Loading...
Docoh

Lowe`s Cos. (LOW)

Participants
Marvin Ellison President and Chief Executive Officer
William Boltz Executive Vice President, Merchandising
Joseph McFarland III Executive Vice President, Stores
David Denton Executive Vice President and Chief Financial Officer
Michael Lasser UBS
Christopher Horvers JP Morgan
Simeon Gutman Morgan Stanley
Steve Forbes Guggenheim Securities
Zach Fadem Wells Fargo
Greg Melich MoffettNathanson Research
Scot Ciccarelli RBC Capital Markets
Call transcript
Due to licensing restrictions, you must log in to view earnings call transcripts.
Operator

Good morning, everyone, and welcome to Lowe’s Companies third 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 Officer; Mr. Executive Ellison, Chief Marvin President and Bill President, Vice Boltz, Executive Mr. and Merchandising; Vice McFarland, Joe and President, Executive Stores; Mr. Dave Denton, Officer. Chief Financial will the I turn program now over to Mr. remarks. opening for Ellison go Please sir. ahead,

Marvin Ellison

you, Thank everyone. Regina. morning, Good

As continued today, in earlier reflected the business quarter. third of our earnings in the our strategic release reassessment

position non-core taking focus underperforming quarter priority Our Lowe’s necessary businesses. top success, to was the stores core allow our by our This exiting intensify to us to build will of steps business. this retail long-term on a foundation sustainable

reassessment, XX well XX the of made decision the part X other close as in strategic stores Canadian locations. to As and we Canada stores US as

to we our retail and and to completed all Instead will reassessment now online will announce we and, attention to shareholders. in to deliver running of our return capital. attention improving our in to on execution send ventures to dilute We our focusing make, that pursue Renovation that I'm our businesses. retail Alacrity Mexico our course, more our Smart our deliver and business, shareholders and Iris we and Services substantially that we’ll were by our stores also annually. retail we message return believe greatest committed businesses to Canada. clear outstanding process on US can strategic have elements that a of we returns a actions continue These capital evaluate effective no of difficult longer decisions These exit portfolio we’re and operations to in intend better the can shift Home allocation the pleased our

Now, of comment transactions. on performance in partially increase our sales quarter. growth driven the in X.X%, a X% ticket, let X.X% third comparable decline by average me by offset We delivered in

US X%, Houston comparable geographic had with XX expected, at due And XX the in Harvey markets the of regions. Hurricanes comp and comparisons quarter Irma. sales prior-year as the and home Our positive Tampa to in improvement grew comps from weakest tough

earnings of year a XX% on $X.XX, earnings Diluted posted the per also for We $X.XX the lowes.com. diluted share ago. comp X% per a period were decrease growth quarter and same were for share adjusted

of call. on Our themes quarter results second discussed many the our we quarter reflect third

First, continued while we drove strong out stocks website, traffic and sales. pressure to our stores to of

our create inefficient in process contributed to our of reset disruption to out continued stocks. and stores Second,

of by resets. our and paint, executed categories negative fashion with were poorly all fact, fixtures comps, In pressured flooring millwork,

an Third, I'm about delivering these address QX our it sales. news sales issues. management the tasks. outstanding distractions the in too store and four, installed and our good customer The pleased you'll chronic from pressures too us hear And is in call. plans to experience the complicated, initiatives which prevents designed team strategic more the later and leadership with our these our is primitive, specialists with burdened to And processes time are our system labor complex, associates too is project are associates many These our spending are business assistance. adequate from provide customer preventing with

rather Merchandising, plans our reflective Chief with to and reset chief And retail Information an merchandising information of addition of foot moment, IT to Also pleased out our is to this in the sustainable was causes the the during success. commitment the and success. building building quantity making stock low in transforming Stores, merchandising officer. issues issues. years quarter. of to expertise foundation the systems. and root As areas, Seemantini functional long-term challenges, our to quick the foundation our President, in said President a fourth third more I'm for we’re welcome and for our through in final conducted Godbole pleased world-class was our Officer. team of a long-term technology McFarland, team their And earlier, for our long-term Joe a XX square omnichannel global to the of deeper part I'm of assessed our job call. third improvement. sustainable a to results priority and earlier success review long-standing executive her and accomplished track fixes ability identifying quarter sustainable Boltz, of they're areas, address I leadership and as a our month, drive of the our is in the Vice outline their and name this And Executive quarter, foundation than Seemantini for and quarter, business we these chronic Bill store modernize help walk But identifying leadership record the developed sales dives the Vice IT to than as platforms upgraded issues, will detailed talent, is us implementing also our Executive lot as third proven Dave executive improvements digital quarter confident well chronic per third plans was of you Denton new operations our committed This In new and team

weeks as well. our while share on his been our first the And day meeting spent his views business As Dave he’s we August, Officer. in leadership announced appointed Financial with with will past the executive and company, has Chief official today team is previously the several

I unique improve execution, stores both We see and as XX And a not price have encourage discretionary at market is $XXX US specifically the of a we pressured, which and turning in issues business age the driven years, short-term will ticked chasing has up improvement confidence home project our categories remains our which our turnover for our billion we forward online, continue drive macroeconomic investor a at attractive performance but fragmented as future our have investment, and maintenance real spending, repair. consumers solid residential an chronic conference robust increase that levels results, And we personal see look every and in to we consumer And to operate engage by in appreciation at hover creates remain XXXX. been marketplace as suggesting I mentioned continues share. high we look earlier, Consumer more and environment, gains projects. strong, in will to on line The some December is bright. income homes income that to housing interest and poor long-term Now, ahead, to as to long-standing although on homeowners employment rates in about macro and home in real analyst underperformance our their QX XX. looking fix strategic the plans actions disposable have backdrop the opportunity stronger initiatives not average we’re to to issue we sharing our top our upbeat growth. enter by support improvements our as concern. and the our begin continues that opportunity fixes, that expectation supported will details prospects,

their close, work hard Now, serving customers. before I associates and like dedication our I’d for to to thank

