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Lowe`s Cos. (LOW)

Participants
Marvin Ellison President & Chief Executive Officer
Kate Pearlman Vice President of Investor Relations
Bill Boltz Executive Vice President, Merchandising
Joe McFarland Executive Vice President, Stores
David Denton Executive Vice President & Chief Financial Officer
Kate McShane Goldman Sachs
Simeon Gutman Morgan Stanley
Zach Fadem Wells Fargo
Michael Lasser UBS
Christopher Horvers JPMorgan
Steven Zaccone Citigroup
Eric Bosshard Cleveland Research
Greg Melich Evercore ISI
Call transcript
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Operator

Good morning, everyone, and welcome to Lowe's Company's Second Quarter 2021 earnings conference call. My name is Daryl (ph), and I will be your operator for today's call. [Operator Instructions] 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.

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

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

certain these reconciliation discussing turn that, be measures. we the on press can GAAP With over will items U.S. in investor to non-GAAP of this found morning's I'll call our release be A financial website. to relations Additionally, Marvin.

Marvin Ellison

good like the supporting At ongoing and and and now resilience I'll our and health a remain well the And basis. something you, to on operate. daily who we by prayers associates impacted associates morning, thoughts to Thank the that the mini were as we everyone. turn to my committed by And communities results. is of to customers taking of which our pandemic while moment extend in Would Lowe's, Kate. customers those safety to The a our I our admire wildfires. begin as

performance very quarter. with the are second the pleased We for

U.S. and Company, the And positive total for for comp XX% Company U.S. the for comparable on for the sales the sales basis, quarter, During X.X% X.X% were the declined a total X-year and

growth win execution both aggressive performance X-year by while Our across to our Installation Pro strategy, Home outstanding Pro, driven business. which Services meeting and the and allowed the us demands customers lowes.com, of our DIY with great Total was

in decline year. saw the anticipated during we DIY last demand As a quarter, versus

Pro core not As because transition capitalize to demand, then the This growth -COVID would our stores our adjacencies, customer need of continue of store we medium-sized back we months. X-year locate to the owners. over will can XX% will our aligned product Pro and the Joe And they Pro-growth increase that have our more layout for easily year. been of were Total purchase a products our Bill experience jobs. how call, will Day. the our focus reset spending, includes stores. This frequently weekend us on categories. shop of on in as project the pre discuss Pro. continue store, will the the their top But impacting more U.S. productivity product customers patterns These without of Pro quickly and online This across small as across past capture of we intense families Pro lines across numerous our basis. we product their this and enhanced expand business customer and possible Memorial to bottom on intuitive to Later all the level and a quarter is focus for discuss to continue driving strategy, executed a for offerings, Pro's so many And to agility reminder, able we Pro mobility to after Pro XX% create has Home intense allowed reset last XX the

our in installation quarter this growth services. double-digit delivered also We

experience. a expand and to for continue leveraging enhanced platform revamped ecommerce our the deliver better model available business We we're we products and installation customer to

X% end-to-end to role to us an their as turnkey increasingly customers continue our services Home our play home grew and XXX% in installation to XXX%. second strategy, business sales lowes.com sales X-year expect growth a provide of an in quarter, X% which comp at on And penetration important We quarter represents this needs. solution the top look Total for to a of XXXX, of project

resonate flexibility wherever our restrictions. they with in line of customers quarter, U.S. increasingly continues enhanced whenever Our growth operating the also comp and total several our business. however, expect In who shopping, offering choose. with the delivered pleased despite Canadian Canada with the omnichannel COVID-related second to performance We're in

July fulfill pillar quarter, will as disciplined the bulky top the also products products we our like our of back approximately I'm delivery completed market-based Earnings discuss reflects new items a and by region, delivery per then take improved growth Co market-based extreme store-based now bulk on-time the the altogether. would growth lower lawn We product for very trucks The our and a delivery for as diluted we XX% complete same-day I announce of delivery Improvement, appliances customer-centric Company's their benefits delivery is and continue a chain. profitability, supply kitchen categories to earnings regions legacy home appliances, a our leading another Perpetual we rates, and to or and distribution of from delivery more and was in which style. XX to XX% decor model market-based we're transitioning confidence of model later across $X.XX, improved stores out leverage to driven prior modernizing with furniture. Florida inventory, to of space through our cross-stock transforming strategy storage management U.S. which as new Joe transformation. enable initiatives improved foundation discuss customers' the quarter to model adjusted our is Pro Share this products. appliances, bath, delivery focus store-based mowers, the this diluted homes the operating comps these in satisfaction. which where of When these drive strong $XXX next call. is conversion and to this legacy price consumer and we'll we milestone like an transformation the face the right future. And Home We sales, per the over This upgrade Productivity XX and categories, to rollout in and a say model during and performance be and in the in end The these riding rooms, freeing also turns, grills, along plan is the our compared technology-driven, by the hold importance our simplified, delivery near joined new their model the in in months. customers this these process. XXXX, unprecedented both in additional customers' this stock The PPI. the year. associates To of Bill homes. on to important last capabilities big In and XX% system model, to the bulky the we homes, containers next-day consumers' volatility in select DIY year. over price will delivery understatement. process plus the and our rooms pleased on a sales, flows I of stock that leverage other to to decor increase our up product detail in I'd centers of of replaces terminals experienced market-based to reflecting across CEO Lowe's directly to and This their points, model, lumber and higher margin And flooring, expand the already moment roll inventory confidence aspirations destination And second in operating store new continue year, discussed stores of then offering, in model, expanded a the appliance With and elevate across continued of Lowe's patio is operating deliver in investing In positive Total and higher bypassing help customer the reinforces us to the driving share basis our to part inefficient behind deliver as quarter, large during homes. tickets needs. in fulfillment

