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Lowe`s Cos. (LOW)

Participants
Robert Niblock Chairman, President, and Chief Executive Officer
Rick Damron Chief Operating Officer
Michael McDermott Chief Customer Officer
Marshall Croom Chief Financial Officer
Richard Maltsbarger Chief Operating Officer
Seth Sigman Credit Suisse
Seth Basham Wedbush Securities
Eric Bosshard Cleveland Research
Scot Ciccarelli RBC
Simeon Gutman Morgan Stanley
Michael Lasser UBS
Greg Melich MoffettNathanson
Elizabeth Suzuki Bank of America Merrill Lynch
Chuck Grom Gordon Haskett
Daniel Binder Jefferies
Matthew Fassler Goldman Sachs
Call transcript
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Operator

Good morning, everyone, and welcome to Lowe’s Companies First Quarter 2018 Earnings Conference Call. This call is being recorded. [Operator Instructions] 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 Damron, and Rick Operating Mr. Officer; Financial Croom, Marshall Officer. Chief

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

Robert Niblock

and in your interest thanks Lowe’s. morning, for Good

moment about made to announcement we Before leadership talk I we discuss our a quarter the yesterday. first results, take want to

late to the this in Effective has the time, has expertise and and I a found with next and comprehensive ideal search July the the March, Since retail board as Marvin CEO. the be great experienced omnichannel serve plans Lowe’s smooth will this will in to that a people appreciation a and X, that announced deep I am CEO company’s complex leader which board Marvin Lowe’s. environments. from veteran industry President has leader to become makes Ellison. him for XX-year thorough take is transition. am He culture, a customers, an and know, in identify you person reigns. confident leader to As I retire pleased that that been Marvin in engaged my right

it and call, serve honor earnings CEO. as my that Lowe’s is this I an want President, last to to Chairman, been As has reiterate

value season will helping value I and leadership that With for shareholders. to a In due prolonged team our many and impacted for growth prospects across now and have people process we I'm to results. creation years Lowe's enhanced creating selling a about leadership, I that under following We to the are where for look in to confident weather company's first spring they turn fortunate unfavorable forward experienced come. the categories. live love quarter, to passionate outdoor who’s delayed geographies strong Marvin’s

result, first X.X% of a driven sales we a comp comparable increase quarter in ticket. As delivered average growth X.X% by

spring However, finally arrived May are has and positive. in comps double-digit

category U.S. X.X% with comps product in Our in first eleven while was of flat. posted regions comps one of positive in six We XX comp essentially home improvement essentially were five quarter was the two flat. regions, the while categories, positive

has years first the rain April categories. coldest seasonal a Lowe’s built outdoor impacted. outdoor of sales over quarter seen historically certainly QX the by XX we’ve With than strong years know very business XX% and driven in the and XXXX, products snow QX more you XX% As were with since and approximately of in

and relationships comps And However, rough supported another growth strengthen with hardware millwork. materials, driving to strong and and product our quarter continue experience. indoor omnichannel we lumber customers comps tools products for were plumbing double-digit building our category integrated positive. by with in led electrical, outperformance of Pro Appliances and

our with as strong customers drive the company above to growth sales pleased We’re we've average. foundation with we built leverage the comps Pro

digit we delivered shopping made this double quarter. and which to enhance it expansion in local customer comps reflected comp investments our while is of we’ve We our both comps our online in the simpler in Mexico, were Internationally in experience, Canada XX% to strong Pro see response continue continue in and positive, growth online currency. do including our us deepen relationships we business to make make the team, Pros investments with to for to services

and ongoing of continue is the poised from rollout continued and digital for conversions business appliances, the believe and we store growth offering remodeling. to progress make We a integrating RONA strong

Canada in experienced by the comps U.S. However, conditions in we challenging weather those to pressured similar were

a to last million the of we the to earnings share repurchase per excess increase in XX.X% shareholders, under on diluted repurchased over our commitment million return our $XXX delivered year's quarter quarter, cash per share dividends paid adjusted we $XXX in of For $X.XX, and share. diluted Delivering program. stock earnings

together capitalize mentioned, demand finally confident staffing month and a we're compelling I As spring inventory and stabilization. Board working Mike key to by offers place and with traffic of I’m half prepared Spring expectation, and arrived, in and we sales the is those such to encouraged will and performance in team are serve areas drive leadership strong is experiencing team are our first management, margin the and as to in moment. May. event, entire speak has a conversion, momentum on to Directors business efforts customers. increase actively the in gross analyze inventory seasonal our And Lowe’s improvements of

on communities In for steady let Thanks our like matter as improving with to help is serving relevant where love remain our customer ahead Mike. XXX,XXX customers, and fulfilling to consumer on demand. the need year, income us strong employment people to price of capabilities serving commitment and that share industry gains. and the appreciation. again our as market We'll will they call and year solid drives positioning employees purpose-driven to employees customers. improvement improvement continue what we expected strengthen the over positive than our serve job interest. continue your the and live. our most our competitiveness, macroeconomic Housing in the to focus outstanding so, supply we to such driver engaging me better its to to And improvement And mission invest I'd of home their past spending. home moments doing to formation sustain in capitalizing see home over to turn resources thank is a gains poised for demand continue Looking more that, excess to as home the which improvement rest persists overall the household of will is fundamentals expansion grow in amidst we the to expect