California Michael make I'm processes response quarter. proud each in associates. XX,XXX and We’ve don't our delivered this also systems they Thanksgiving in like the evident Florida. communities. support to serve areas it of impacted live and prayers relief incredibly the and to the We’ve which meals. wildfires. disaster their easy by afternoon, other our impacted work. Hurricanes North Carolina This of in way for impacted associates Florence send served Our meals our I’d hurricane And being for communities relief to individuals communities all is and they this hosted hot XX,XXX the Nevertheless, XX our customers, already XX,XXX buckets events will and and people and thoughts hurricane in the

warehouse devastating of California by is we wildfire and Hardware supplies event. closed associates all Supply do and our and from in support using emergency this the communities horrific history locations Orchard can our relief for This to We’re most the we one community. the will donated impacted

the Boltz. I’ll with call Bill turn over to Now, that,

William Boltz

good And and marks the I'm Today to XXth discuss my with here team. everyone. Lowe’s be day Marvin. to merchandising pleased morning, performance Thanks, of the

posted turn our stocks, challenges certain with put growth X% those sales with assortment home comparable transactions. quarter. in The of ability website, Marvin execution the and pressure drove poor to great categories As this in you, on traffic but combined macroenvironment, values our and of into we with continued stores and out improvement issues US shared favorable visits reset events, to

departments the led merchandising and along and Seasonal living, of some and rationalization and company third Seasonal and a the of Let garden, in outdoor high activity. by the the with with electrical had grills all in average. comps eleven plumbing out lawn positives me delivered increased the discuss living comps and quarter. inventory the the comps, from positive take Seven driven rough quarter. moment appliances, outdoor kitchens comps lawnmowers single-digit double-digit driven by demand way to above

as we air-conditioners response and delivered hurricane-related addition, products such dehumidifiers. also for generators, on In the

garden fertilizer, activity watering along season, and our the live were our fall with and the capitalizing comps grass goods Our preparation of growing seed, extended result lawn fall in programs. on

our we row, a leverage in continue ninth and as omnichannel we our through breadth events. Labor quarter in leading Day brands, comps and Columbus our the Day For above-average assortment of drove strong offering to appliances

also with pro also and as core posted And we cabinets strength in in as had and groups within kitchen shelving and comps, solid performance rough countertops. department plumbing well our above-average electrical. product Our organization

the driven heaters, completed brands continue our comps two of into and brand effectiveness destination A.O. in setting to of programs double-digit during of with Also pipe as strong pumps the by by in MAPEI growth tile the stores, Smith. key and excited fittings we quarter, short customers, be professional plumbing new materials. was pro the We the our evidenced our rollout water about Zoeller attracting

and jobsite the that of power from cordless. corded launched also convenience new Metabo exclusive brings through ease the the Bosch tool of power a We and cordless HPT tools pro both to

We demand strong a continue consumer sector. robots home by improvement bolstered to see

As merchandising quarter, building team added steps begin basics. as we to part the world-class industry to to of noted, merchandising our Marvin retail the experts We’ve a during took third organization. out our focus on strengthen

third dollars ultimately, also quarter, stores. for in the clearance have of on inventory underperforming SKUs those now our In With complete, process aggressive we you many focusing and an the that quantities on was undertook on we eliminating or addition, begun our slow-moving that pro focused lot the know, in clutter reducing as and, customer. reinvesting into improving job in-stock process SKUs best-selling

are we for are to subsequent for the shifting merchandising the hand goal, on processes. to from ready allow managing merchandising, inventory categories the example, inventory customer. stores benefits the in and streamlining in sufficient and cannibalized have moving the We're decision-making allow sales mindset dollar our reinvestment SKUs to Although the amount our other will which, strategic to clearance faster inventory investing an have for and future, and will the us quarter. during activity the we breaks discounted season set before turnover an Within inventory

opportunities the let of Now, the discuss third from me quarter. some

poor including out-of-stocks, improvements categories Millwork underperforming such doors, realized categories, that Out-of-stocks execution, the both limited pressure the therefore, and entry from a on Our product stemming by was comp. job resulting planned reset blinds, and, recovery exerted were categories lot the transition. dates had challenges window of difficult in pushed also from quarter. and by all were which were interior pressured largely inventory back impacted core and in not supply in product as reset

the We in areas improvements these part to see early XXXX. expect of in

transitions, with brand partnership transitioned we disruption, as Our paint by Sherwin-Williams. business along into with exclusive impacted supply our was

Going we forward, this to we’re position working see with inventory improve improvement area year-end. our by our to expect supplier in and

in negatively lighting, led impacted challenges lightbulbs availability and of commercial to Our fashion where out-of-stocks supply to the reset shortage department was perform delays. and fixtures reset a third-party resets labor and by

improvements our fourth throughout continued in-stock quarter. progress in the We expect completion reset and to make

hard vinyl that in our to in in is continued the surface, as the and in still was ease innovations reset and soft shift we overly to flooring. on Finally, available flooring underperformance an by consumers flooring focused driven disruption plank assortment see that business continue are

plank exclusive, Going forward, the new better our this with products. core, reflect of assortments will vinyl trend expansion smart our

to planks the the introduce will to will these are points local great the DIY and assorted new laminate be customer. areas, provide also updates the both and looks Our will trends updates price in will vinyl to will expand stages, lower introduce which market. tile, that and early new that and in for off-shelf values laminate pro space These

Given XXXX. latter implemented the solutions we complexity of expect to of these the have activities, half in

sales. identified results were mentioned, execution causes Although we our Marvin issues with of our quarter, third that root as or pleased the have not negatively in the we the impacted

processes We are issues we anticipate changing by these our will results XXXX. in on that execution we and improved to see focused enhancing our address