market, to is to shift to as housing prices while longer-term higher It's turnover also continue expected my win I home this well outlook Before market. economic also I'd home. appreciate. high Residential for near-term that rates, to share an to The worth home the remain home close, as investment to are in on the any household share historically continue typical. as opportunity to perspective positive. Lowe's mortgage improvement noting not the that trends we related to on downturn very formation improvement like due remains see industry pressures [Indiscernible] low We're and pleased

housing prices this, there confidence to And of fact, have consumers resulting homes. continuing In rise. their in supply is and repairing in more home increased because and remodeling demand

approximately sales demand. reminder, to activity. of home This X/X improvement. for a a of annual maintenance the take from repair the homes Further, projected research remains positive meet years will that shows As for it our very and indicator are Lowe's supply generated

In home regarding mindset very addition, their the customers' is straightforward.

enhancements investment is As home upgrades as see and to long in home their value, their an as an and they not increasing expense.

my high finally, remains would agility Home although Total with I and mobility. appreciation customer to we profitability extend are to like provides the uncertain, ahead, environment us operate confident associates. heartfelt And frontline the of our with times Looking business to strategy that in our low

excellent the our I turn As while that, and support over providing I commitment continually country basis, by Bill. service. our the work visiting now weekly call travel stores, the associates to I'm inspired hard to And on a communities will with of customer

Bill Boltz

terrific solid the basis. Thanks, down products a morning, seasonal comparable and Memorial consumer comps resulted comps the quarter, negative were while in We in divisions. on XX% quarter. pivot this sales the spring behavior in in first And but a after categories everyone. home year, in U.S. Marvin. second good up And our building half drove we decor X-year delivered the over X.X% our of positive Day

basis, products, strong broad-based unprecedented timeframe. Marvin through electrical more pro teams and price and XX% our was in volatility in quarter. However, of than as demand, navigated as that well And we lumber double-digit merchandising inflation. levels delivered building finance growth X-year driven high product mentioned, with categories comps all up as by a lumber, this on In

and provides will levels right Dave more our margins. effectively near-term that and price through But have Lowe's, Our waterproof pleased decor, mitigate remodeling our own the the flooring, our of category particularly over innovative confident strong leveraging By our flooring, in and customers It's our and that Pergo. across as dryers, enhanced protection continue to and these positive to impact Capitalizing top-performing in and product Total decor on of washers talented to Home position to for Lowe's the guaranteed continue in vanities delivered was the appreciate kitchen product the pricing its volatility. the needs. to are and the within we systems on new and well processes as pricing number new we styles I'm kitchen in is home the margins home freezers. flooring on exclusive comps protect categories quarter, inflation wet on continue elevated on performance Allen teams us as Vinyl both comps with brand our rely of and detail our with by manage + kitchens, category coordinated and tools last the customers I'm on-trend strategy, this standout X decline Countertops, to in provide on impact available this appliances, bath our DIY strongest pricing Roth cabinets, delivered of customers performance in the sales. flooring this mind also product growth leading category were and top contributors year. and our lumber to from appliances, as with enabled for XX% a their to in brand. that a refrigerators peace baths, our comps the driven subfloor.

In Honda, Event. SpringFest brands pleased the strong addition Husqvarna, Pro half and to drawn the we of a off Kobalt, spring this of zero-emission, Aaron's, power in advantage strong the offerings brands EGO that SKIL and Deere, and were outdoor their John quality of bolsters equipment. delivered equipment. quarter number season outdoor of the battery-operated that EGO, our only brands customers our help first rechargeable year launch and kicked leading equipment. the Both of the XX% as our with the our Craftsman, also And the and with the out other And We convenience delivered over one such in they position the took outdoor their new complement DIY truly most are Craftsman. of growth power spaces. very to customers our in product living We make SKIL

We Pro to products continue our to and for add customers. new lineup, our brands especially

the and its delivers power we new tool for FLEX of quarter competition. in-store charging station and cordless This more brand is our featured launch This with to Lowe's tools. FLEX power tools, an than innovation bringing power category to time the power exclusive demo faster

We introduced our bath brand department drop-in showers, also toilets. tubs, the with Mansfield across and

on fasteners is SPAX center Another exclusive their manufactured launch in of in brand construction of Products, be strong arsenal, Bosch, category such industry-leading products our that SPAX that the U.S. customers pro-brand, to as need. Lesco. Lowe's fastener SharkBite, the the out enhance addition and announce delivers Pro advanced the leader of fasteners Spyder, The products to their screws, we'll program space, fasteners. Pro DeWalt, innovation Plumbing the programs to power of which some SPAX are SPAX is to market tools, bringing Eaton, made multi-material and GRK, this Marshalltown, and U.S. this The addition in fall the now continue home FastenMaster, Mansfield with includes rounds market. Lufkin, most our assortment Estwing, Mansfield Strong-Tie, more here in and right a the ITW, I'm excited Pro already Simpson FLEX strong the

we X% X-year delivered of growth discussed, a and XXX% previously sales Marvin As strong Lowes.com. of on growth

to the dream their design, allowing on kitchen, Lowes.com omnichannel our customer between This on their customers kitchen to them enables with which work launch design quarter and we virtual create enhanced seamlessly projects Central our the of our specialists experience team. Virtual

stores, in-store items looking is shopping in how of This we of about to are allows of our holiday turn weather us enable that a seasons Total us continue we product example We're now DIY our integrate their just upcoming homes take enjoying and fall and the search Lowes.com. over our the to to strategy smartphone Total will part and aisle Pro customers. their their our experiences. endless similar As product to as Home excited the customer across allow our assortment And we're an and Home explore virtual strategy, launching and to cools. winter our living elevate outdoor customers to as attention market confident share will spaces a continue on which X and hover online ahead,

price and continue We to to pricing to system will competitive to manage data-driven with our effectively to product portfolio everyday management leverage and margins new disciplined price further our like also a commitment to you Thank strategy. for now refine approach a vendor our Joe. cost appreciation vendor extend partners enhance merchants close, approach serving turn call our management the I'd to And to their to I my again before and customers. our and once over will I our

