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Lowe`s Cos. (LOW)

Participants
Marvin Ellison President, Chief Executive Officer
Bill Boltz Executive Vice President, Merchandising
Joe McFarland Executive Vice President, Stores
David Denton Executive Vice President, Chief Financial Officer
Kate Pearlman Vice President, Investor Relations
Simeon Gutman Morgan Stanley
Kate McShane Goldman Sachs
Scot Ciccarelli RBC Capital Markets
Michael Lasser UBS
Chris Horvers JP Morgan
Seth Sigman Credit Suisse
Elizabeth Suzuki Bank of America
Call transcript
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Operator

Good morning everyone and welcome to Lowe’s Companies third quarter 2020 earnings conference call. My name is Rob and I’ll be your operator for today’s call.

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

Kate Pearlman

Thank you and good morning everyone.

Stores; are Boltz, our Merchandising; Chief our our Vice today Executive and Joe Financial me our Executive Bill Denton, Officer; Executive President, Officer. with Marvin President President Ellison, Chief McFarland, Executive Here Vice Dave and and Vice President, is which website. I like can on Investor Relations statements be you our press notice regarding that found would in our release remind forward-looking to included this morning, Lowe’s

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

website. we U.S. morning’s Additionally, items release our these financial be in non-GAAP this found Relations certain will reconciliation on press measures. of A discussing GAAP and be can to Investor

quarter share like Before on our I hosting from discuss remarks, over our with facilitate prepared that turn December to I’ll speaking virtual discuss are investor provide growth we and efficiencies Eastern Marvin soon. to will an session. call opportunities to a several to will will look market targets. we and again also forward expected will our drive host Marvin. value, he With X:XX update we be financial X time. third the further announce Wednesday, will XX:XX operating sustainable shareholder After on We update that you gains. opportunities our am Dave a that, Q&A discuss results, to to would

Marvin Ellison

many very to extend and a and COVID-XX other this start and is like taking pandemic. the out I’d been by doubt for a There natural the us. prayers moment everyone. hurricanes my to the of by as challenging has disasters, as wildfires, year impacted communities morning well no individuals many to thoughts all that Good

to associates by of Although commitment challenges be by a home. communities serve the we’ve pressures at the to Lowe’s three be juggling continue obstacles and inspired dealing are with and same facing to all we uncertainty continue faced, their guided the while customers of multitude rest our key I country, priorities. the Throughout our

built highest safety our a customers. be in shopping priority protecting safe store health customers a that always our a our as safety and manner the associates protocols First, distancing of experience, will with company social implemented believe has strict consistent, trust and through in-store and our environment we and and uniform

healthcare for priority second remains providers providing Our community, our responders. support including and first

third priority priorities, is invested third quarter invested first of billion more store support $X.X time. Our of these associates, during nine to support safety associates. we’ve associates financially We’ve communities this our through $XXX year. million the in In incremental COVID-related than initiatives, for challenging our in an our now the this support supporting months and

$X.XX. to investments turning long XX% share over to delivered the operations sales adjusted quarter year also for and total XX.X% to time, term across comparable our growth. making of for growth same company we’re in earnings At diluted we company the our position critical growth Now the the results, prior per

categories growth both was continuation of comp product consistent strong a from In driven across was throughout broad-based improvement and project pro and channels, from home U.S. XX.X% customers Our quarter. geographies. by demand and the trends DIY QX,

of school, in with outpaced as home office, choose to retailer quarter home home. the they to to their pleased Lowe’s across third pro exceeded to Lowe’s purposes: were continue at DIY recreation serve very XX% customers comps comps We of geographic all continued the XX% the took steps their a on projects. again fact, primary by functionality shift location redefinition, across and and that In focused growth their a consumer home shop all on three a in choice driven entertainment. that Consistent and quarter, of digits their triple mindset this for departments, regions, remains lowes.com. merchandising as important redesigning the these customers primary for

business in pro comps third the quarter Our with remained exceeding strong XX%.

to and improve the Our investments customer service our customers. offerings resonating overall and is pro with product experience

a to Lowe’s rediscover pro them buy significant back We from customers over are seeing us come and we’re number again. seeing new and over of

to We detail adjacencies bay had geographic to the improve customers, sales will our continue reset moment. more shifting existing customers. growing shopping product of our productivity with per a also on especially to of and in positive Los positioned that initiative important U.S. exceeding third layout were very product From focus Regions our while a all well quarter outperformed stores Atlanta, and this Bill create New the Angeles to in reset customers We the share growth York. the pro growth wallet provide the square will comparable we pro foot. sales divisions. across a perspective, regions merchandising goal footprint changes versus increasing total redesigned XX a investment the attract all broad-based of and three stores, believe Houston, geographic with with comps XX% company We’re launched to a new a U.S. we and experience pro, for layout. project these intuitive focused store of significant more

to in also over points. urban We by remote see rural basis or continue trends outperformed fact, in markets sales sales comp XXX markets our strong areas; in urban