Now, fourth quarter. let the me transition to

our on excited great and about exclusive mechanics and offers, multiple individual tools, We are highlighting continued Craftsman rollout Craftsman, that values are quarter, products of including Throughout the power hand $XX. at including showcase tools. will caps, three we fourth end featured tools

brand, We destination best industry. storage to equipment some products in are exclusive of in center this proud channel the power the offering hand be iconic the home and the tools, for outdoor

key and holiday We experience be about integrated are driven events. for that an other also Monday by will excited our Black omni-channel strong Cyber holiday Friday, plans

redesigning appliances and steps around strong our we’re development, merchandising the holiday labor. strategy merchandising from implementing as team. our lighting, showcase to by productivity team, investing key One, as a and ensure to great real And that offering reset assortments service to and and have we’re décor, our basics, experienced recruit merchandising our gift we to traffic end best-selling will conclusion, localized process assortment that, stores. we drive this in presentation by taking our and estate to valuable support we tools, process, organization in other reset or With the on are both our our continue we continuing lot ideas faster reliance merchandising to our to refer on We our job off-shelf the Four, across store. the that rollout are brands third-party great will overall our channels. we’re decision-making across trees are of rebuild internal with our by adding that, our our quantities part and within implementation showcase of merchandising new best-in-class of a five along reducing focused simplifying we’re to what we all leaders strategy and enable values and highlight values key refocus In presentations cap to innovation continue ultimately, field-based Two, of improves Three, optimizing we with changing and five, and with rollout sales strengthen and SKUs. talented, priorities. assortments MST.

at we customers. experience laser designed All the is these initiatives this the end of of improve All to the into forward the us drastically discussing quarter to plans we’re to sector. five hard of the excited the the analyst these day for execution we’ll our third ahead launched were XXXX. December I as in of rollout pro move future look and be to focused our on strong and detail five demand XX conference. more on Lowe’s about investor We're and very opportunity position healthy at a capitalize for working in priorities and

to allow over I’ll plan we near long-term wins. will the in Thank now, to place and take us you. detailed turn steady progress have with but And call to changes a time, Joe. Our make

Joseph McFarland III

not morning, in Bill. to struck very basic good XXth too And celebrating am improve some operations. share the taking it steps of were and we’re me place. of I everyone. elements you and day my the operations the with I Bill, Thanks, I'm to with foundational Lowe’s, store excited When joined that company, Like

goods were a the As truck, were to systems to to leading allocate to sales track, for than limited, customer the engineered for labor in-stocks. service. largest or coverage. like sold, we or in-store payroll is flowing and company tools expense an drive receiving And had inefficiency floor, from of payroll standards the processes ineffective and monitor antiquated detracting example, there shelf Other the from unloading product ineffective scheduling and stocking cost

This In addition customer reports like lack combined were experience. led poor process efficiency, inefficiency, prioritization. with stores payroll and with communications a to non-existent communications out-of-stocks inundated excessive payroll standards, and of with no to breakdowns

the home team of in to processes execution identified an our and all and we quarter, Therefore, before to hindered to these procedures operations issues. quarter, challenges our experts place encountered in address with improvement put and solve solutions develop I've in initial focus simply established steps have the process take these third Although issues third types to them.

service. As experience business. sharing you meeting. the solely we significantly consistent simplify allowing scores. and this and focused his To non-value-added metrics, with leader initiatives December details concise sent Martin taking deliver funneled excellent we address held process look on I on process the how priorities to removing providing inconsistent to competing reports directly hours teams communications reports recruited specialists and and industry to business their analyst we’re and key engage also a activities to the that of the To stores. service, on simplifying to to field Earlier team day, and at with established we part we’re and all and communications complex project month, information time against an and reliable all store these improve efficiency, bypassing we important This demands XX and a the the can sales repeatable in have essential our customers teams customers, and recently single stores, steps our while analyzing the of overly grow accountable more stores, that leading more the busiest clear, the going with service forecasting spend reduced tasks. volume formal in messages drive clear operations, focus eliminates associates distractions and range customer the investor we've to stores. redesign focusing To Through teams of associates executing we them the conflicting focus metrics third provides and weekly this approach customer mentioned, eliminated priorities our corporate and leadership, the selling during and our of and in overload, install experienced sales gatekeeping Previously, for streamlined customer very To forward across and most sales communicated the also on to stores priorities. so execution. quarter. through instead improving and our portal,

to November. In standardized and in process, comprehensive we US from focus product stores, in-stock stores receiving sales addition it our in including moving to the floor to developed procedures efficiently out for a simplifying rolled

We expect measurable as in into our we that XXXX. head we’ll in-stocks begin to see improvement

engagement, appreciation our to As in we we continued work invest customer to improve our military program.

Series discount we Veterans weekend, featuring and awareness the retired World all thanking During veterans of service, our while Day up and for active duty over veteran spot XX% our a military. ran building television for associates, their

and in-stock comprehensive our a execution. five out veteran proud strategy I'm veterans Gulf payroll that our we’ll developed a priorities. As consistent driving year. on to system both rolling to communications operations Storm, unprecedented over efficiencies. veterans. payroll a we’re this and of Three, customer we we’re of in-store with in rolling To the while Four, experience, inventory that, out allocation as better One, for we’re recap, we the new $X Marine key developing provide deliver is a work Desert for to our to and in military to and fundamentals, focus This who improve part our fact War company served through retail are simplify have our operational store for stands activities. discount, sent retail our have taking reporting engineered steps in standards proud I'm stores. and billion all Two, savings

is the store for assortments their and This that the establishing stores local adjust our meet the top-of-mind to clear in managers to customers. giving Finally, autonomy we managers associates ensure stores. of are includes in demands our their to customer service priorities district

to of spirit more plans We’re environment. experienced any call encountered win have Therefore, at in still a last Thank improvement in in we to capitalize you. before. place not will my expertise I'm retail. a I've the world-class issues work confident I've big power demand in not to in retail focus. business develop ahead and XX that is I Denton. to news and sector know or believer the operational good fully And Lowe’s the today's the in Dave home problems in now The we healthy We entrepreneurial our believe ability our the is turn there days over on