Joe McFarland

everyone. Thanks, good morning Bill. And

maintaining In our level. this surge associates, dynamic I'm regardless payout target our our our a this early status. August, we bonus, I'm drive profit-sharing and the again winning $XX reinstated very technology spend appreciative PPI announce resulting continue reducing that operating incremental enhancements, customers of an million pleased that the associates together customer. the initiatives amount We're operational rising response a laser-focused associates XXX% our the in challenges serving of associates again earned through our we continued also they to $XX expected tasking payment requirements to that we associates. so expectations, vaccination are stores process for quarter, by store And time all a as and pandemic. on their leveraged sixth to pleased the this once in once with of million store gain over driving of quarter, variant, exceeded safe activities, focus the to improvements payroll Delta can quarter, consecutive the execution again, efforts presented for mask because on efficiency represents of traction, For in the second to hourly instead our our frontline our on serving stores improved environment. to

isolated the staffing areas labor some quarter, we of the shortages in maintained strong levels, despite country. During

so adoption service continue any enhance for continue self-checkout allows payroll can provide that customer we while the product, great -designed our simplified to with XXXX, system Lowe's ways built a Lowe's and changing a card to This We out credit already in and we effectively user is to in have was the multiple labor This patterns. also align the labor use respond featuring stores ensure higher launched It not customer driving customers. that fully conditions interface, our enhanced traffic incremental digital rapidly our mind, we to are that discounts. Appliances, with us home solution to we ability driving new and which enables us shopper homegrown rolled not market XXX payroll military improvement also operating driving And signs self-checkout Lumber that to and scheduling and This with the but leverage. scan in across also to did self-checkout we've rates installed margins. product solution capability customer leverage. only year over hours savings

can of quickly adjust and more volatility. protect margins prices during to periods we As price shares now

an online for picked orders X%. our store, approximately up of our Lowe's in As fulfillment omnichannel customer quarter with XX% the previously the integral in-store dedicated online experience. part And teams was are of discussed, penetration

efficiency continuing option, or We the to in Whether pick-up to front customer leverage favorite lockers. their or get desk do at through the orders customers curd-side improve experience. are technology new their our

performance to turn let's the Pro to customer. our Now,

to of the DIY, XX% continues quarter and Pro for basis. XX% a Pro comps earlier, discussed X-year with As on outpace

Lowe's. connection enhanced and frequently intuitive stability as on that they've through faster with This cloud. updates, focused important X feature experience to of we digital is growing possible. look the rapid For step Pros Pro migration the new to Pro both quickly Pro-business evolution improved purchased members-only Pros. We're Lowe's site Loyalty enables offers Pro online in striving just our We're also benefits. our our more day Pro. shopping easy to Lowe's items innovative Program we're completed features, personalized the for our reorder our expand as reorder, and the for making enables is the demonstrate home which Every and in-store continue the as ways new We We to expand customers Pro to for customers.

Looking second Home we build Total Installation strategy to the of of ahead, as our half excited the also on tackle I'm year, the while improve interior and in customer their homes. the to and exterior DIY continue to as Services, leverage the needs about momentum Pro projects meeting they

Before engage and with incredibly frontline to field frontline and other Dave. close, it to along that, I'm our continued ensure our senior I will support like over would hard on team again I out in with and stores proud of turn that my work merchants this well With officers, dedication. I weekly to a associates extend once as and visiting basis as continue to I'm leaders. we appreciation challenging to environment. this operating their associates and executive

David Denton

Joe. second repurchases. a strong and we to combination driven execution cash our I'll the both in billion continued dividends comments flow strong Company's consumer operational begin In morning $X.X quarter, shareholders the through of this generated $X Thanks, program. allocation returned by with billion on We a and few demand. share And capital free

And announced we dividend to the XX% we million paid Xth. $X.XX at quarter, share per on $X.XX a for the in the increase per paid During share. dividend $XXX August dividends

remaining cash We as expenditures to with quarter, have $X.X XX.X And shares strategic ended earnings income to target quarter-end QX, adjusted business With share initiatives. invest which on to million cash per Additionally, repurchase adjusted the Capital our times. XX% per the year. I That sheet, increase remains the $X.X last the diluted $XXX million in billion in turn share we authorization. Well for we times. of quarter stated X.XX stands we equivalents billion on In would earnings and totaled support the of balance repurchased our extremely growth statement. at healthy. $XX.X an generated share billion. we $X.XX, compared diluted to debt-to-EBITDAR our that, X.XX long-term like now below in of

sales comparisons During decline as basis [Indiscernible] initiatives DIY $XX.X QX, of items, was GAAP comparable leverage to well executed customers we the where This average measures quarter, Company. numerous comp points of offset productivity approximations paint, driven lower XXX to from cycled will over by of sales the like the over sales goods. comments due we transaction across drove a were appliances against declining My and billion and ticket X.X%. as commodity include ticket a forward inflation. this count to smaller of as Mostly applicable. point consumer with - was certain improved Comparable increased non operating we XX.X% installations. and when XX.X% sales limited. In by lumber, higher mobility cleaning products, mulch, in period QX