to enhanced shopping online. the our well in to omnichannel for we’ve product offerings markets capabilities strength customer as Our urban increasingly improvements pro customers service and made reflects serve our as the

in demand for DIY grew as increase shopping contactless options. to see we continue and an Our both pro lowes.com XXX% customer sales

progress expectations to to meet whatever last over they omnichannel the way years choose. with We us have tremendous shop retailing investments ever right customers made our the capabilities, to increasing of the enabling two improve

distribution centers, delivery and ecommerce supply bulk We open terminals, in our our continue expand new to to invest network fulfillment we as centers fulfillment capabilities. chain cross-dock

sales. have cloud-based growth of still front dot-com our a we map of detailed only Supported by towards online our meaningfully seen and tremendous talented omnichannel year, retailer. road platform, underpenetrated this has representing best-in-class in becoming runway online as growth team a modern we’ve our with us technology business is lowes.com X% While exponential

as comps while drove quarter we top pro important to XX%, DIY sustainable Turning on to that store demand growth. operations XXXX playbook will posted significant supported early to capitalize us demonstrated and exceeded to store by drive model us results continuing while will how across customers a line Canada, company as strong that and proud positive chain to our enable make trends a lowes.com. our to and supply that us behaviors to and shown as of lowes.com, efficiency in adjust as shopping to of was has us and merchandising, fundamentals an agility we’ve retail of implementing business This improve on change, all serve unprecedented we the success I’m can current strong operating very driving for position sales. number well investments quickly

We post-COVID important in hopefully as also will be agility a that understand we retail later pivot XXXX. environment to

remain making of retail to experience with investments they to However, losers efficient determine with world-class current shop we’re any and choose. our pleased development strategy winners omnichannel omnichannel future, the far and therefore retail choices provide we necessary to committed that thus way an the understand our and the creating in will customers

investment enhancing our growth business. focused term, near the our core profitability and the will of thesis remain on laser retail Over

still continues efforts country Before share again I and forward again communities our business for to on and to at speaking sincere business my tremendous the The a with us. investor associates us discussion safety call COVID-XX December when customers. a our face With like focused I’ll ahead appreciation they I’d I X the will of support our close, challenges the always unpredictable one look an to need essential on our opportunities now to by over most. environment; Bill. to however, growth supporting be priority number very lie our as express our that, health that turn with update of significant associates market presented you is the this of and and customers

Bill Boltz

morning and everyone. Marvin, good Thanks

we As Marvin the of posted in home growth improvement sales third quarter. U.S. mentioned, comparable XX.X%

elevated in continued increase are product DIY execution customers importance Similar on online, by merchandising and the the and both in second increased pro the homes. all across serve customers, broad-based strong that us effectively placing with to their driven brand combined departments. demand to sustained and across quarter, store was enabled customer Our offerings growth and

XX%. unit demand fact, In merchants demand job our led strength and investments and lot sourcing departments way, supply DIY by driven our teams products. across all high positive in XX strong continued the by and pro our of chain customers comps generated again supported in the merchandising these exceeding quantities Lumber

to schooling. continued spaces garden, accessories, across actively products exterior and with lumber, to broad-based our furniture, landscape the fall business, the though and in driven for average live growth garden, strength outdoor addition home and Within and organization lawn by goods offices above create notably along strong remote as and most strength lawn In we and décor, engaged and other projects. living. new home update was accent including delivered seasonal décor, there landscaping furniture as was in and and customers results customers largely comps in within in outdoor the In

being space looking Our comps with company by outdoor pits average their this living patio above to category heaters quarter delivered the fall. this the accelerated seasonal for product customers outdoor team also entertaining driven and fire and extend

Craftsman, powered We outdoor two brands, with all-star which in the our continue top Honda, brands battery our like addition and number to strength line-up Charbroil, powerhouse to brands Husqvarna, outdoor destination which power top selling Deere, we of continue power for and our the Aaron’s be leverage to equipment which is the the includes recent other continue John as equipment, one in Weber EGO, brand to position grilling. the and outdoor

delivered XXX% lowes.com. our of to we sales Marvin results, mentioned, turning growth online Now as on

including serve efficiently the delivery is rapidly enhancements as With cloud, better more that the we time experience, them, customers and that need enhanced the easily delivery a reschedule most online to select lowes.com arises. to the deliver re-platforming can or customer have so self been for deploying scheduling convenient of

now along handling, orders special a now by capability easier growing, also each capability powered items a or care by collections We individual customers lithium with also for and Skil shipping item. we and online it can so to ion search I’m items collection handling. battery ship powered This involving to other XXX it with of require require EGO, product batteries. like Cobalt, us to lithium consuming that purchase time batteries that and may made enables set products the have shop excited patio handle that without over products now in products

of in our footprint Marvin more customers, store resetting so experience As for shopping the the it’s for we covered are a the his especially opening remarks, intuitive pro.

rough plumbing to shops. two key our of pro reflect the the re-flow how for and electrical that the needed aisles example, For are areas pro

