank joining, and disconnect. concludes you this Ladies now all may