David Denton

And I'm I success. forward you, to everyone. look many Good to as Thank morning, I position of with for with my while Joe. you know all excited from today. Lowe's financial working be we of you past, long-term you

While by I’ve robust I've tremendous the existing And Lowe's at yet, strong finance the fundamentals appreciation. today the and facing time a and necessary market, the weeks over grown. grown about well day few company. that business. official believe improvement weeks, driven the efforts as myself past residential with is past I've seen of and the home I've from been future team investment the home the the the both the is the associates. for a provide performance significant engaged and positioned come opportunity as of overview strategic excitement technically few price company executive year. strongly be immersing real several away stakeholders, and the to review challenges minutes with third in in customers spent had long-term reviewing create this value leadership spend great for the including I quarter This the in and all both shareholders, and I've first the both I’ll here business. actions our participate deal CFO, the success can believe my ongoing company's balance as taking to to of morning, financial an both long-term in we near I of expectations for planning well the the team, appreciate

with so to comparable significant on adopted retrospective the Also, year, sales. The the income, this which prior let within impact income business, a as adjusted. most reclassified it items of of As year adopted of on Also, review sales. modified discuss on classification certain impact had before recognition a operating reminder, pretax the revenue the not the the from associated first and basis, during been accounting income the we SG&A was in And program charges no of we’ve the performance result, taken was standard. adoption new profit-sharing a underlying quarter proprietary standard briefly our I quarter. operating the operating the no has of the meaningful credit me

the in reassessment this allow These in million with pretax to has our described morning, returns Lowe’s the creation. release improving resulted charges company's $XXX on to the strategic the press long-term As to reposition organization of value objective charges. incurred focus the financial and of were key drivers of

charges $XXX returned expense Canadian in Alacrity Specifically, at Iris trailing to and four our we nearly in and operations the dividend categories. and of Orchard quarter $XXX include dividends accelerated with the few can million exit with charges we alone, decision And to paid million these starting And program. cash million. to These major Smart of in and the approximately XXXX, future capital our both that Services long-lived obligations. include review $XX XX% million to allocation Hardware be repurchase related $XXX ratio to $XX underperforming In we The outflows associated our nine purchases, nature million few a decision approximately lease accelerated for we’ve approximately all quarter the the stores this generated Supply to dividends months which currently $XX into the Mexico, Canada obligations, asset of Renovation of amortization, retail $XXX these over of million locations, $X be settled payout and million certain turn billion stands I’ll our quarter, and decision year, $XX a to the classified Home $XXX a in In related million our to in this severance decision agreement, and in $XXX quarters. of pretax depreciation a now in approximately first close the with retiring related impairments, share net business. million a we our million given third shares. exit of other million to through locations, along combination operating X.X our in share $XX close US will into cash million expenses, million the cash. in August free XX% In performance shareholders. estimated entered $XXX

million repurchased shares $XXX We market. X.X also approximately for in open million the

to QX, total, to we’ve quarter. billion our for repurchases of year-to-date $X.X $X billion with the through year. million $XXX repurchased the in So, the a end plan brings repurchase of in This our share stock

have approximately share authorization. million on approximately we importantly, quarter and million our invest We capital with $XXX $X.X to in billion of remaining continue expenditures nearly our year-to-date. business, third the And, $XXX core in repurchase

We are very business deliberately expenditures, managing healthy our generate long-term investing our that capital will and stabilize focusing on in areas returns.

The associated per by and to excluding adjusted better were Comp activities. we effective year's growth rationalization $X.XX X% the of And generated of of per partially by continue rate better-than-planned the the about see traffic in offset adjusted beat income diluted of recognition per last inventory a the X.X% roughly provided in the ticket performance a Sales a ticket an of $X.XX by X.X%, point increased over our of looking reassessment, result in as strong anticipated, strategic standard from comparable with a offset the billion in diluted sales $XX.X decline increase earnings for the to share. average to charges $X.XX, growth. was Now, at partially a quarter has share X%. of $XX.XX, $XXX basis Despite share quarter. an X.X%, earnings sales tax million than decrease softer earnings share X% XXX the average driven of per GAAP expectation. basis, statement, pretax sales Adoption compared lower the transaction transaction. our shared, we revenue in third total was third quarter to earnings decline LY. third benefit a X.X% performances the margin $X.XX our by team new supported quarter to growth On

out-of-stocks, pressured those certain transactions. in to ability reset turn poor execution our and assortment visits inventory concerns categories challenges However, into

effect from partially Irma cycling XXX net was point and from the offset comp Michael. sales. the on quarter, drag by Hurricanes During demands of and Harvey Headwinds hurricane the were approximately season basis Florence

comp the Our inventory benefit in to provided points rationalization XX basis sales. efforts an quarter approximately

trends, Looking in flat monthly October. comps in essentially at were August, X% in September X.X% and

the Excluding hurricanes impact the X.X% impact a our of September of our estimated XXX pull-forward efforts, sales, of margin. inventory benefit a October. X.X% XX.X% for monthly basis adoption QX in were quarter of points adjusted rationalization to of X August, XXX the in decrease the from third points for in and Again, negative margin was and new standard LY. provided comps recognition net of Gross basis .X% estimated gross revenue

Our aggressively improvement. underperforming or efforts margin and better slow-moving important company's step rationalize long-term positioning growth inventory sales effort to negatively inventory SKUs to points. by impacted basis in was gross the ROIC foster eliminate and This an XXX to

down XX activity clearance Hardware We reset-related basis from points from also and experienced Orchard basis of points from additional our wind of XX clearance the pressure activity Supply operation.

was in XXX new SG&A revenue sales, Finally, basis which negative recognition quarter adoption for standard points. de-levered quarter. SG&A on point of of a product basis had resulted basis margin in gross the Again, impact XX XX.X% mix deleverage. shift point of a XXX the the