Michael McDermott

to with positioned capitalize well such and weather targeted Weather seasonal on late and place entered projects. inventory to exerted XXX pressure disproportionate spring Robert across ready spring, geographies assortments, Thanks more and impact sales. as lawn in their basis as season strong outdoor a unfavorable morning due comp the to good categories demand had compelling approximately But, and content, staffing and complete help everyone. points messaging, garden on of well seasonal personalized customers on living. seasonal We as

in-store and well as in customer comps We our delivery, However, advantages of service class we and drove leading our online, products. indoor in brands, repairs as our like experience we and for selection of as best both haul comp double-digit facilitation positive leveraged maintenance. achieved appliances day away, investments growth and next in

and a continued rough We solid from electrical, year. Pro with plumbing we're drove drove And Pro as and product capabilities lumber in Pro our investing to be order comps outside growing the strength delivery Pro continue demand in sales, the continue above-average saw and in millwork. launched also expansion streamlined month by tools brands excited In customer hardware, we're the investing with materials, to comps site and attracting strength maintenance selling Pro improving destination on also about effectiveness in strength above to average. catalog in business, building comps leveraging having company our we customers. options. Pro to as and space the experience. job improve of this later the We're this well branch headquarters MRO supply our follow building

the delivering enhanced digital And in including customers capabilities informed enhancing line strategic providing in-home priorities as continue approximately our our to We're execute with shopping for and services of for omnichannel to optimized which easier online We'll meet projects quarter, growth our to home assortment it X% comp project drove to on assets lowes.com, it our an sales. reviews lowes.com project we're this our in on by on of at request through experience platform. We continue specialists do engage solutions expectations. presence. services, in-home represents continues driving opportunity making customers' We evolving sales business search complete improvement grow, to with connecting even quarter. now digital upgrade increase and our me the XX% differentiated

noted our on strengthening execution. focused we February our are day call, to day As on

associate scheduling to restricted diligently but We also and traffic. conversion knowledge improve working to more and customer Not department campaigns. align to traffic accelerating and through revenues staffing our by are better even training around marketing providing promotional by only key programs

and provide a experience model are We better associate hours processes. in store our utilization and customer all our Project our service experience. quoting, key pickup reengineering of paint also improve

planning and task guide their centralize This education, completed our selection, of project their than allowing of rather projects, the project compiling on the quote. process with flooring, phase a administrative sales our time quotes quarter, to focusing project on to first customers through we associates spending product starting

lowes.com flooring for customer, to associates. to customers We process request has of which while have easier also allow functionality added another our the the selling consultation removing dual task the the making benefit from administrative online on

allowing product location being to to improved have activity. the color to and reserve clear direct We processes order our paint associates XX,XXX we recently an store stores parking periods, selection signage paint ensure focus separating placed. selling our pick-up convenient associates ready of that during have our cross out and skilled in And dedicated within pickup selling We is staged and rolled to for two and spacing with model, advice providing service spaces, paint trained project experience on peak advanced assist with tasking mixing expertise. to optimize pickup customers with hours

paint processes up of our extensive execution core reengineering to of and to underway experiences allowing order the taken expectations in stores will pick meet minutes and within five product our through our continue more drive Central we the pickup them greater arrival. XXXX. model efficiency store within improve of effort the actions are processes quoting, fulfillment of a expect new as improve improve store examples We the our customers to and ability have snapshot we service in in process to

opportunities have We as additional well. identified

improve conversion to time additional kitchen, to as are order and better touch the in provide in categories, and visibility communication better status our lead categories example, high instore touch experience ways For in improve These integrate improve high such we drive systems and the opportunities millwork overtime. responsiveness and the customer. flooring, and to will

growth, chain key also our on to better better improving and supply As short traffic and transformation work expectations in to the are efforts serving conversion capitalize customer we long-term.

flow the customer and right optimizing management ensure we connect on the that of focused and offer product supply have the product to saleable chain position for our products in inventory are customers. through needs improving to the we with better We services

demand efficiency through reducing analytics reduce than to to pricing including damage rather we shipments stocking centers we and also level bulky products we're Lowe's expand our while in unloading store to of centers increased efficiency, closely margins. to highly distribution of in-home we’ll ways network as efficiently a application regional the segmented from testing efforts plan handled elastic appliances a currently improving will stores, market In and work both tools given of to the This manage with and less we’re vendors products for working level, costs. year, deliveries greater while example, on and organized our that gross is delivery, cross-dock quarter, and profitability the inventory highlighting allow improve continue across less product progress And promotion our network the traffic distribution in manage our highly driving at to the will shelves. competitive network level. improvement product at value to our frequent, of and segmented products increasing we more on elastic stabilizing made items, the trucks first other our For at for ensure booking market Throughout we're products new facilities. through capital flow for more delivery the