We and are relevant next respective now their placing cement pipe other, fittings next each pipe adjacent the necessary all products as to of category. to pipe the such to

We without are demand call up items in these bays bays, space also local will for plan-o-grams - higher opening velocity, the categories market. higher reflect that eliminating thus we better merchandising junk

are stores reset have by on of there track end, fiscal year two over this be our to the of XX% noticeable for will part We changes. complete store as other reset, and

to areas, First, go. what we the we our this adding pro for seasonal and to it area, pro year easier making a did similar flex are in earlier grab

are another are example the first the our in the of category productivity to this visible or main store. of we working of cleaning moving highly just area we This to stores. the aisle ways the is Second, improve

our treating to treating no our the look more our neighborhoods the building are we’re and approach and to like much had for at invest stores, but or pumpkins time at years avoid began a we continue congestion you, we on up candy we’ve to in doubt period in hundreds results and over thousands of of that where event their we’re at keep who expect about to and first-ever no gave have of that, prior may can’t year. home, drive-through as stores. around holidays spending demand. delivered other I the in momentum be Joe. of season holiday in our our who savings feel trick available that out customers Overall, promotional with I’ll year, creating we a compared call customers and were be past. our holidays about away not the curbside an same As hard holiday extremely unbelievable of say because that season the deliver enough unprecedented families outstanding with year, or XXXX, trick the have helping We this excited will worked season and to time activity will Thank Consistent to close with and the we vendor when door-to-door efforts extended our home, the memories our this turn reduced partners merchants throughout to now they’re creating the over the our planning to

Joe McFarland

Thanks anything health keep hurricane, year, my Bill, businesses everyone. to homes operational response associates This their flood, and running tornado crisis, and Lowe’s morning in times. career. faced or Whether unlike play pride challenging the in we a good in they and encountered global in I’ve challenges take to role families safe it’s

hourly with in the $XXX of $XXX Lowe’s. recognition time efforts associates their gross-up two our profit their our impressive year. this morale, over pleased additional team, represents Winning the of the a our expectations, remained in the row, financial provided associate sharing engagement cost in part quarter their stores thrilled $XXX customers have providing Full commitment to to our bonuses $XX associate another comfortable trip I’m In shopping of our time for Together their to million survey. to covered Our level. see totaling exceeded so payment, recent COVID-related over received third while also also This was I target support $XXX feel returning received $XXX of to bonus brings the the announce stores million in annual that associates million efforts have total associates of again, associates payment have earned associates our assistance million. XXX% tax quarter. to level our this steadfast in outstanding Once and in safe we financial Lowe’s reflected frontline experience so our for incremental an strong this each shopping again. really to a

associates and that stores and company communities customer of energized by centers as our are we’re Our support levels supported through seasonal demand. more the XX,XXX hiring this their holiday across many year. evident options our hires shop. and within live, year, our a these This programs, seasonal elevated by we’re transitioned we’ve feel they U.S. associates hired over The demand for work XXX,XXX challenging has season role hiring associates way changed This year of have the is increased the work, in indicated and permanent they this that our all during and on bringing distribution pandemic to through shopping supporting company. to we customer this contactless

stores pick-up we lockers began checkout. our quarter, our pick-up BOPUS complement This adding BOPUS curbside and to touchless at to

their We’re focused we markets and standing function. stores who speed on of our major and by up lockers satisfaction this on our Thanksgiving rolling teams out improving dedicated service already at metro customer to focus these fulfillment with consistent are are important

to as We’re also meet with product offerings we and raising our their pro game our the needs. expand unique brand

We’ve tool In rent of least the largest home off over projects push our remodeling pro pros variety of across our SharkBite, kicked for project and go-to they both once now are DIYs, with of pros, which pro for the rental solution we We online distribution the warriors convenient electrical a needs program the provide to have Combined ahead weekend easy, DeWalt, a high builds a and national offering this and in the in and the have XX% Strong-Tie, of quality relevance out that for roll-out time. a rental project. where we must offering to allows the with our our that our through their for location tools August, that Simpson Bosch arsenal meets plumbing ensure assortment, on projects handle. multi-year provides which a Charlotte, partner working plumbing project, are product to tool make celebrated adding any connect at our and competitive platform reserve brands, opening tools Eaton to we of increase to we fast is customers Eaton that pros that year. first of Spider broader a a as grand of tools power SharkBite

pro from the most in feedback We early the are frequent our strong by area. Charlotte and the results encouraged customers

results, Looking the that at third the really with exceeding delivered. comps our pleased quarter I’m team XX% pro

of We are site job every week, quickly, efficient pro available meeting the our quantities with on they’re on focused needs job that consistently the customers back are getting products lot and the service for. looking them

new again winning pro they’re to again. We’re customers back coming and stores our and

customer technology store leverage service improve alleviate We drive by continue operations our tasking efficiency and the to vest our streamlining to responsibilities we red for associates. as

it’s customers checkout touch under screen technology POS time. and on by end XX% way green of associates speed leveraged we leverages back Lowe’s. position. With simplification who and our we screen other cashier the touch customer consistent productive also screens, old These now I at they and quarter, target service scores to the shop with on to our will This we improving more off cashier not store experience. up cross-train belt, XX% a new all our are our same Dave. the associates acquire our with easily turn customers new these at also only over the from registers This paying Thank service training as store you, provide intuitive the which our keep registers hit satisfaction improvements our the tasking with call approach at to technology make coming faster is while customer and of the to high new processes well year, to new