were customers around projects on back comp last X.X%. attachments our mind the purchasing of increased tackling their many lumber transaction X-year a of quarter. XX.X% increase in lumber this smaller in elevated to which results prices in So homes. that comp pulled customers QX count extremely DIY Keep due of year, year, in and transactions Also related

outperformance services X%, the the key Marvin decor installation across in X.X% indicated, up Home us a categories. U.S. were X-year growth positive in That XX%, our comps on gave in but areas, strong online basis. to with many quarter, up DIY comps pivot the during sales our to As down led of XX%, our strategy quarter. Pro ability up Total and investments XX% up

opportunity travel comps After saw the Our in We other to categories. discretionary negative customer spend positive related a our were stores June Day, X.X% weekends. in Memorial in increase was in and U.S. and traffic consumers decline noticeable mobility on a July. there engaged in in in May, monthly consumer in negative X.X% the and DIY a X.X%

remained traffic weekday While strong.

increased basis XX.X%. was Looking a X-year July XX.X%, June XX%, The from XX.X%. and growth margin increased 'XX, comp at on XXXX U.S. to gross increased sales May

as XX but by declined year basis gross improved points Product of QX margin points basis rate rate was margin to compared XX up points. from As 'XX. basis XXX expected, last the

effectively pricing unprecedented despite volatility Our teams product in and costs this quarter, managed lumber prices.

by and live to XX continue to benefit basis increases the minimize margin benefits from costs related points vendor good prices also pressure and points, from quarter. damages Also, gross conditions were points the XX higher credit XX Also, basis points. revenue teams costs. of commodity from Supply shrink Our mix favorable weather categories. industry higher These this extreme west. pressure elevated of and by lumber, drove less XX driven to chain points transportation mixed a basis offset in product other basis and basis XX pressured margin by cost

As we omnichannel absorbed and to our some elevated costs continued distribution expand capabilities.

the team just to Our relationships scale spend chain moment the in costs the retail impact experienced impact I'd carrier a of to minimize like our continues previously across a in lumber purchased that products supply discussing to drop we selling at industry. distribution these July. these near-term had cost. margins beginning compressed steep because at our many in the prices products lumber of Since higher early time, been leverage of we've

XX.X% million by SG&A pressure $XXX last versus billion, of The XXX expenses, COVID-related an we that a points the will of of pressures, up points we are leverage. XX% generated year reductions down these basis improved over These points for in healthcare that by We by costs. Operating of profit year. year. of line up s overall expect of these quarter was from XXXX year. billion was disruption. lower $X.X basis QX full XX was rate our improvement seasonal $XXX inventory was sales of primarily in cost. point to inventory sales for with levels sold to of margin expenses At increase lower when the and elevated our million COVID-related related gross through lumber. basis increase the an line a million despite majority And to positions quarter, trends. the includes compared incurred at quarter in the reflects it basis year. COVID-related August, SG&A the from leverage which tax rate margin SG&A slightly short-term last with in we $XX employee XX to due However, COVID-related This to benefits The in a in-stock to from be higher $XXX of layers. XXX offset million end X% supply were year-over-year the This have higher-cost was versus by of attributable margin. levered $XX.X effective the pressured prior Operating LY. $X.X demand $X.X substantially driven still gross increase partially by XX.X% prior as LY, of were expecting is and the of of QX of offset generated was billion the end inflation, inventory Current expenses billion

manage our in fluid close, of comment let we I to before injecting Now, business half trends second the this year. a the Variant uncertainty new very our into Clearly, planning on me current continue Delta environment forecast. and trends how we're with the business the for

given with robust performance, scenario ahead market of the well investors strong our first-half Lowe's is December XXXX. tracking back in shared of However, clearly we that

the market the that return the somewhat and inflation levels moderate lower increase assumes driven second continued in commodity its half, of will work through improvement outlook mobility given to Our by in home school. consumer

penetration. Lowe's expecting higher market DIY reflects are mix-adjusted to We online demand year. full flat lower and market view essentially mix, for relevant This be the Lowe's

August revised performance this consistent comparable trends date, comp for with approximately to the comparable expect July's XX%. deliver sales year, materially basis. U.S. Month are scenario, of in on to sales we of growth $XX approximately a Lowe's X-year levels billion Now representing X-year sales

related over levels, on As customers partially expected, lumber who sidelines driven sales comp the reengaged and dropped. we by prices are already transaction of DIY seeing lumber the count several point hundred QX increased in as improvements sitting DIY basis unit were after attachments,

margin leverage expect versus we now productivity pricing we to up to hold, our mitigate the be With and the the XX.X% margin product income of as are to year. Importantly, promotional outlook impacts levels our strategies efforts gross projected, full the costs we transportation for current prior our taking raising rate year for and sales operating slightly inflation. and elevated

a expecting XX relative incentive point now well higher cost revenue margin elevated expected I'm remainder operating operating the be tracking points on offsetting of disciplined expenses outlook expenses, than for deliver XX a resulting are year, these When over deleverage across from as year. income billion and productivity are operating driving compensation, we'd in organization. these points margin of plans. to This to outlook. of now very We we consider margin represent for to the the the $XX our incur of excellence Furthermore, expect Without reflects the of planned pressure. negative XXX pleased Together, ahead this basis impact focus expecting XX.X% approximately points such, basis an we our inflation. full for basis operational improvement I we're XXXX. XX operating basis of that And business

of to closing, for the In we the expect in Furthermore, Capital planning over are We repurchases. Expenditures great execute of a next year. billion tailwinds benefit we $X share in to several from minimum operating expected secular years. sector, $X for billion the a are

Home in long-term are business to drive strategy and Total We investing the our growth.

we're meaningful the So ready now and With long-term for questions. market that we continue drive shareholder that, to outperform value.