Looking encouraged QX, sales momentum we've by improved. the weather we're forward to seen has as strong

for power to we’ll outstanding of all strategic year, just seasonal outdoor event sets, into forward storage, on our staffing spring the We on tools designed the look well Craftsman now Then, season with to the to serve expand we’re pressure later that capturing that Xth expand creating. Memorial time differentiated individual tools proud Father's to and exciting brands the messages, flashlight excitement and select washers we're Given July capitalize Day, in values, organization, hand our an equipment. We're is garage season. with traffic. We our of and offering tools, tools portfolio Day. experiences mechanics available in prepared power events include inventory the as Day incremental demand and to year, believe focused increased to Craftsman the compelling first and brand Father’s with mechanics of welcome this half

center this and and expert equipment destination it iconic the the of the We to for some industry. tools access improvement brand channel any homes aren’t confidently to offering outdoor we’re storage best making in exclusive customers the power guidance to be Together high need durable they home tools, easier tackle projects. the for quality, in

excited also Sherwin-Williams. our partnership with We’re about expanded

selling and together customers evolving exterior right on strengthen easier paints, the Marshall. makes HGTV to national product now the for national Water Thank Purdy. our the capitalize Lowe’s work deliver the Home Thompson's event, now select Sherwin-Williams will and the And is that company improve execution, it we to while to this Krylon, including U.S. continue you offer interest. is investments customer we’ll center Cabot turn project and now retail outlets to ability exclusive Lowe's expanded only summary, to brands as well expectation, brand. and for As over paintbrush as future. improve painting the I'll the strategic Valspar interior that your simplified and serve a for to to sold supplier demand competitiveness In to home their position rapidly needs. top Under partnership, top accelerating the Lowe's brand call Seal for our our Minwax, line into

Marshall Croom

morning Mike Thanks everyone. good and

the During ASU recognition the standard XXXX-XX. accounting quarter, we adopted revenue new

associated which with most benefit we year to to on decreased program total adoption of $XX.X quarter credit X% X.X% was certain were impact recognition ticket by operating sales. of increase supported points it growth provided Adoption transaction offset As $XX.XX. to income SG&A income profit ticket from by within significant the to not been proprietary average adjusted. revenue driven XX transaction standard for sales. a sharing to reclassified and Total prior Sales operating of the The income, result, has a tenths a on our comparable Comp reclassification adopted percent] of the a items on new standard had of increased basis no retrospective modified first no [six the of X.X% average so impact was sales basis account the X.X%. billion sales the by an decline growth. of X.X%. the

March, Looking and at monthly in trends. April. X.X% Comps X.X% February, were X.X% in in

last in XX.XX% and by standard gross spring Gross basis from prolonged impacted recognition quarter basis to points. sales unfavorable of year. approximately an increase for revenue to negatively quarter of points geographies XX XXX indicated, As delayed Adoption across new points a Mike was XX weather the the first provided margin basis the benefit selling quarter season of the sales margin. comp the

also gross pricing share the value deleveraged taken both inflation As perspective. impacted negatively well basis as offset partially from the shrink from the XX in we've transportation costs optimization our our XXX clients, revenue positive deleverage. benefits grown improvement were quarter and resulted the were which actions impacted ago We from standard as efforts. has the the recognition margin rate mix competitive quarter. Adoption which year lacking of results by an was gross for new of in points XX.XX% lastly, basis sales of our SG&A And points. margin in been

a the X basis costs. earnings million, quarter sales. as over to drove year of which While of share X effective for last adjusted per diluted XX leveraged X.XX% basis our for was demand Operating appliances basis was quarter from of was The a of XX.X% the rate of Diluted increase earnings XX in was hiring was of XX.X% success XX basis leveraged income X.XX% deleverage. for reform. compared delivery tax quarter $XXX and year's points. $X.XX declined a last Interest points points points. tax payroll than quarter continued expense the $X.X. seasonal Depreciation $XXX a growth result for share planned to was customer per amortization sales deleverage basis XX.X% first million lower spring An the sales in increased a which drove points and

end equivalents items billion at versus and $X.X or X.X% the with Now the had million to sheet, billion, inventory Cash quarter increased of assets. the starting a on cash quarter $XXX last of few driven turnover $XX.X balance the first primarily tools, flooring as categories. X.X well and categories, times, a was as Pro as by in which appliances, basis first was investments across year year. investments key XX of the such Inventory versus decrease quarter last points was

million times. EBITDAR sheet, on first quarter represented the first increase capital accounts end billion $XX.X X.XX section payable lease over was of a Moving of to invested X% liability quarter at Return was XX.X%. the year. $XXX balance adjusted last the debt to And or the on of

the $X.X we’ve million the resulting were $XXX $XXX cash flows. first Now billion, X.X of billion. we $X.X million shares quarter repurchased dividends In free million capital stock in in cash was at statement of million. for flow $XXX Operating looking paid cash and flow approximately of expenditures