David Denton

dividends. in quarter free in alone, In begin company’s very everyone. we performance. outlining the operating nine in cash $XXX morning paid allocation strong third million the months by first we the flow In generated driven billion good and I’ll Joe, this you strong program. capital Thank XXXX, $XX.X morning

of will the a that also increase paid per this year. of $X.XX a X% be dividend We fourth share, announced quarter in

During million. expect to market invest offer in We rate capital creation. continue a X.X October, billion the advantage incurred share business reinstated favorable our interest In of our expense bonds. $XXX and to we repurchase shares cash the long as initiatives, omnichannel significant of support a our million open quarter, we $XXX I capabilities. term program to value tender million strategic our of program we shareholder environment $X the took our repurchased interest a be to for share expenditures our for contributor in through including coupon higher to reduce repurchase

of billion the fund XX-year interest term. the offer, debt. $X sheet billion rate by We immediate to $X.X on cash we balance in billion cash low average are facilities, tender of billion on combined a position ratio EBITDA issuance uncertainty. have record now capacity interest a in recognized notes lowering loss our equivalents $X on seven, is efforts a is our revolving issued the At adjusted liquidity $X.X access and enough As with notes. of of extinguishment and we navigate of This a over undrawn more at of to result, end These consisted XX and To to credit the strengthen the QX, have X.XX%, unsecured with $XX.X longer company’s the stands debt in history. which our further of capital we than confident weighted funds which times. our any billion expense we X.X

we last share $X.XX a of $X.XX GAAP compared XX%. statement, of generated per QX to turning the to year, Now earnings diluted income in decrease

average to by basis year. adjusted XX% billion will as elevated a higher extinguishment volume an growth where company QX, XX.X%. the In the sales driven incurred I to strong of increase well $XX.X of debt than of execution comparisons diluted were of share earnings prior results as forward were loss was versus driven expected this comparable $X.XX customer sales year. we As the this ticket point compared certain on from non-GAAP QX These demand. My per applicable. growth on billion, and mentioned, XX.X% per an XX.X% comments of by meet comparable delivered our a sales increase include quarter. This share, $X.X prior transaction just

geographies, Commodity continued and from inflation points XXX approximately see comps in basis sales DIY drove repeat in from a to selling quarter with and U.S. continue the of were the channels. pro and strong departments strength demand new broad-based both customers rates comp benefit merchandising both existing across and We quarter. up customers. to XX.X%

LY. compared the in XX in Our market XX% level continued of capacity our offset shrink, October the approximately with of and model XX rate We further lower long as basis quarter and consistently basis basis sales in of third for of compared gross expand LY. up monthly quarter, supply costs. fulfillment QX, center promotional bulky the points chain our in a margin coast. XX benefits big headwind points XX promotional sales XX and of and pricing, September, Favorable of mix significant the network increase XX.X% are cost quarter management product XX XX.X% improvements from driven points SG&A chain U.S. of point from points an with comps These XX partial basis were August, reduction expanded in west to basis despite with improved term new of in was stand strategy, were our points XX.X% pressure direct was credit strong Consistent the a in basis revenue, ’XX. to by we inventory we basis benefit. improvement Gross supply on activity to opening drove XX.X% margin from shipments a Product from products. strategies. for our points throughout pressure investing versus of delivery by

cleaning and leverage in of investments impacted XXX points. negatively anticipated, COVID-related million million million COVID-related related expenses. and $XXX to $X contributions. charitable financial programs These safety basis $XXX included associates we other and related approximately These $XX we our by assistance for in As $XXX incurred SG&A million expenses frontline both approximately of million

stores, basis in related the partially of basis XX Adjusted impacted and leverage sales XX points. XX to costs efficiencies, our was The inventory XX.X% which benefited stocked approximately We of the from line prior elevated our shift QX At and higher points XX a leverage by QX occupancy offset with increased up customer $X.XX sales. to throughout in levels a adjusted also $XX.X demand of benefits, fourth leverage by strategic store effective by quarter. the in margin expense spend timing $XXX the These leverage compared improved of as were tax product approximately million payroll meet basis Also, volume X.XX% higher year income quarter. leverage of points $XXX the was XX of U.S. on large negative points prior. we basis incremental for just rate of incurred QX. scale to into advertising XX at a operating discussing reset billion, SG&A lumber million. employee few inflation operating like basis to points, values basis increased merchandising points. to inventory outlook now I’d of minutes