Supply $XXX result points which of million, basis Hardware. amortization of insurance from partially leverage drove compensation quarter again, the delivered exit reassessment offset XXX of in and XX of XX basis to quarter basis XXX to strategic basis points primarily charges pretax related points employee our for sales. depreciation accelerated as were related favorable Operating decreased leverage income adjustment. XX the X.X% the a incentive of items Orchard to deleverage well. Additionally, These basis by the points a to points, as Depreciation was of due and

effective well as XX%. of third of largely was or recorded quarter, at lease was result in significant compared return tax balance quarter as result invested decrease the Quickly, year, items was items debt-to-EBITDA the of the Our end basis capital quarter. few XX.X% to let Inventory last million LY. X.XX $XX.X adjusted of the The of rationalization few discrete our related of QX tax third improvement rate LY. X.X% decreased versus XX.X% a to activity. times, X.XX our turnover sheet. a reform And is the primarily billion $XX on inventory that a was at XX highlight Inventory other the me points And versus times. the were again,

we've Lowe’s I’d updates ahead, business several to address made outlook. to the Looking that like

and home the be shareholder But the by again continues you remains enhanced investment year to for as real a improvement in refocusing returns continues value. driven to Lowe’s, strong, to both homeowners price we residential rebalancing projects. somewhat in XXXX know, of shared, as robust are discretionary Marvin engage home As drive backdrop to appreciation, well organization which encourage

sales a we business. for expect sales comp the reassessment of As opening GAAP a reassessment strategic business challenges, anticipate strategic We an includes by X.X%. associated total On year. points. of have basis, ongoing of of basis X balance of result the approximately XXX This the approximately and the of increase updated this a driven decline XXX charges of with basis now X% stores. increase We our execution of operating the our our year, margin to XXX we expectations points for expect to XXX

for share effective in And the expected therefore, per executed on to our not depend retail million of GAAP on with will Mexico in is $XXX exit and share. $XXX we per $XXX our charges in in the the the a amount, a Keep the and, the quarter, plan expect of the pretax rate expect to nature operations quarter additional third second we quarter. of As an now charges million in the the of fourth tax timing XX%. be year, in million earnings $X.XX additional $X.XX mind $XXX reflected business to outlook. that been have any basis, and The diluted reminder, million approximately incurred associated

impact adjusted charges of reassessment, our earnings is now the associated the with be Excluding to diluted strategic a share. share $X.XX $X.XX to expected per

flows focused we And questions. in drive on the our guidance excited and it that, $X.X repurchases now approximately share up approximately we’re open about forecasting cash capital the now actions assumes And of cash is business to and are billion to free necessary for We expenditures of taking our billion $X billion. future returns This shareholder the and billion $X.X Again, expected we’ll of in approximately for $X.X with year. result operations approximately XXXX. remain of for from flow value.

Operator

[Operator Instructions].

Lasser of with first Michael question ahead. the UBS. comes go line from Our Please

Michael Lasser

your performance or a we relative Thanks quarter. category, morning. your to Good back a the taking lot question. took look this competitor clearly at my to large If you relative for step

competition? don't it Now, think thought when gap some narrowing see Marvin, be anyone I progress Lowe’s by easy. this But, was expect going to to can we by your to

Marvin Ellison

cadence things. the any quarter, to tactical buys the of think the foundation that’s stated wanted all or today. appropriate results. fixes types those of conscious give really we I I Bill us team promotional stayed the Boltz those creating retailers with in made away this to were types on think day effort why decisions and the comments, prepared short-term a that for company because In special I in McFarland XXth on we make and We and cause. Michael, decisions really focused not can of and it’s sustainable celebrating – are short-term chase get Okay. the to third both And a from of quarter, root time appropriate to kind know Joe their to and I

on place lot we going we team quarter. improve great short-term going reassessment expectation have in to of of kind although that our taken into has see made all business initiatives business, the XXXX. that an the business put But the some have just expecting we’re the the of in the really So, actions improvements also of we’re and that, said executives. in in based the third a some Having new we strides

will about And some looking endcaps. productivity that just to will customer service. things some think task are things that fundamental talked those our bringing service we about talked in and task are simple versus Joe short-term time, we be very removing of level how designating deliver at improvement Some Bill results important.

productivity. the Our billboards. have for real used endcaps past sales Not been in

simple have we how now in-stocks, and we our improvement. the we in that supply will see chain we’ll improvements will stores transition chain some and The think made add we've value. So, is just better incremental coordination improve supply between

fixes, quick have and you’ll see the this start want at doing why an fix fixed in unrealistic. the over So, into results couple quarter. improvement quarter your And were expectation a can root some we And to to really chronic chase if over think that months, trying to question short-term these sustainable of issues that’s that's not there’s rather we be of to month month, specifically, we’re answer that. it And than quarter. chasing we we long-standing in believe going XXXX, company that,

Michael Lasser

what Marvin, be you what as gains for the into chance with preparing and by execution industry tougher of head year next the any that? a you some that just XXXX, you issues how self-help sort environment offset of will probably make simply addressing and are are

Marvin Ellison

I think, we’re revenue. if for $XXX business our marketplace. us, And our $XXX you less us that’s combine chief thing in home that about the improvement in a billion and is billion great than fragmented competitor,

And so, of share up there a market is grabs. lot for

poor happen what have been as XX% customer, market we localized, chronic is reason be on been have we poor focus share with customer important an reset opportunity could transparent. transparent competitor have The that as no Most we’ve a dealing pro as service, irrespective execution, is issues, about when marketplace share. not assortments are very that of a the in issues our company underperforming we companies fix individual because massive We to on why are very real the competitors, just or because company. long-standing being going out-of-stocks, not these we where

as and with And understanding conference. really about long-term some the analyst investor our XX is team because December environment This at of so, need very out we steps and other and take concerned more places, to not kind the improvement. in will what's macro about macro to initiatives the lay we’re home feel even really we for execution us improve happening the not specific short good

Michael Lasser

you so much. thank Great,

Operator

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

Christopher Horvers

diminishing Can that thereby Good from basis cannibalization, talk sort headwind from and you Is a basis XX for of about there clearance? ticket comp reconcile lift point sale activity? little full-price on stealing to the more sort a morning. the sales any XXX clearance inventory and there point Thanks. the assumption bit that the clearance in of to