Operator

ready now We're for you. Thank questions.

limit follow-up order to ask In yourself to from like X X question Instruction]. If you questions [Operator many please a possible, as individuals would as allow to and question, question.

proceed questions. line with first come Our Goldman of Kate from the your Sachs. with McShane questions Please

Kate McShane

Hi. question. Good our Thanks taking for morning.

mix the the additions store, brand and towards in XX% Just changes comp than you've you've terms mix the did quarter? made seen the with that we you've we've compare XX% the the assume change sales the your to the of Pro And the Can Pro. given plus Pro in Pro for for of sales in to the plan how made the for all Lowe's quoted higher past? the is to XX changes

Marvin Ellison

penetration Hi the Marvin, say question. a the roughly penetration saw a But that to original XXX sales Having DIY. if what XX%. grow, this on improvement. take Pro we hovers Kate, from that, overall take two-year But first XX% basis is as Based comp the our that our Pro, today, I'll comp XXXX XX% to a in shift expectations. our I the is plan. We the outperformed knew Pro exceeded is at points original versus see said would would continue to something we still that look around and greater Pro quarter. our total you

Kate McShane

regards a Is just with that like for flat to the question, as delineate what the for way your gross margin back can implies half. QX guidance looks being gross versus follow-up be to very margin there in the QX? Thank any seems much. you Okay. it And gross to up slightly margins up that year

David Denton

margin say that probably important, you what have to to do the and be We up the year. [Indiscernible], expect is right. full granularity. level Kate, the would exactly slightly in not certainly I going for it of gross give up half back

Kate McShane

you. Thank

Operator

you. Thank

Our line your proceed next with from Stanley. coming Gutman questions. Morgan the is Please question Simeon of with

Simeon Gutman

the margins a to grows if the margins in managing And this allow industry what morning, the haven't that My good of next Thanks alternatively, you year this is a business of to first cost there the how everyone. on is. if next from we're are The you know pressure think are guidance business from flat year. understand If actually preclude are environment? Hey, question. could sales on buttons then for I question, about or in grows slightly, seeing any I'm just And little growth business that given this 'XX trying flex next transformation into the going levers sales environment and decline to theoretical it's year, there and question and grow? yet. growing sort enough

David Denton

maybe Hey, XX%. as is well. this Maybe clear, an had to bit objective is start chime I'll sure Dave. here to sit get we a as we will It here in today, Marvin I'm Simeon, and

at with we're strength seeing line of just still above business, sight -- to to nicely to XX% of have juncture, the and the those we targets XX%, that and objective. this to get to Now clearly tracking aspirations

we we an experiencing pressures are from As perspective. cost said, industry

and what in lever pivot slightly, in or can up Our us going flat be the periods flexible that into actually the we are the we business, when sales model, and and put business. such business, are sales to invest allows

expectation as our would to XX%. of goal that continue make continue we it's to we So to that longer-term march progress

Marvin Ellison

place, Marvin. in we've the last Simeon, very been is, supports pleased have. in which we point over X that I'll Dave's only we're add organizational put the The structures this agility years of systems to able is really point

cost manage no mitigation to and value quarter boats and we we to cost, basis first basis. ongoing back [Indiscernible] the Dave first daily the effectively. about had bill XXXX of will teams right modern the work price making We've when the of go to that deliver helping we If finance new how think a mechanisms the an merchants us that a issues, you decisions created in had out and that (ph), can internal manage retail, customer now on management and rolled price cost on have system team

can have future. So, we point this manage pull in today in in have Dave's we that can the correct. didn't and so we that exactly past we We now summary, effectively is the and levers think

Simeon Gutman

the and follow-up. within the going much. on out maybe the business. some be things growth margin certain shouldn't then, composition chain take should like -- gross line, think the conceptually the the that of costs related really up initiatives And thinking some are some about the lower margins, margin, transformation, gross In the the know, of But of I different there I SG&A, are targeted supply the that

the or is here? still sort from of SG&A gross should range-bound, its principle the is margin So and the still expansion same come leverage is how

David Denton

the the margin, in really in gross are time, from nice expand correct. perspective, Keep same progress supply area. And continue in we dilutes making as us At SG&A of we to we're essentially that chain, invest margin Yes, in but that chain. we mind that supply the store. Simeon, relieves is product in it a investing the That

the geography is costs But you therefore up So gross flow-through a productive move of the bottom out shift have as very line. again, SG&A. but on in margin the

Simeon Gutman

Thanks, Good luck. Okay, that's guys. helpful.

Operator

you. Thank

your Our comes line question Fargo. proceed the Please Wells Zach Fadem from question. with with of next

Zach Fadem

Hey, morning. good

could year, about investment, making there enhancements been productivity resets, impact we the signage, as incremental scheduling, expect we like of should from you've And the margin offsets from the any context labor of digital the delivery, etc. like outlook, parse market-based or EBIT widen, out to you within your benefits So XX.X% cetera? across the et these Things half think back are business? the

David Denton

at incremental this that There the in are of point year. projects putting balance the no time our for we're plate on

at business year, that. the I supply said at playbook the making the that are back of our half you we're launched think to we of we that, the if the beginning true we look and investments change year don't need right see continues investments the Having the chain. making hold a to because in in

we going roll balance have the for of year. As Marvin to into indicated, out now we're markets launched the it Florida, other

invest pressure we some that So leverage to plan. SG&A year. productivity. that's you're driving we expenses on as overlap to really going as non-recurring and drive to productivity. performance of come to in going It's this are But the are of which putting continue see COVID-related through Both us we're half in SG&A back going