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

to business detailed I Lowe’s outlook. like ahead, our address items several in Looking

As traffic. we Robert quarter to spring staffing the Mike first over the half recover indicated, majority the and next increased seasonal first event, believe prepared are miss with our serve we sales of to the is inventory quarters and two expect and

We increase by driven of it the increase income anticipate comp We XX not sales basis change margin As and negatively our adoption from to XXXX, impact result, of recognition the stems by new X%, approximately standard, opening approximately sales positively the only revenue of stores. approximately accounting a sales expect we X.X%. does to points, now impact guidance operating so affect approximately comp the sales. to for XX expect adjustment or operating total this by X% primarily

now expect of and Effective of approximately of XX is XX be a As approximately the a on we decline expected margin points points. basis an for operating tax rate basis we year, expansion the GAAP standard, margin basis result XX.X%. to expect new now gross accounting

GAAP year $X.XX for $X.XX reaffirm guidance the year. For approximately a our the share to on per earnings of we diluted

We flow billion, billion. of approximately forecasting approximately the is result are operations cash cash $X.X of free in approximately to XXXX. expected $X.X flows $X.X This billion capital expenditures from of for estimated

in Our XXXX. ready guidance questions. assumes approximately now repurchases share for are $X.X Regina we for billion

Operator

Instructions]. [Operator

line come Credit ahead. with of Our go will the first Sigman from Suisse. question Seth Please

Seth Sigman

store, improve best opportunity Thanks. number has lot about There a guys, today. in of a to in Robert conversion and the initiatives been that luck Good to you quarters Mike to of improve talk discussed morning, of recent you. the and

of that industry sort versus retailers, the way you And others we're more guess something As the to to it trying yourself guess core, stock, Lowe’s to over as there benchmark I that a other then in you think core it related is understand curious opportunity? I think time in the the at service, and that's store here, opportunity, just and frame just would within is I’m perspective assortment, the declined the also that on and helpful. issue is any is I be do what it is

Richard Maltsbarger

I’ll Sure, the the that and in to leadership year, progress a and work our we talk rate I'd the do. to year. To year that over your put have specifically actually certainly rest in in rest for have the past decline experienced question and Mike team close of question. the we We've of have of we the communications, I absolutely. that had like of as the last actions Richard, place have and still the early some this elements some part take into place the to quarter Seth, to we of and is highlight begun

didn’t talked for advantage, strong that and associate we a Happy season of development say, weeks, we've call but place with begun to we spring memory this in The the in season, into recent call thankfully first, our the experienced. associates couple spring, the season we've hiring, readiness last under and most take about our the we that ready reality comps primary readiness helping their had we've to the benefit Ready. both spike Vest to came So on and is, season past from has Red been that development. it’s the we to we over of focus the the staffed as with we the expected early quarter, that in delayed the believe support achieve staff all program,

to we include earlier in customers a the key those trained splitting focus The our in we holiday what second processes being this his such their of for to non-selling floor terms on way we select about increase serving test periods. that color be during we remarks, planning on are the as the executed expertise and of dedicated set move covered providing paint reengineering, those scheduling, behavior great we've of serve area percentage a as that under what bring key customer. being we're that more on for prescriptive Memorial country behavior during to associates, whom as the holidays to paint investments the able rolled non-selling XX,XXX to some tasking for able aisle activities. talked mixing selling With with periods the approximately primary staffing several the quarter now of Day example as you plans and is from in labor the make being customers focusing of the associates, to peak had reallocate project these to quarter can most associates. by is Mike floor we Other in weekend through across benefits of and labor are be QX, A tests as markets, the them like tests our activities expertise where during in of where of intraday periods well cross Mike

team feedback from rest additional of areas However, many as leadership Mike the able they’ve first there gotten the which to and feel store to XXX the of in I our they two talk best our gotten role, been the customers, into and associates, the taking -- of days didn't are are action.

DIY key have breadth to where and and and in flooring flow made the like the serve tools we inventory investments depth believe Pro customer first chain hardware both categories necessary is supply and to product we’ve customer. appliances The and the

Our our focus service and in-stock to, is percentages. that now to we flow levels how Marvin improve our improve shifted Ellison.do optimize to

emphasis a the there area Mike and as into noted, is movement our that noted selling regional distribution our deep stores. center is As dive key have Mike our led the The good to high-touch last focus I he of from a great associates that. quarter ways with during specific and our time on front millwork of example is customer. more in kitchen, flooring, actually Central categories the and a of identified we to have selling Quoting allow in which

As a during Quoting Mike to providing we've project passing a quote, a customer our combination project saw the noted, to of over uptick from non-selling undertake doing allow Seth burden different believe types over right going signs improve to Ultimately great work tasking on more over over of turning of team actions conversion that in that We spend our the specializes take experience satisfaction the this each seen. in these administrative set time. activity. the educating to to their to in-store of QX, and to time, Central specialist planning, levels select We're finalization need for confident early in-store we're team the we improve and us for conversion. is their to of them to the a time products, customer, then helping that