the in trends, visibility While to longer the term about we I’d are still environment business perspectives my limited how the uncertain like remains share QX. planning have operating into and we

expect our quarter. QX is from with patterns that seasonal improvement of abates outperformance will the in fourth the moderate home This consistent sector. We in levels categories as natural top demand line growth

financial we and expenses of ongoing will the two to will evaluate any anticipate and For safety million potential comparable quarters, and In continue prior total sales incur QX, to approximately incremental associate and that operating between assess COVID-related assistance. expect Consistent with XX% $XX cleanliness we environment XX%. support in our operating the we growth the of stores. quarter, we

with We end incur in reset expect stores by for fourth as the the $XXX expenses the to XX% expect our we to our approximately in U.S. merchandising activity stores the associated of over complete quarter. investment million of

chain fourth shareholders to rate in with share our repurchases our XX%. assumes return should fourth in enhancing revenue to prior to investments coupled to network. adjusted over value approximately typically continue essentially performance to billion our tax will repurchases, the significant share Continuing invest margin we commitment our in in smallest flat effective through supply guidance Additionally, quarter is quarter year expanding our The being levels. expected These result $X quarter. capital be operating

adjusted of $X.XX a We diluted share. $X.XX expect and share GAAP per earnings to

growth year. For adjusted the XX% over the midpoint represents EPS, prior this at

for which results share We confident remain are with our with on focus led in now we to In months market of expenditures pleased drive focused to earlier for outstanding year. grow In investments. an extremely planning growth. capital for year environment, our omnichannel expected. customers the communities, the that the closing, billion than I’m operating remain an $X.X making right first we a nine are our sustainable approximately serving opportunity on investments we our I unprecedented to and the continued

and to investor and balance with December We look lead sheet I strong capital again for our we you, we’re creation. which shareholder disciplined a program have committed soon ready term forward speaking at are a value update longer meeting now allocation you questions. will With thank to to on X. that, I

Operator

of line Morgan the from Simeon comes Gutman question Stanley. first with Your instructions] [Operator

Simeon Gutman

I everyone. have morning a Marvin. good Hey, question,

you’re should like what things out, you path and reaction much your has your wanted on. changed be or that little know you got in timing maybe you look Lowe’s? can when look that’s is you far investments step mismatch But critical flow-through, to ability bit if not stock’s beyond, there something so If some and only to with the your I gotten since you Lowe’s it than at to and it’s and envisioned transformation stronger the get the you’ve a I of, ask and to XX% I back think doesn’t be a reflecting margins morning there’s but this for that of goals anything and playing down

Marvin Ellison

did, I perfect when we to think Simeon, a and online two the years, just XXX% that’s in two how a look dealing at know imagined no XX not the months actually have one the is We pandemic the question. really transformation. platform growing ago. we when short But we’ve good brand. we’re in that for with key to future as idea, don’t no XXXX. visibility in very digital global and term. our the we’d Obviously Merchandising year I be we quarters at XXX% about us the think progressed that have the about not feel concerned quarter, great we’re levels about a far had initiatives, chain, XX that last We could is third even this business, supply last quarter, the great you

going and the think share. X investor more up a at into be the out right look strong At as believe exceptionally ahead mentioned, taking of future. trying really the bit a we to team. that specific market about can and of investments pleased I share. in a update, that are because additional I of to I’m see we schedule, we where accomplishments we’re the December sheet, the Dave we’re we’re we’re we have lean around overall, the and couldn’t proud make start in the progress and We When this be market start to little years team, to balance more we this transformation with pick But how lot where going to

Simeon Gutman

think and Okay, and into costs. benefits the year a we How into COVID to billion have that additional associate quick follow-up, do about XXXX? I fourth about of incurred think quarter $X.X we and date

Marvin Ellison

and for we and committed relative additional the has providing our to funding to Dave that continuing that execute. to first in associates context. a expenses all environment take our stores, to I’ll and if that is part any safe customers Dave physical we’re cleaning committed and see mentioned something are so

has know additional all any the last investments and for We’ve if the other aspects what, the to in need associates different. add? philosophy that quarter. our any, We’re the followed actually be couple and determine going won’t I quarters, if be of to quarter fourth fourth anything Dave of needs made don’t to of monitor just

David Denton

is are tied the performing, leaning but payout in add how that Together Winning their associates to Dave. to then obviously would if receive thing Simeon, that, and Yes stores from program to into are the tied I compensate The majority, that the also areas will almost play, in the December all not incremental vast at our so and kicks compensation, we’re stores our this associates to needs max just only November, given is into performance.

Simeon Gutman

Okay, thanks. Good luck.