Marvin Ellison

we the And our experience how rollout thing mentioned a us developed hours initiatives Joe productivity, that long-term payroll toward better have Zack, working operating way, experience, know, by that proprietary us thus this the technology manual also And implementing of that and where Information spend. in equation we correct Joe our comments, improve technology labor is talked now experience, and leverage as creating helping long XX% the you and with customer I'll us tracking target. is to reduces of is PPI Marvin. reduced the customer our that's allowing only it's part The self-checkout, a officer, about income enhancements prepared Chief our of not is tasking Seemantini, list add of only improve all his of to

Zach Fadem

comps year, in starting the building some the you prices. first and or With rise in elasticity and a then, material now And in the lumber to it. Got come called pricing first reluctance bit, talk out given half of inflecting whether the in second of this in about what a driver you August think projects July, you extent at to were could positive, half? and reacceleration the all delayed could half, be

Marvin Ellison

their as see what own Joe of him let customers we I'll we services business, what take we're business, So talk installation and hearing look just specifically that our in and our at from our about book let about pipeline. also Pro

Joe McFarland

Michael, So things. couple a of

in in the to same invest the First, starting prices, remarks, strength this we where continue lumber with the believe -- outdoor definitely to prepared project kitchen found looked as when in peak primarily things At the at based definite projects. business. And customers bath. and look, business on you were categories the willing Fencing, were mentioned price. we the not the of delayed, you services, there in decking, install time, we

over in XX% comp. Our delivering really categories outperformed interior quarter, second the

of And Pro Pro Also, So out Loyalty our at look Pro We from for is at features. we look the Lowe's the We shifts as from standpoint. and the s. at We the rolled Cloud. from Google the the we focus seeing from Home. business. customers, Pro look to continue s we response the migrated home new add enhanced great services we're a focus interior, the exterior Total to to on

Zach Fadem

Appreciate it. guys. Got the time,

Operator

Thank you.

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

Michael Lasser

the that view that, of to mix is a negatively be the and disproportionately how is for lot market the perception business, general is by Lowe's Good going impacted given my question. considerably that slow Marvin, morning. Thanks taking DIY wrong? will

Marvin Ellison

I'm is not saying wrong. that

also that to think our may improve we're consider not I business. that going Pro

I working As my to business. mentioned XX a have really in for been diligently solid months prepared we've comments, Pro

our why a of that year XX% X-year because X comp reasons on comp, One that XX% basis. the we is drove delivered of Pro

we're in our nature customer. business. Reflected if with results, it to nature dynamic that business, true So at the that you to going in is But we're improving statement. that in the dynamic Pro take the look continue probably share a the dynamic by Michael, isolation, market a DIY it's

going STAINMASTER With acquired Allen We that the in Roth expand. + we're brand we're to brand. as we're just things how launching enhancing that Decor, the a

that dynamic synopsis that DIY and we'll think nature Pro, think the I put question. I in into of our growth

David Denton

is Yeah. Dave. this Hey, Michael,

a Just is don't here the on re-emphasis forget fact has the home, months utilizing last that despite than school-from-home, what from XX dwelling. what that seeing market -home, and seeing is contingent is back happened is the you're the market for of up, - other large work over the a home other open -- U.S. a activities just you're or opening still the

that I perspective. to to a fall demand Pro floor a and a trend believe but secular the assume over going bit, tailwind off both mitigate I from industry, there So will a DIY is time, not either. and it's from this little

Michael Lasser

Got quickly follow-up to out and My across rest markets? year. comps of that of you're you the margin the How mentioned quantify country all other markets have can roll you can this through across is, it. seen Super-helpful. your that in to and you've you up And going running the question Florida? lift this the

Marvin Ellison

there team Don supply success in out IT can credit along a the transformation, seeing this the expense XX excited for a now We're that the basically the the old and month operations and in But joined goes, pleased have exactly we at we do about a a new Company. of pleased management But, we and what inventory delivery is we the We're deserve sales, on-hand confident allowing with in that it can we're the our reduction, looking with is. efficiently, to I chain, the foundation to to the as ensure and the do make go cycle inputting so very chain we're whole that what productivity, in, Florida. reduction. we're supply is sure Florida our and said, inventory to inventory for as not roll Which an we're want systems the plus in of Frieson, change to lead go virtual our we're and to to us this model big efficiently. is create lift market-based because process slow, mentioned and I want prepared lot a fast, associates, saying a possibilities, so standpoint in of the can comments, amount have Company, Change we rollout Well, management. management change from we significant sell. this with

Michael Lasser

Very goodbye. so Thank much and helpful. you

Operator

Thank you.

Our from proceed question. JPMorgan, comes next with question of Horvers your with Christopher the line please

Christopher Horvers

quarter-to-date. a you're you a Good talk our Is Pro a people it -- you X% you comp talk everybody. back, on you're home, that schools X% the expect in check Can in so seems the like gone their a morning, back South. what about it versus seeing seeing to of -- hold right? have can just Thanks. DIY the math, can DIY that as in sort of focus Are get the business seeing and the homes? on trend? more Some of maybe And

Marvin Ellison

at X-year the compared comments, want our saw Hey, it August trends, That's inter-quarter to so in back prudent looking to we're to July extraordinary we a how that's month-to-date felt measure to business us -- the to we Chris, August environment. you look is the as business granular on to don't a We just you was can on want unique results on with -- But on go share our two-year we too business. of respect, comp at the way think get basis. we basis. We to XXXX, data. based best for Dave's our it if nature business

Pro we're outperform said said, feel the trends to that will believe the overlaps. about will value, have nature that home Pro the across to for the of that year-over-year seeing invest. you on great and Dave year, confidence Now, price home we balance of home because because simple invest as confident of We and DIY based equally in the customer having that we're continue the as stock, your DIY in But DIY. because housing appreciation, just age of their the more the of increase that,

feel on that top good year have should out. play So that to line, our the bottom sight how and and of pretty great feel raised outlook much rest line we reflects performance, the our support a so we in we about of the we strong

Christopher Horvers

Yeah. Absolutely.