Marvin Ellison

hurt never to in process Chris, liquidation it havoc believe Dave But to quarter But the sold into started think liquidation of we it of a kind as desires in because it as believe reason his got when see your liquidation was average we on we because ticket. we not have the the being month average saw at it early prepared the aggressive really we its why the from only numbers. October, at cadence, sales. most wreaks ticket, stated comments, one some inventory we comp a a retailer massive that did cannibalized inventory is benefit higher

in and an antidote, store odd. month seeing thought So, very I I in remember, October, a and clearanced heater of as being a being the was that

ago from a had been the properly So, because after in realized clearanced strapped that was up, out. it we overhead that been that never followed two heater had I seasons

that down roughly can unit ticket going about to a cannibalize rate, items. if for to at a trade think heating really very if we’re So, that's you it’s and selling high XX% second, XX% get time you a October is a when but regular off,

the may but negative of have think impact. October, beginning benefited comp And it specifically quarter as the progressed, at so, us a think standpoint, a the we it from we quarter was

David Denton

while The likes Dave. good liquidate. now about company liquidate $XXX largely us. it’s news to we million to had behind is, Chris, That’s no inventory

into So, perspective. quarter we’re kind of into back the positioned now from the half that and of going XXXX, clean

the positioned locations performance. So, we’re put right I improve to inventory in to right begin to think well the

Christopher Horvers

at just Lowe's. advocate devil’s guess, question, you conversion as I talked a about And, issues Understood.

you sale my question weren't is aggressive for necessarily on it So, do product? that know discount would've how guess, the been if made that I that

Marvin Ellison

simple showed being you an the not Chris, intention have about of decision stock. is buying. to overwhelmingly considering in we either they and a to they're or our conversion of at And into an buy analysis. stock. and talk when some not what it location, project physically our level that very the quite so you were a walk retail customers we’re when of often. out more consultation buy up happens that just customers business, a When asked the were liquidation issues inventory less store, get to on in question, drove But is a item to brick-and-mortar This about

resets to the nothing had do fact had inventory number that a liquidation. with everything It still and on very issues conversion we four of had we significant our problematic so, with to shelves. our have underway do And the out-of-stocks

You walk see our can the eye. naked stores it and just simply with

is and decisions, supply that’s but put mentioned, process unless on to short-term some flip short-term in out-of-stocks we operational McFarland We going aggressive improve to we with product that fixing making reset chose to or operations this, decisions. the something a some to that's in processes having make freighting have help air place stores. as like bad do we’re process consistent going and a chain to the coordination you're not better us in-stock between can’t store also So, in switch Joe resets. an going actually own some internal and team We're you

driven was us And so, by conversion for exclusively out-of-stocks. almost

to execute conversion to going just we’re will we so, improve and And continue and our think accordingly. improve in-stock

Christopher Horvers

going for should forward? quick Thank then, think How And just model. we you Understood. about the one depreciation one

David Denton

with at back Mexico I the you my business. should from out going do disposition be that of forward. will we and If QX, indicated fairly prepared ultimate remarks, if It about consistent look the a bit it depend charges you that little what

Christopher Horvers

Got it. Thanks.

Marvin Ellison

Thank you.

Operator

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

Simeon Gutman

quantify I your out-of-stocks how the Good it, quarter? morning. in Maybe hurt but missed you reset and much all did comps Thanks. you think the activity

Marvin Ellison

not. did We

Simeon Gutman

you is gauge? to too Do have guess difficult a it or

Marvin Ellison

to team supply issues, these a to difficult root in-store issues supply why too probably Bill planning. the of trying coordination little cause reset issues, the spent I've of and his most time understanding lot call. third-party get issues, of exist. Boltz to It We Simeon, just a an gauge. is time candidly thing that do not learned guessing quite spent a good on is to earnings

cause. good And so, that about we’ve we identified root feel the really fact

spent analyst And investor so, this we have a to our we solve about now to more it overview time December spend to this those calls that important XX focus about detailed and really we to it. two attention to steps trying in those want specific we’re place chronic because and correct it taking we being felt the how of make talking plans meeting And sure communicate on we we’re on was a now on our We’ll issue. put time solving issues. and last externally much because the

Simeon Gutman

business. been Okay. around in affected, you right, I category I guesstimate guess, to for that within – has maybe that question, And paint, two quarters some this think, maybe I I think row. have a categories comps on stuff a figure seasonal then noise would think it probably was I that way outdoor what tell probably and given us in just the And in you the about for exclude there weren't were is affected. can the some there. hurricane that answer,

at that you on you little have look maybe categories the color above-average, give of reset at company type but some did mention if traditional average, more a didn't activity? So, categories, some can some we

Marvin Ellison

me, we answer question for had quarter. had is negative to I interruption way that best All for hopping categories Simeon, your four four reset the the think, issues.

reset answer had way probably issues, so, effective the Where issues, not comps. we Where positive comps. had we negative question. to the had And we we have that’s most reset did

And that’s impact so, on me, the of explanation best I execution think, to business. the the reset of poor

be data useful. not beyond anything would think may I be that that just

Simeon Gutman

September, you in name of didn't that? don't a Fair that And it enough, backseat brands, take forget of that And is. brands. think didn't could the some Trying follow-up But does share you new was brands the on mentioned a what’s us operations pro have. the core visibility know I couple real now to were business? the us, if – to to okay. of Lowe's my get I I you that is, fixing with you it there what

Marvin Ellison

do will I things.

of let that programs. brands brands that have we Bill to record, I’ll those always some try are just the programs And, get a highlight. talking the some the practice about just want to So, quarter. that of them actively to good we that we’re very the companies those in we third to in really say, about brands feel brands don't have. just about talk Bill, talk of bit because proud our have, going to have talk we’re that the assortment. But I’ll take we’re to we well working first, we the And we the we about the will desire for only have performed little the about and And

William Boltz

Yeah.

what we’re happened water So, heaters excited and Smith. with about A.O.

what very with are about excited We happened SharkBite.

under finished rollout remarks fittings, of material pumps, Metabo we around the the Bosch MAPEI. products in I tile finished our cordless We of prepared HPT. plumbing rollout new under we setting introduced the my As mentioned and pro Zoeller SharkBite

that good and to and opportunities are the make we’ll and that continue to merchants, customers those at offer brands the assortments our as want. going we’re where products sure best evaluate to look doing the So, try forward

Simeon Gutman

Thanks.