Seth Sigman

much for very Thank Richard. you color. Appreciate it. that Okay

Operator

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

Seth Basham

comp break get what the around possible the excluding Is of sense is it your X.X%. to by Thanks the better comp a that out ticket, My categories, ticket a question trend seasonal lot, $XX, so under down trends we is? and underlying morning. good

Richard Maltsbarger

That's most had and impact weather there. about us, on seasonal of tickets and Certainly, significant significant lawn that in $XX quarter, our business the our the with primary driver transaction for XX% impact driver Yeah, garden was and concentration first to could an under tied performance. business. that the be to our a

Seth Basham

think Yeah we ahead? about, as go

Robert Niblock

point, the it I we well on is of impacting seasonal items to lot is the spring. to the one of transactions and – buckets Just add were A in as the spread pressure about other would XXX that basis if as well. across talked points for just lower could,

Seth Basham

seems When or do there conversion well you're well? positioned within challenges you it. feel challenges, smaller-ticket ticket about the What you are converting Got about you on they're see categories. primarily in think focusing Do smaller-ticket your there categories? like categories it as big

Richard Maltsbarger

Obviously all focused we're as well array and categories improve When way business. are take in our from feel try experience our a on broad I got conversion inspirational customer balance smaller look takeaway in positioned of both perspective, assortment, the believe at I the high-touch we categories product we position ticket the about across the I of categories the across good a enjoyment. perception, very product we've to competitiveness our brands, value our overall the categories. from

Seth Basham

very Thank much. you

Operator

of go will Eric Our next with Research. question the line Cleveland from Bosshard come Please ahead.

Eric Bosshard

Good morning.

you're you're if One accomplish? a little expand spoke of what and bit trying the you wondering what I'm there stabilization. on seeing initiatives you've to was gross could margin to

Richard Maltsbarger

gross offset gross vendor partners took basis first we value closely our seeing And tools we'll to in competitive quarter. the and manage And saw market effectively particularly that visibility fourth to around from quarter commitment. the these both deliver remain sequential stabilized improvement margin installation, momentum the points as really benefit. we as first provided competitive optimization deliver with competitive actions improvement XX of analytics partially Yeah and net our work margins. in in to widen we as improved we're Obviously, continue ability And increased we excited required trade-offs value recognition activities us the points, the work lapping by continued margin reduce meaningful pricing by basis revenue gross highlighted, I'm marketplace Marshall about to XX gives to and off. positive to I'm the XXXX against our

Eric Bosshard

you curious if if thoughts up different, follows could you one baton I any on pass as same provide what be what perspective you the might then the to could. Marvin, that? have your I'm or be us might thoughts just And Robert,

Robert Niblock

exciting the him Eric, anything industry, welcomed told called for have I be home week the and transition. Marvin him available significant could Marvin experienced we certainly early in he and retail industry on very I do call. in Well home are I that and spoke I’ll think back CEO, to for excited the us smooth him join you experience him and as is so congratulated to team, him and that’s certainly to know this role now the to assist a an improvement improvement have our to join

I and have I no in we see place, see to customers' think will seen and progress working look have working plans be outlined improvement his care dive of on of and with we add then the continue areas taking do that think we for how opportunities we already strategy wants to initiatives able our be job make you care, in are call needs. view take Marvin team's in become to what have and the he where to on and that today, better to to thoughts

Operator

Our next Ciccarelli question Scot Please go will with line of the ahead. come RBC. from

Scot Ciccarelli

you’ve in feel Good in obviously a from a but to morning have talked a close happened stores for transactions, guys. traffic decline that’s you rates seen your what’s pure all decline the I driver do to know you about and been perspective? your

Richard Maltsbarger

up positive be both to lowes.com. continues traffic stores The and for

ultimately great the and from yield better driving see value of Lowe’s We engagement traffic. continue awareness, campaign to to start positive perception,

media. I think occasion the and right right balance mass striking of personalized our spend targeted and digital the are we delivering Optimizing messages.

and and brands, So, with customer the promotions a customers I positive strong values to very continue with great connecting really and we we in macroenvironment, engage think trusted are assortment.

of lot things traffic right for us the now. front working on a So,

Scot Ciccarelli

a quick hopefully Okay, for then Marshall. just

there any of? cadence shifts monthly guys provide Thanks. you we the calendar be us need to On aware are

Richard Maltsbarger

meaningful [X-X-X] for first we in four, basis, any calendar calendar [X-X-X] five were quarter. forward the on wasn’t shifts the there

Scot Ciccarelli

Got it, guys. thanks

Operator

line of Simeon come will ahead. Stanley. Gutman from with Please go question next the Morgan Your