Operator

Goldman from The question Kate of Sachs. next with comes line the McShane

Kate McShane

between quarter, if quarter reset the last could you’ve saw narrowing put in wonder and pro store I for and gap sales ask taking initiatives last the place of next two? morning. of versus a Thanks about two just leverage year Hi, penetration performance pro in should about I questions. DIY, good versus be if my this once or in you the thinking year we the the how that the some you

Marvin Ellison

to very pros it’s have the continue you’re that to forecast forecast, see penetration as to start Kate, start is at and close a when a difficult gain to of post-COVID on high kind any a the gap we environment think Obviously for of environment. for this will financial get we but that to nesting anticipate less you more to going specific most this effect the really give us level, we I difficult that.

going we very post-COVID us, we’re business that we’re to all reasons question One the starts is of grew for I in XXXX. retail of in in time. how to the so the as that’s XX% The be know quarter, based this customer investments and the and nesting the of and making gap minimize large important these the environment, expect anticipating DIY we and over because Joe over both this is as to close to we continue effect pro, when, third part and is on into COVID get we mentioned

David Denton

pro our seeing in making think time is I both numbers grow DIY elevate grow we’re that customer and into and year, and today. in really it as business to just week financial and business, we investments push and It’s have not pro and on turn opportunity really that’s quarter, the in think and as will we significantly, back here. QX just the is this I’d our if to is around pro over add to have each our but of really algorithm each cycle bolstering the to model times, Dave. next be the switch, you the grind we you’re is that the like out strength QX, this and is a light to said month the of going pro. and step about continuing that and each we’ve that objective over business, next several and company this penetrate many real Kate, years, The going ourselves kind just

Kate McShane

this a unrelated you segment, ask your wonder about news Okay, and for If about I investment thank you the week could within quick, MRO space change just how competitive remind think follow-up, could with the supply if I you. week, the just MRO you’re chain just this us in thinking positioning does the anything change Lowe’s? when

Marvin Ellison

committed made investment business. greatest return, core to business. evaluate we can and the in earlier we the comments it When that we’re it Kate, in our gain look my we thesis comment retail the at our not. core is prepared where I does

outside model, store business. continue and operational tie those that mortar that’s Now, to to and but MRO position connected our reps the going we’re continue and to to going that and good sales reps, our pro core the we’re current that in like and core we’re connected on make the and the our MSH target focus a strategy feel stores, model focused business term our those our with brick our our are to short omnichannel thesis dot-com core segment thesis, and our to is and platform, defined time investments, our has just but as together, other all change may in laser like term, our over chain, philosophy. supply in improving to our but we’re and is near components that scale; we that We ability business, feel that the investment

Kate McShane

you. Thank

Operator

Please Scot with The next questions. is of your RBC Capital with proceed Ciccarelli from coming the line question Markets.

Scot Ciccarelli

Good morning everyone.

Another expense related question.

improvements, lot Lowe’s the expenses some on a for think COVID hit, productivity assistance cadence. story clarity, you’ve Pre-pandemic, the incremental know, leverage. COVID of you heavily was - very of Obviously How obviously terms or basis, labor overall you should about it should the it levels? Thanks. frame however of to we because of sales growth. think ’XX, per-store SG&A let’s just want for we call associates, on, those in extra incurred as to way way Looking for centered think about just terms a your SG&A the about growth in

David Denton

model incremental we’re make out. XX, as both that see investments you’ll gets built process an little little making will in to talk investments that with labor continuing XX-month that move That’s but a happens, take our probably in around so a think delivery flow-through with chain, from as and both perspective and perspective seeing better, delivery to Yes, early the operational improvement focused before technology well stores. supply think see it’s forward is on or productivity our that within XX, push we you’re stores, is out I way in to probably effect the drive is should incremental productivity, one COVID. that so perspective, cleanliness. general, we’re but costs market-based ’XX, effort on relieve a specifically is and with which to an bit the managing and to I million it stores store that that burden about quarter the SG&A have on very just creating of continue a but you The model, thing per a get of of us the associated Couple probably we what $XX pressure from so into safety gross neighborhood absent ultimately margin costs ultimately to the go market going

that time. think some for is to of here period stay I

Marvin Ellison

our Joe a Scot, I’m little initiatives. about bit to going McFarland talk let productivity

the and that of was evaluation about ago payroll a and flipped of of XX-plus with Joe of roughly stores. that going our We’re him an for towards non-customer spend task let talk that fact facing the the all equation extremely XX% months second. we stores, proud I’ll activities, in when absolutely spend has did our

Joe McFarland

Scot, Marvin. XX/XX with thanks pleased progress been we’re we’ve our the transition. very making Yes, on

ahead continue in mentioned XX% of investments we the also the make pro in the and I added the fulfillment there. like we’ve We’ll that supervisors things service, to task schedule. remarks, of of As XX% by that that we’re and but expense to that the my incremental this year, our to business teams end well prepared hit the allows incurred area us

very productivity pleased that we’ll the with We’re march. productivity on and continue