Marvin Ellison

Okay, thank you.

Operator

question next line Please comes Guggenheim. go the with Steve Forbes ahead. from Your of

Steve Forbes

initiatives sort second of half first the of Good half, five operational of of with key the you a It briefly XXXX, morning. store the general with I some completion the to the would helpful. priorities take address day, functions. just anticipated start you these wanted too and merchandising mentioned be initiatives? can idea Not the the much the timing from timing is analyst but on

Marvin Ellison

on and still some Steve, really specific him So, to of because, ask details Bill it first high-level these. keep to go of can it and him you working hand let we’re as the I’ll over imagine,

working are little there appropriately And launched on quarter, say some at initiatives still of third ask to a high on. level operations were the I’ll as these details of end kind Joe Although we’re well. the specific

can talk about priorities for merchandising. those Bill So,

William Boltz

Yeah.

categories prepared The we’ll get us early the take sooner, take remarks that part we complexity. back as will the those obviously some of in I we because in of and of as longer, possible. we’re the ones want merchandising the my leaders, of will into some into to XXXX half early in to done opportunities, done, and that those as continue some talent early of have of the part so it can We And obviously, experienced of quickly to called can go work through out So, evaluate will XXXX. bring year. we implement as continuing we as next as that

issue we’ll issue work through as them by continue basis. they come So, on them to an and take

Marvin Ellison

Joe, Okay. you for ops quarter? talk to want about the

Joseph McFarland III

customer And implementing those store already we challenges about so, service, taken would we of have. trucks, simple process have new receiving initial have I we payroll steps. allocation all for identified Certain operations, already We've the what that is think things like say begun as the we for system.

will flow XXXX. that However, into

well the I’d have we underway excited so, all And we’re we share of causes to as we’re and identified that get more say December. in root together

Steve Forbes

Thank Dave. follow-up you. And then, just a quick for

about You cost transportation called out for margin. and right, quantify bunch this a drag quarter the quarter? cost? that margin Can gross of chain the you dynamics, during supply What

David Denton

year. been Like, the is included transportation a next would into I in closely. guidance. balance point balance this our it’s We’ve as in not the that that watching through this and time, year forecast Yeah. closely we’re the say all participants cycle say for worry. at at industry it’s of significant this headwind a the cost for we we've I’d year, but that, watching something sector, in look of

Steve Forbes

you. Thank

Marvin Ellison

Thank you.

Operator

Fadem come Your next Fargo. question Zach ahead. Wells from Please of line the will with go

Zach Fadem

findings needed had you With Hey, compare your going you your Marvin, morning. in? could good ideas to coming I'm about head, to your talk around expectations strategic how sure a some change. what to review

for So, those compare And I'm functioning magnitude business within how curious to underperforming, the initially areas change that are than of your if speak does then, what to areas you better expected. you maybe thought? you needed could

Marvin Ellison

the is people most the with I've been of pleased what side Zach, business.

it but on over of making as of supply company said the on creating for haven't our easier prepared I our capital spent chains we lot easy the we and As associates. efficient, We just comments, stores environment making lot our my make an modern capital years, a more seven in work don't a last spent necessarily a associates.

MSH including our And been every so, I've markets, resilient. the our away I in I've pro, our walk encouraged of all have being with and by community. and engagement mentioned our just case, operation the visited associates. associates geographic for just Canada

is communities of for had just hurricane. real I that It on. by We’re I no when happening got a here. for thing impact kind This affected serving meals the Thanksgiving, today XX,XXX was

at out business we I So, needed when Boltz to been were our before, core of and culture. successes around in in problems, the And that’s And supply and I leadership as kind some retail new thought organization. we've who’ve gone look is it decisions the is quickly I who’ve around Chief and leaders McFarland chain loving my et best Frieson find What that why in retail and experts. would associates cetera, done there, before. structure leaders it merchandising the Seemantini bring learned Officer, go in Don the we’ve Bill to in that's solving and et table done the in and Joe you're and Information stores it I've out been cetera, part required. made of rather say there, that world-class failures and kind and recruited that's when of

that like also, I what more these And found, but quickly. need make so so, And solve process. I I to that sure capital want was we once just the I leaders, experienced disappointed problems bring in we allocation felt in had disciplined a to could

great the we exiting reallocate reassessment earlier, a be getting and of sure retail making businesses, invest part we the non-core of we because get stores, environment. a I home As out like improvement creating underperforming lot can’t competitive all scale and in a where closing environments mentioned is capital Mexico, of strategic can’t really

are it. from kind feel can on great this a company. we to can of about the because that's sales But that’s causing a of we’ll it. to doing encouraging to what's and necessary what how we me, know exactly daily/weekly And to perspective look and at we’re we’re and point very changes. where shortcomings underperforming we the obvious basis. so, could continue fix We And identify We where future make we

so, to we’re it. for continue And going push to

Zach Fadem

Got quick Dave. And it, helpful. for one Marvin. then, Thanks. That’s

expect announced welcome of aboard. next your store out additional process any of just some next the reinvesting about could coming and bottom savings are And then, closings approach to savings there the would how think today, the the and year those And do year? you curious if First redeploying and drop to the of you that line initiatives to to on of those all, speak cost savings? you

David Denton

and for be activities really partly going we’re think doubt that intensely. long-term generated be the bit no is There very to we fall have think the obviously, these team going the from the future And investments that focused will we about returns efforts a next financial today, future decisions and as position invested the both about Joe periods. and I the today. this to company we business bottom company against returns these growth line about over success. some are repositioning do that the is to that. these from in Well, the making savings Bill enhance on really and heard little think future as of and But, are the the the largely to those I you that importantly, think

Zach Fadem

Got it. Thanks time. so much, guys. I appreciate the

Marvin Ellison

you. Thank

David Denton

Thank you.