Simeon Gutman

just recouping in some hold guidance to Thanks, full occurred good the you full morning. bit making of about a up I terms I in first expect sounds predicated it sounds the is going to the your talk all that any third. investment decision like the flow the a is and through picked that the making are make up the you want of Is quarter there that quarter? from the year. little -- of on flow and it like profit remarks, loss in second year year and to to in sales for the prepared same it less through or you’re the

Marshall Croom

the We expecting QX the flow so we change we that’s the again associate we’re efforts the are revenue accounting guidance, we how we have shoppable stores, to the first of in that of through them the customer investments factored lot confident improving other would make and were anticipating and made in so experience, of the majority missed are really in sales our that QX, been what but the within for quarter, our only believe A again staffing and got we stores. have what are inventory. the making shopability with that’s the to so connected inventory maintain standard recovering in recognition we to to

our strategic we leaning associates laid the anticipate on in customer out engagement. to up investments XXXX to ramp we're investments help So, call for February to do into really our improve we better as looking the that

continuing So, that services the have supply in. I just we’re efforts invest Pro of spend examples transformation to think chain of what are we some across

Robert Niblock

margin we is Robert. up additional we’ll start and as certainly continue some his the get as some that and well the year early of work progress as serves we are seen doing of of Simeon, through to will already from team marketing had Also, last balance signs throughout the year. make this you’ve that of the gross stabilization the the to lapse Mike year,

on those the effect of layering delayed the of were see a sales So, that recovery you'll quarter. first top items from of

Simeon Gutman

Okay.

so, as clarify, you investment some made in were of tax cycling light the then expected. rate less as to that that than -- the initially improvement just those it's goes things improvements you're beyond and just are I’m planned that as the what savings speaking running you or of year better that to some and So of planned far from just to what investments last internal no than a opposed

Marshall Croom

the that come of advertising, get on I but of will investments that we're that the year. planned certain as we’ve are underway, we I the underway. some and to last things, ramped we Robert’s leaning we’re traction that things in the up right for certain Again, to as tests efforts say there would think up lap. point, more just one, competitive now, gotten pilots encouraged, But with into some actions, beginning year ramp to continuing

our is. with we're it as comfortable So, guidance

Simeon Gutman

any sensitive Okay. weather underperformed that less or And product maybe worth categories maybe outperformed are my follow-up, are you that where calling out?

Richard Maltsbarger

and class we Pro Yeah, experience and like in I with customers appliance than with to great there, they and And something example got Simeon, to demand our electrical plumbing also think to and better Xx tools electrical, we've of continue program would expand the hardware, that. in the and work a growth see share, run best heater storm some building about above in you rough we is tell cable, there. assortment momentum, business Pro, driver positive for biggest obviously, would double digit the space. new that water that A. electrical in gain O. customers some inflation growth continuing the grow that in leverage favorability categories, progress brand, good materials Smith and industry plumber the take double-digit their related to share feel improvement with very the continuing I comp in recovery average commodity the related supporting our as some continued do continued saw continue I category about for Pros that and penetration Pro in thinking being for then the and Pro plumbing

associate and we tools launch tools continue the So, like Abrasives, our storage [indiscernible] striking of investments to actions Norton with like the engagement that launch Pro really that key double-digit Marshalltown, theme you is hear brands we're to Craftsman. paying recent that and of comps will tools and feel subcategories complement taking in the the start mechanics in off good the

the are they pro good So, with categories customer our I’m feeling see great base. and continue to progress pretty about a

Operator

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

Michael Lasser

luck for best taking Good of and Robert. Thanks my morning. question

to basis traffic, XX.X%. with due to as called points you contract out your XXX So, that of traffic the allocate we the down weather closer all your to

more would easy that pretty gotten traffic comparison basis, a the even have have X.X% the on that two-year was so Why traffic weather. noticeably conversion, you focus would you quarter this that little think it bit would disruption lot a and gotten the even there after worse much of so. Was traffic spend for down quarter, You or a put degraded have better? adjusting this on

Marshall Croom

impact just When points categories. transactions impacting in you Yes. is or seasonal seeing XXX-basis the garden and of from were that's really those think categories reduced what we weather lawn

we indoor XXX-basis comps impact. think the our positive that's again, about so in how points categories, So

Richard talk I not weather, again, within within opportunities five as execution opportunities that highlighted guidance associate Richard just the with it's of the about think focus number And just with we all the etcetera, highlighting points on laid out, the continued conversion. have factors stores.