Scot Ciccarelli

Okay, thanks lot, guys. a

Operator

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

Michael Lasser

for my thanks morning, a Good questions. lot taking

service, gone home of and the between maybe realizing tasking a and through you’ve bit cost phase mentioned now new savings you business. Are next time and yet could is productivity margin increasing you. acceleration you together the wallet P&L we’re entering some expected, an the these schedule this share do at the already you’re we same category, few in some some seeing the you in of a and a where where low-hanging split investments improvement shift cost, of some this the like the your been harvested retrenchment the of time of the of bit all in are transformation, a Thank terms at As which come ahead that occur such this has fruit transformation of benefiting a investments see or that over of of of quarters? degradation that or

Marvin Ellison

Marvin. is this Michael, Hey

update, there’s of front here’s As believe tell we’re to will still going to the don’t more entrenched specificity and investor us you. Dave we’re mentioned, We have in what December drive opportunity X bit get a I that going we productivity. amount believe little but to a of on large

out would size and those accelerate Obviously operational early and customers, and gave $XXX where candid. expense, over million next your of multi-year opportunity. decision the chain, the vary on of see third would we our We reset in of perspective, roughly investments well expense on supply see to XX% million create from that’s business to so this focus of initiatives enormous years, not in this of productivity DIY get our create XXXX, we $XXX how we’re to that term sure roughly taking we’re being in benefits want ahead to now to this we’ve much still etc. feel on initiatives doing couple an you pro to a perspective made have To we focus. a revenue and quarter. operational perspective, quarter our we mapped profitability comments, believe us we’ll intuitive a be example we timeline that feel we all provide believe performance, to us benefit going and and market transition U.S. but in make took will We experience have confidence put because merchandising the but initiative we’re term that’s store for December, customers tests scale, gains that completed. more a That and we that be good running tremendously perspective about our we it shopping and right in the have as going long our stores share about productivity gains, some quarter we making really that When schedule. a good long to as and is progress in update position We

David Denton

just was decided on map the program. was on our very consistently important here. program that didn’t I’ll accelerate we an we He said we’ve something have road map. since not said, This This years, incremental Marvin to fund add, drive been lot This is the the Michael, there. and road over last those couple I of the valid, we and taking of now so to think it, I lean we’re that the very runway all put original into a forward. are to performance we going investments see our think continue opportunity thesis investments to forth,

Michael Lasser

those in are does the macro forward SG&A, is, investments to around what come of question in the credit revenue weigh that on such Dave, a mean question, even you just pull will and environment? How gross of you and follow-up year, on those P&L next leverage the one going return was that and tougher some my to pop those be up issues caused clarify lower this and long better a can from shrink. that the in could the add cadence get change big that be Then dollars your suddenly? to of if discussion unrelated that has margin, quarter I position

David Denton

bit we’re secondly, and forward. talk Then that we’re I’ll about investments to things to credit you specifically years about we’re McFarland shrink making, revenue us will the to ’XX, a yes, in speak I about the from won’t perspective. improve have our are talk these investments as doing come. Joe we today actions yes, productivity taking making think I’ll the benefit going Michael, but a the

let pulled two saving of seeing has things that little On Then risk credit those so a away tender Marvin and credit are back label line. are having on seen little forward we’re bit from pressure our forecasting tender macro it’s from credit a really pressure that. happening. pressure. shift debit, of into bit little that that and just future, we’ve secondly, are on higher rate the shrink so I’ll has bit going economy shift of both house, so that consumer and a puts a perspective, PIN increased, are the of given side a yes, the Then as their the the we revenue Joe a debt private we there, some U.S. in things comment driving on One,

Marvin Ellison

are little Michael, I’ll that go about hand two to forward to but also to the a to reduce those things. Joe, some bit pull cover ahead talk you in it a example we two the and things, of of initiative explanation it, can another Joe midst give of give an shrink, executing. initiatives on and trends of our

Joe McFarland

All right, Marvin. thanks

Pick-Up As example. We you pull-in year omni to last our leverage we this Store and the far map. rolling the the this of investments, dedicated I’ll This Buy originally This as million out year. expense will business. to quick a so road $XX approximately In the Online us on discussed was expense had that give an to was drive to from payroll continue lockers, and allow our continue

last business. fulfillment experiencing investments the the have the very continue make several about shrink over shrink, new we we good In team, we quarters. addition, regards so in In pressures the to we to dedicated have feel been

where the challenges. lies, we a of understand good sense that have We

invest I programs, but pandemic. during believe from and in loss retailer, loss the market payback. retailers open safety the to have of about There today, a and of prevention the in been being were being the onset that some significant feel again essential some we intelligence, investments so only safety prevention the trajectory. standpoint, some good from an challenges of confident We making as level standpoint, we’re continue a we’re in cycling we with

Michael Lasser

a nice and Thank have you much, very holiday.

Operator

JP The Please Horvers with of next questions. question your proceed is coming from Chris the with line Morgan.

Chris Horvers

surprised gotten I’ll bit I’m we’ve quarter-to-date call Thanks, morning the a obligatory question. guys. it into far phrase without the little differently. good this

to about mix being of a expecting you’re fourth quarter. in driver comps seasonal XX% XX% why You talked the

that XX%, You into just moderation Are mix mix adjusting XX% other for you to XX% assuming and in the in drives you did post are you simply or a seasonal October. categories?