Operator

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

Zach Fadem

questions. of Great. A couple

got EBIT piecing that really adjustments that year. in million think, margins the that’s right? $XXX the slate to this right, year? – over numbers, hit charges, it that that clean bps, And around XX of year of piece inventory I like-for-like XXX XX next XX together and if as you sort the points there’s of non-cash are think XX year. right. basis If course guidance we but about Am of XX hit Should $XXX right, together we is those of inventory mostly into the sure a that thinking it to down the mentioned be sort XXX XX was of I there basis Just quarter. million to want Dave, I inventory the in I about If to make margin of this to points third

David Denton

bit. Well, a little

We step just minute. to Let had inventory a me discount. We million cleared that $XXX of a clear. roughly back roughly at XX%

think perspective. We essentially inventory QX, we’re behind recycle into I clean So, that’s rationalization largely us. from the

So, about hang into QX. Think complete don't about think a in QX. over being that

Zach Fadem

it. Got

basically picture quarter, the we what gross Great. that were is And XXX, when to when that’s think terms do and just margin. what you year was took traffic Marvin, but think, we about really of behind we traffic of measure counts we counts third it I – mentioned and conversion, difference that versus run on a then, bigger the next was have and transaction second close transaction traffic that sort it saw you traffic of that we just but X% us, that’s XXX were was get down in positive, now down How clean we of and so, the Was in store if down. conversion? still sort that up X%, rate – margin, And rates?

Marvin Ellison

pure online just traffic is a think I Measuring couple Well, ways. of data-driven.

we XXX% any to company an like platform. other e-commerce brick-and-mortar something that’s have So, visibility with or e-com

to straightforward. traffic. stores, we pretty at that’s When monitoring the traffic in devices have measure look So, we

to difficult Our because project environment a is business. conversion more we’re measure

we’re to so, discussion from going shift conversion transactions. our And to

think way year-over-year I understand our to better comparison a a that is of business.

So base online, having but you traffic. we understand on driving said we that, traffic, and/or the functionality on look conversion online it, we in about both how that challenges transactions good When some based in have addressing. we issues with still know have we’re we measure store we that and very feel

and checkout. issue have ease we and of We also with search know that navigation

at look much an can app, that you desires more to be our robust. see you If app mobile

process delivering in that. We’re of the on

are want you the my in As retailer delivering on this out pricing from of consistency huge make is couple out-of-stock. about of walking we complicated. I’ll And put why incorrectly that’s to we We we’re to there reasons you're traffic we this don't look on When that not data feel what such pricing advertised addressing us comments. of issue. the good store, back and stock. go your emphasis overly tells store, our in And or really all previous our a are that’s Either a a why. the you of basic

here we’re we root now solution understand got fix And we how create sustainable a so, it. We understand to the cause. to and working

Zach Fadem

guys. week. See Good you That's in Thanks. luck, great. a

David Denton

Thank you.

question. more We’re to one going take

Operator

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

Scot Ciccarelli

at here. pro Home bulk gap performance is in Good for the about morning, picture of I against guess, Marvin, second the you well. sales a guys. side. on as on of kind we a as is view a really When per your the this bigger me look for fitting store talked Depot, basis, Thanks

incumbent but side? right do pro If market opinion to an would their you get this And of you where you on think over would change – is? what the to take I a where you stores them, related in-stocks that, product the want back them – Thank the you why you. share who want timeframe start pro to know were kind is supplier

Marvin Ellison

fair question. a it’s Scot,

customer a pro very speak customer. And they're customer, simple customer. important So, this is for a is of customer very, but fundamental the I’ll on couple The looking things. a specifically pro very

First, they're anything They're great looking saves money. That's identify for service brands that And agnostic looking they're much looking time them with. a they for really price. because They're is the that else. on it. for time pretty

his market in three we in one priced. have things team advantages. because you were that us, lose at something can lead pro are point, dominant That’s market because, so, they on. share and competitively And Bill make going Lowe’s didn't dominant maintain those for it primarily, proven sure I are that pro that a outlined of and the and no longer has it taking And competitive share Lowe’s had to we’re

all And that for stage again now, to about because service going out trying It’s don't It’s time actively the product. great giving for we their them It’s to to in we’re them ability they them. the at service the and pro brands. and having shop and have. in things, agnostic to job both to as those about I fill speak and three the buy the or engaged And we the ability is the When the product them to desk it's sure to engage Bill currently which engage is is go make things knowledge. third We’re level brands you giving pro totally do get those money. online. channel And lot pro mentioned, with language is because assortments have our not about that quantity.

Scot Ciccarelli

you Depot? to think come of instead would that Lowe's pro And the Home to do apples of kind you matched if apples,

Marvin Ellison

we I very looking Well, spend little key street. the across think is, the time

believe we a we what’s of customer-centric itself. will operate and Lowe's the care in about company. marketplace, in a in customers fragmented billion we in serve we don't fragmented is, for go a how and street billion up the of $XXX share us, we largest we more how are across we in. $XXX this than else whole lot more And marketplace less environment. just happening really and share, less out this everything competitors, customer, about And you if our it’s means what’s $XXX about the competitors, grabs so between and take which there’s remind We with that that what market billion take care we’re care than take because for And I’ll happening

Scot Ciccarelli

Understood. lot. And Thanks a helpful.

Marvin Ellison

Thanks will look, fourth-quarter very XX. the which And, time Wednesday, forward on our February much. call. on we Thanksgiving. have to attention call, a appreciate be very you Thank speaking blessed look you and to your And again Okay. and we

Operator

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