Michael Lasser

the it of gets from weather, did this quarter Outside worse been? conversion where has

Michael McDermott

weather has intensity in No saw And Michael, outside period. is pattern of back the the now year that. we the all last on that of the conversion away the stabilized focus in challenges QX working to

Robert Niblock

it's Robert. Michael

in think keep business talked we the we about also the the quarter we about at first our XXX the seasonal mind, I drag, when in sales. strong look Just basis points of built XX%

weather was kind have the a does disproportion it quarter. tough this how effect So, given

Michael Lasser

that far traffic about it talked then the seeing Is conversion already quarter. seen third all extending improve? in May. you you've thus you've are that thinking comps the through about related, And double-digit then And

digit quarter already what So, trends seen through believe comp it's you always given that makes you've third the going maybe double quarter-to-date? to be

Richard Maltsbarger

that we as loss feel expand as seeing take we're growth fourth good we our product indoor transaction and got alignment, in of what we business of assortment. promotional first throughout the weeks quarters. ticket recover balanced a look a and May, third we'll is through The our at momentum that in the well that a of majority seasonal business categories Michael couple second,

of unfolding here. with optimism So, the business is for way the a lot us

Operator

next Our go Greg MoffettNathanson. the Please Melich comes question of ahead. line from with

Greg Melich

thanks. Hi

then dig if going Marshall to the It Just think in a year. and to on Pro And described like and right little right. to was sounds sort got the Pro maybe drive probably I sales I lean is sure XX% follow on what make it a that to do the Is working categories of you Mike, had you quarter. of guidance up you're and you given the rest deeper the what think that the there up. question of guidance into the

Michael McDermott

not XX% I number. Pro we would performance that had ready but go have penetration say our yet that to strong with So, the Greg beyond

Greg Melich

please And help stick Robert, I also the that. all with And math then enjoy retirement. the thanks the sure So, for make your got this. on over year, right

accounting, think a last fair I assume I quarters the down positive, through, year, if first half that think dollars is of that way say back it guidance little now it's were of of year, but be Marshall. shifts the really the the The take in the Thanks. dollars to in still if flowing mid-point the the more is a it's EBIT will to we’ll the given given cadence or you here. three EBIT X% do just important your guidance bit quarter, up for be

Marshall Croom

the and as over have impact, again going play through opportunity majority flow have QX recover, to so the looking are we that out year. QX, Again, that’s in that recovery of we’ll that we a sales so obviously to the

EBIT. sales we’re we how how about, that’s would thinking So and recover

Greg Melich

that to done. like quarter a change, focus dollars, up second if will if accounting on it So, just and sales whenever the come given third it the that it’s the sounds be through the being the it second but ends flow more quarter, EBIT will quarter,

Marshall Croom

changes or Correct. And again, the accounting not operating impact sales does income.

Operator

question from ahead. line Suzuki Please will come America next Lynch. of go Our the with Merrill of Elizabeth Bank

Elizabeth Suzuki

Great, good morning guys.

related particular lumber. that quantify benefits you any call You out related hurricane mentioned Can activity or helped in anyway? that storm

Marshall Croom

from what hurricane in basis points that step was was Yes XXX Elizabeth, benefit quarter the we change Again, related it from from about QX. year. experienced last QX activity a to the

anticipate down back expect can of that step I the to realized really think and you again the we and over QX we that year. benefit half in the

Elizabeth Suzuki

categories a outdoor you Okay, more that’s about in can of just little sales the and And have positive outside talk helpful. that really didn’t comps garden. living lawn and bit

presumably categories? and on those just comping Can So, talk in what’s flooring were you kitchen going probably negative. about

Marshall Croom

impact. significant I had Sure weather Elizabeth, paint think a

time underway quarter weather think first in lot the of kitchen hurt stains us not conversion an flooring from the those in there. experience categories, our they the managing the certainly highlighted phase When exterior and got install. about the think installer our reducing but paint, exterior and a his a improve until receive Richard moment in through we’ll about moment work If base just also makes as rate selling you customer selection you and

the high as they touch kitchens So, are most had certainly focus impacted categories. and significant and of been areas flooring

Elizabeth Suzuki

Great, thank you.

Operator

go question next Chuck comes Our ahead. Haskett. line Please of Gordon Grom with from the

Chuck Grom

morning. good thanks, Hey,

points for due on to Just basis your clarify guidance to said rev think you I the year, in change the view rec change? the entirely XX margin that that’s the up gross

Marshall Croom

we the margin Correct, quarter XX before points, to gross it recognition first the basis were revenue flat was the guiding standard. in adoption of

So yes.

Chuck Grom

and Okay follow-up just as that. a to

the think when earlier to the to you half you said second case? the and in provided I be expected still front guidance and half the is year the you that lower be that better,

Marshall Croom

and QX the of that addition that’s year Yes, we still to good and the QX. to step case in actions again gross from lapping a some improving in primarily QX stabilizing change QX again took last margin,

standard more than back in pressure on lapse first of actions. some margin, half ex the half, pressure more the those again, So gross we again recognition, revenue

Chuck Grom

guys to are not you And year, earlier? it restate last you say going did Okay.