Marvin Ellison

guess think difficult leave Again, just best where complex I’ll X, our best this us to worked feel more difficult perspective is that, tell be this is to guidance. really would a happy to estimate We I’ll I today. trajectory and it and way great early to speak we’ll key but Bill of at I’ll headed of good other this December December we based they meet demand our our environment have feel We’ll an take detail What is Dave exceeds trends feel you our our has the and of when forecast the our in but understatement. of about X, is we ability QX in trying on and but the say it; in be and up frame we know is more about the obviously either To what additional can our context the the have jump very Chris, to more or share business, it forecasting on environment any if we in. have we business this, comments. on than XX% much good let to you if if XX% most investors about November. on better most is in we

Chris Horvers

prior date margin? largest all but down causes that it think structurally there’s performing I near Previously revert to differences that in just the back some have a chain given that high the question XX% about term year what the Does target, trying the understood to box higher mid existing you. forth. ’XX to to term how are to because Thank you’re gross and think is nicely opportunity do medium efficiencies get this Then pressures? you very the normalization? I about algorithm supply work on, scale, given guess around range it had if same regard, in in mix, some talked that promotional your so Then term, the so XX% gross Understood. so, you’re long you does a range margin investments supply longer about given to the at Is outlook. probably and time, XX% doing the and drivers, chain. to peer the some into

David Denton

perspective. opportunity gross feel very the margin of We strongly a us is from ahead

this We’re on there back not I give going say to is specifically. will P&L. say some, I’ll the geographies

gross We continue performance, being a margin there’s going a time, but this accretive is efficient I same that’s revert gross and anticipation on there think our perspective. in our is promotional I year. from prior standpoint, pressure back. we it’s this being at but our The so where op-inc, back to that product would of put push we investing supply cost just of see some margin, shifts what that’s nothing efficient would going operating to stores. were management expense very going and relieve to within geography to flow hard revert through to that very the chain At to level It’s part very from consider improving very to you’ll not we are

Chris Horvers

luck. you. Understood, thank Best of

Operator

is question next the Credit proceed line with with your The coming Please Suisse. question. Sigman from Seth of

Seth Sigman

everybody. morning Nice good Thanks, the questions. quarter. for Thanks taking

magnitude the the understand it’s ways of FYXX? pull talking impact from to Can know if I forward, the are and been the continue net to different year perspective. next sort is, asked investments but trying question expand positive, manage and you’re are couple line investors a comps today, through in the think about I top rate and you you could margin from a so

Marvin Ellison

Well this time. XXXX in Seth, on detail at we’re commenting

a the on December to initiatives time, majority context we’ve have the you doing have what about lot be that going to to bit ’XX occasions, take we’re we’ll mentioned more a we’re on to of different perspective actions going and be couple improve we’re and going At of and As spend we’ll presentation little talking and all to than provide on updating be today. perspective--we’re market that able a X, of better implementing we’re going share. to

David Denton

a up where not just income get I’ll end let’s Seth, end and The And of XX% ’XX. where flow here on reality target set we is through. hung we’ve ’XX add, we operating

I upon think we’re objective. delivering on focused that very

getting go point using to of a I think as that stopping further actually sight line we have potentially very and to after to level that that. good just

a the that. think over have that the I we flow and see is of focus strong still on really we investments making, very that today sight that through to time, line we’re improving

Marvin Ellison

we is Marvin the this other only marketplace. question again. The MRO the is were strategic a make space about are on I and comment changes make going asked in if based earlier Seth, will the we actions any to

the point. not drive to hit One of will so and and to opportunity drive continuing the investor that able context we’ll continue as the to by an investments our productivity systems, will in we’re to a see is more December. reasons Again, see not update we be see much we improved merchandising we we to we why in our business supply chain, and point, efficiency productivity core so Dave’s a operations, beyond milestone make upside because in right and that pinnacle XX% incredible but as then at provide

Seth Sigman

That it, sense. makes Got okay.

David Denton

please. We’re going question, take one to more

Operator

The next from America. line Suzuki the Sure. Bank is from Elizabeth of question of

Elizabeth Suzuki

I a that margin, lumber the talk category. given standpoint you sales in product lower you. about that hear thank gross the that surprised a helped Can strong this categories just was out to was mix quarter? margin usually growth product little the favorable from was is to and mix Great, a

David Denton

in typically put in this said merchandising pressure the really quarter, say some kind and Liz, down environment. across we’re categories, a out it we’re more I’d Actually team margin all category Dave. part. done as lumber just seeing that, the can’t merchandising and say all I’d on the seeing improvements the most costs, categories, of did the does is gross nice the across inflationary managing I finance job has an Having Yes and because less or for improvements where P&L up one call in

Elizabeth Suzuki

Great, thank you.

Operator

Thank concludes today’s This you. teleconference.

participation. lines time, thank your disconnect we and this may your for You at you