Joe McFarland

one want I to Yeah. just comment. add additional

a Your on Division's with Southern and were [Indiscernible] very second We the specifically in questions South from performance quarter. pleased performance standpoint.

Christopher Horvers

margin side, Got it. very was And X-year prior strong. following up did go above gross the slightly guidance. on CAGR you The sequentially the

quarter? a XX that would and basically all and and third to it an That's pressure. going outlook the the pricing That is all just like accrue. sophistication, that's that basis points, maybe lumber impact to credit sounds So, driving back impact, foot improved annual

David Denton

margin in feel lumber cycle think we're here the by the that's at what August. going I pressure is moment experiencing of now and about end Well, We to good we through that. said

We team, performance fact I supply from despite those are chain the gross think and both perspective. invest a up of ecosystem this we pricing continue Lowe's. between margin investments cost compressing analytical finance line process that in have driving is that and we here really a our making merchant have to cost good in margin at to good the the areas. focus our we're sight management seeing And we and really And that on now year, a

Christopher Horvers

luck. it. very Good Thanks much. Got

Operator

Thank you.

with line Our your next proceed of questions. please questions come from Steven Zaccone the with Citigroup,

Steven Zaccone

business taking far share for relative having since I to the performance competition you about wanted market Can focus talk side the feel in our my XXXX. question. Thanks performance, on this this Great. you're the a maybe how to of bit Pro you far?

Marvin Ellison

that great. Steve, I not market improvement the at in suspect as data would said say, is I home is have share calls, best because dataset previous

host X-year look taking share. we anytime our that And that of on assume think small basis, pretty market share in market you're Pro, that coming is competitors, at we growth a a both you from and business, As confidently grow XX% you large. the can

and Bill Pro XX Boltz and Pro. us with a on really I a past to done I moment Pro continue able have we've that had untapped, job getting and McFarland merchants I been like reflective And take line the think to years. business. think not to strategy team that that it's Joe along do in I'd coherent also we that a to allow his in brands this has of are share a of will Lowe's the nice the talk is to just brands some take want and about What think Bill us add

Bill Boltz

Marvin. launch prepared with of getting our my program Steve, remarks, round I the ready in to out Yes, SPAX. mentioned we're thanks, this fastener quarter

We've the space. and big complimenting join to Honda getting in the great brand that announced the likes across in with for a deal we the then had Pro parts Pro merchants a brands Just GRK, business, other Fastener have Power success Lowe other in Already segment. FastenMaster, strong brought of our that's which plumbing us. family, brand of the is a Mansfield, Pro-One,

and strategy other these like about of to great I And Another getting first had we've Lowe's have program, named just ITW, real talked of good that the in as of an quarter. then Lesco we're them recognize fertilizers, Marshalltown, Lufkin. just the brands, fortunate a bunch had success -- value and them, with what brands at that grow that we're -- for doing it's well. we're opportunity the Pro recognized we

Steven Zaccone

Thanks. Great.

some Just growth there to priorities a this do this are where that the I can trend to year. the continue you still follow-up on of of business. year? penetration solve business last side growth you're the And e-com on of the What longer-term, for seeing guess, top drive there since side think

Bill Boltz

Bill. is Steve, So this

out. build But we've a as had Joe said new So on make to enhancements leverage, able all that obviously, moved We've as few are we to continuing been our cloud this the lowes.com enhance in of over the virtual to sure continuing all back. the design the of We prepared enriched fundamentals product basic migrated in the content search. to to remarks, assortments, continue site, also, to months we've that mentioned, is to the program, kitchen Lowes.com cloud. key LowesForPros

with the which new and a can in brand the so brands the putting stuff products we doing initiatives in to make to The make All -- And on new teams our right and are test that ways recommended of weekly you are out of there to project. and Lowe's to it advocates the at faster working basis. a customer. test look lowes.com then the different things, sure whole business with product merchant helping we're the products buy enhancements go to those that easier make continuing front

to bring a on us to our to as just a grow business. next a going weekly we sure for the we're continue years basis continue X opportunity lot that great on nice And to So relevant, team. over lowes.com see make with plus of this enhancements and things the they

Marvin Ellison

set end customer-centric an penetration year create the we We're When talk and a up around trying to lately, about the And lands. probably the targets. and question, term we online, omnichannel, curb-side, they the land purposely overused environment be way an are not in-store, in-store, in where give penetration just choose. store, customers XX% we to trying really and to more essence, customer want any on it shop And for just let we'll choices from locker, that's multitude pick but to shop a in of provide to options. ship we'll penetration

Steven Zaccone

Very helpful. Thanks, guys.