Marshall Croom

We the adopted modified retrospective method.

and impact not the basis gross on in highlighting does you require that, margin SG&A. that So to restate sales, points

Chuck Grom

touched the And elastostatic far? your can us you this with you in you've you've progress a update that terms earlier, on but product Yeah, bit okay. so analysis on think benefits of then made Thanks. I little seen portfolio

Michael McDermott

pricing and management So, of positive new to tools. relates our we continue to moving see it revenue improvement under optimization

results under about calls, models I move more our that we code as as it’s we management, that seeing to and time having margin. take prior those benefits revenue and So, approach. optimistic are to strategic the of on more And we're gross does it mentioned to

Chuck Grom

you Thank much. Okay. very

Operator

Jefferies. of the from ahead. go Please Binder next Your line comes with Daniel question

Daniel Binder

on talk was wondering were about slower where year. you I we Thanks. could like the growth if a bit Looks last little just bit than Lowes.com. was it a

and get are think accelerate it? you key your on to to what that drivers Just thoughts the

Michael McDermott

delivering digital our again. Look, quarter Yeah, with this is another we strong Mike, at properties, had XX% comp.

we traffic, marketing traffic but to just business assortment our improvement throughout and reviews certainly do We continue journey. competitive about efforts, continue conversion build the through line as out their omni-channel home experience for is remember continue targeted our capabilities overall the Lowes.com to we and customers integrating perspective, drive those optimizing saw support we We improving elevated to remain our conversions. to comps, online improve and interactions pricing all from our digital a not

navigation intuitive capabilities I get grow expanded better to this we year, for planned and faster experience. think assortment, investments speed, will got capabilities, with as enhance So, that checkout digital the new site usability, in improved Lowes.com search business we've will continue omni-channel

So, good place. a in we're

Marshall Croom

Officer add and Digital continue Vikram And Dan, just Chief We've that. new that board, and into it’s about When lean a Singh. four on certainly this in digital to is Marshall, been got invest. had months, capabilities, he’s we something about I’ll platform investment here we to the question continued

X% into sales XX% and top an comped of standpoint. forward front so to our expanding we about looking into is and and from on we're is So, so our sales XX% digging last that capabilities now of platform, online our that penetration leaning our on year, he's

So key certainly, a element strategy. omni-channel to it's part of

Daniel Binder

decelerating, if kind as And understand on generally stable, better that then adjusting just growth describe rate where there follow-up, I as have a but of it’s similar growth for trying it's trend sales know getting you weather average, been been? we’ve to sales, as impact you Pro the any Pro above may or say, growth to would accelerating,

Michael McDermott

and the pattern of take that to based do we relatively believe share in have tracking a all the continue space. we that we that continued marketplace it's similar strong Dan, in

Operator

will the with line of final Sachs. from ahead. Our go come Matt Goldman Fassler Please question

Matthew Fassler

All so these after Thanks the much, years. best you all many to Robert.

February. start by On the talking briefly about

be and basis were. representative a of stepdown to seem the monthly number still a terms are not in a been. where way basis did bit March impact The February we've of February one-year of on the two-year So, a in April from out or call weather

or the was the how really first of as was the quarter difficult last months well? So, two it that the was month were light

Marshall Croom

that say we from were would transaction bigger that had impact. a sales April the Yeah, March and and I crunch

Robert Niblock

Yeah volume. certainly if at look you the

we the between business February grew Matt, know of the the you to the by quarter. get As time dramatically end

leases than February. month a significant So, would higher from like impact the volume much is in those be it

Matthew Fassler

Got question to second you. related expenses.

were operating SG&A know we the a shifted to the labor from later whether that that the changes the in a bit But into came there. for Were gave dollar up remainder be held guidance labor the had our progresses? or investment. year you seasonal taken I below expenses actually of and year. a maybe A I you all perspective needs forecast any adjusted investment there margin number that You think know in as accounting the that you cadence to as a deferred bit about that. year. for the on bit other new below

Marshall Croom

the we in quarter. No, pretty first actually were pleased our with results

So, productivity we labor. the some efforts had that in an offset help with provide even investment

So, continue we front. do keep that lean focus efforts a into to have year we'll productivity we on the else as as that where

keenly And so, productivity focus opportunities also move while as we forward. focused the we have we're on as that sales

Matthew Fassler

bit more finally then strategically. And a

you've your efforts. impact to when as elasticity and You today goes impression? and promotional them how you hope to your for the been consumers from talked from analytics responsive about surveys roll that desire has price out the the sense your your on up from What's that pricing gross has are and that as those consumer And margin. emerged year best

Michael McDermott

now value continued got position wired been we We quarter perception the pretty tools. And we good took the that at We've more the new see regularly. competitive competitive, competitive since on really pricing where Yeah environment a the of relates Matt, be XXXX. competitive as right a second our to And I front. our front. with metrics about in rationale feel we view these into to competitors look with consistent it value perception action remain

and maintain value So, priority customers one make margin. is got to gross be our by competitive and right to doing off we deliver great trade that the to

so results. seen are So that's And our positive focus. we what far

Matthew Fassler

you so Got much guys. Thank you.

Robert Niblock

your speaking We results Lowe's. again August when in XXXX report our quarter look with day. interest second thanks always to we on as Thanks. forward And XX. continued you a Have Wednesday to great

Operator

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