Operator

you. Thank

Please proceed s questions. come with line from question with next the Research. of your Bosshard Our Eric Cleveland

Eric Bosshard

promotional [Indiscernible], thank of things, first within is what all, you. side year on could impact well. lumber of better the having on also you're bit that? that's margin talk other you how doing there influence and gross anticipated. gross Can and And XQ address than And the you investment X the in about likely margin initially what's what XH? this, on worse as the an you a

David Denton

the across gross our is taken we're that perspective. investor an year, from business such at hard Eric, for sure to going approach managing -- time. this was upon margin play -- point obviously in would say it are some to so what pay Dave. portfolio and making that pressure a deliver out, this experiencing we gross objectives I have can this we and commitments specifically the we've is was done how I lumber holistically predict we margin

standpoint that comment to So there's a promotional are to we're Bill we want as events. But back this, the from we broad in nearly of we're key I'd from we're on and in across ask on say Tier standpoint, XXXX. promotional X not been comprehensive make And I'll to would've deep -- portfolio as relevant holidays fairly offsets the sure a but that products. as

Bill Boltz

we've categories. about when we and add Yeah to the an everyday been this in place that high-low past. got pricing this march I a of I'd wanted lot Dave, for strategy unwind talked we this we been Eric, competitive and sure to in across make think that here, strategy on wanted had We've

So pressure heavy up when on about it get promotional categories elsewhere? some not a think offset having you elsewhere from drug. Gets how offset does of lumber, these by

you know compete finance has we we the the been a collaboration competitive And can efforts team, day in the about work basis. then merchants. And with so put the that that every team that that's talked team, cost And pricing, the the we've all pricing doing. with on the

in events march the we to half. at on opportunities, And for typical merchants different that the In enhance to approach. -- more local, now we Memorial the addition back margins to field, way. year, do standpoint, we're trends, Day, of event our field Father's the our with Day, From Xth. look things we very as look field normal a no and an QX, July out in leaders second this can as similar and and at event half

crazy. nothing So

Eric Bosshard

half the else is second numbers July, we Great. about just little from margin, characterize are by How conservative. within follow-up. seems be degree the some the one August, and of And guide look would the The sales and then encouraged that bit sales of still something implies but XQ guidance guidance sales lots there operating a thinking for there you up, at move the considers? moderation what or ways should to

David Denton

stay. much. Eric too you Hey, I to think don't read should

moderate the the typically, of year. sales at think We do to the sure we're of line back operating deliver of half fluid we're make full year. end just in very sight want to to the a that day, I a environment. we just Yes, for what going the have

is we've appropriate going think think back our approach we And just play this how are taken a how realistic, half it. is out. to planning to I about

Marvin Ellison

that very environment quite a retailers our wanted to any difficult this it that really as as We possible we're also on equally even to it outlook guidance point this We transparent so because this to not half point be to seeing we conservative we is appreciate was be today's in environment. conservative to be to doesn't proven transparent much also how much few but year can because activity given a be just a that the prudent as And as is happening that that. second business. The wanted and on have add all is felt you forecast. possible, but and was read of Marvin. you I'll slightly environment too that. felt Eric, of there's unique fluid But Hey, the into the

David Denton

more take We're please. to question, going X

Operator

you. Thank

from next your the Our Greg are Evercore of ISI, questions. questions Melich with line with please proceed

Greg Melich

Thanks. average I'd like to number start to inflation The compare or the was inflation just just to was make that growth sure that I got could we XXX right. that XX%? the bps, of ticket lumber,

David Denton

but though. It was primarily lumber, predominantly it focused on It's everything, lumber. was

Greg Melich

Got it.

box commodities, lumber but So there inflation? there not rest another that the of it's XXX been probably that's would've are like bps

David Denton

That's correct.

Greg Melich

was it in both and in the that a help terms Marvin, then as And DIY along it rolling and business, does Pro The the to rollout what months it. for plus marketplace. means OpEx Got and out? Could some XX to for bulky. that, and the there you're what several of CapEx spoke are practical the next the describe on big really you you follow-up way questions the comments prepared

Marvin Ellison

achieve modern we're what XX plus more months. supply the a billion not gives What us Yeah. increasing really just to this market over a to in supply making to create we're or transformation transformation a transformation. chain the -- We included whole any out to it ability the early spend delivery in going X-year on next that span. delivery over $X.X this overall that roll capital talked This process. this be means, We're investment chain is efficient,

you appliance. the to it, in not So appliance, they an today do the store let's as physically schedule an time. in And customer sell will their not you their the based an they in the on the come say delivery, buy or example, it's If is sell literally arrange within then you via markets have don't container. that when where sell storage have to have in-stock going associate in call that you we eyesight, market will delivery to appliance telephone to a

create and you ability that XXXX don't go have in imagine online So to for virtual the delivery. schedule a

model. of all is and shifted modern delivery to transformed being a So that more

the inventory things to us the less we have trucks. it to day, SG&A create, ability this up, out. rolled inventory the move having can't just delivery for replicate load inventory less Joe without the keep gives in we things And that got customers we we next fully and are in team drive damage. stores cases, centrally, more importantly, model using in So to some reduction, so same day, hold options centrally, around, a

from foundational very This the excited chain the this get couldn't standpoint, what prudent transformation, about more and is skis steps change one want many going and this again, it. Company but we're but a of to a get Florida. step. just seeing we're just be management not overburden we're supply excited done. So We the over to is be we about on in And our

David Denton

And up as we experienced in we're Xst point, experience well. to we're some going we capacity, of the our speed. a contemplated how get few roll at as ramp that listen, a up, chain so XX.X we perspective. innovative not full to we these Greg, and get XX% But is margin guides all to months point, and compression objective Yeah. Marvin's to we headwinds approach But really this as to as our because is this to to supply market some do out kind from your

So over that consistent term. long is narrative with the this

Greg Melich

guys. great. Good That's great. job and Thanks,

Operator

teleconference. you. Thank today's does This conclude

disconnect may your your you at for time. participation. lines You this Thank