The operator introduces the participants of the conference call and reminds listeners that the call is being recorded. Kate Pearlman, Vice President of Investor Relations and Treasurer, discusses the company's forward-looking statements and potential risks. Marvin Ellison, Chairman and CEO, discusses the company's first quarter sales and notes that they exceeded expectations despite challenges in the DIY industry.

In the second paragraph, the company discusses their strong performance in the challenging home improvement market by adjusting their strategy to win early spring customers and gain share in key categories. They also saw growth in their Pro and online sales, improved customer satisfaction, and maintained a focus on productivity improvement. The company's SpringFest campaign was successful, and they are pleased with their investments to improve the Pro experience and strengthen relationships with small- to medium-sized pros. The company aims to take share in this highly fragmented market by providing excellent service and building trust with these customers.

Lowe's is investing in Pro growth by expanding their capabilities for larger order delivery and opening new branches. Online sales were up 1% in the first quarter, with improved conversion rates offsetting pressure in bigger ticket DIY categories. They have partnered with DoorDash and Shipped to offer same-day delivery options, in addition to existing partnerships with Instacart and OneRail. Lowe's is tailoring their digital experience to cater to different customer shopping journeys and using virtual and mixed reality. They have also rolled out a new loyalty program, Mylowe's Rewards, which offers points, free shipping, and other benefits to customers who choose Lowe's for their home improvement needs. Customers can also save 5% every day with the MyLowe's Rewards credit card.

The MyLowe's Rewards program has been successful in gaining customer adoption and the company is now expanding its reach to soccer fans through partnerships with Lionel Messi, MLS Club Inter Miami CF, and the Copa America 2024 USA tournament. The company is also facing challenges in the DIY home improvement market due to uncertainty surrounding interest rates, inflation, and consumer preferences for discretionary spending. Real wage growth and home price appreciation are positive, but customers are still hesitant to spend on home improvement due to concerns about the cost of living and the economy.

The article discusses the current and future outlook for Lowe's home improvement industry, with a focus on their efforts to grow market share and support their frontline associates. Despite a challenging macro environment, the company saw positive sales in the first quarter due to their strong spring assortment and targeted marketing strategies. They also had success in attracting Pro customers and winning early seasonal purchases.

The company's marketing efforts, strong brands, and focus on quality and value have led to positive comp sales in lawn and garden. The Sta-Green private brand has been well-received by customers, and the company has also expanded its online offerings for garden products. The addition of Toro to their lineup has further strengthened their selection, and they continue to see positive comp sales in gas and battery-powered lawn mowers and handheld outdoor power equipment.

In this paragraph, the author discusses the performance of Lowe's Pro customers and their impact on the company's growth. They mention the success of building materials, repair and maintenance categories, and electrical products, as well as the challenges faced in home decor categories. The company's focus on inventory depth, localized assortments, and partnerships with brands like Klein Tools have helped to rebuild credibility with Pro customers. The author also highlights the popularity of private brand products, such as the Allen and Roth Harlow kitchen faucet.

Lowe's Stainmaster PetProtect carpet with leak defense backing helps prevent spills and pet accidents from seeping through. The company is also expanding its market share in appliances with a focus on fast and convenient delivery. Despite challenges, Lowe's is seeing improvements in selection and innovation from its appliance suppliers, such as the exclusive GE freestanding range with EZ wash. The company is also focused on improving merchandising productivity, with a particular emphasis on expanding private brand penetration. This strategy not only offers customers style and quality at a great value, but also leads to higher product margin rates compared to national brands.

The company is focused on building a strong private brand portfolio and delivering value to DIY customers while also improving productivity. They thank their vendors and merchants for their partnership and acknowledge the hard work of their associates in improving customer satisfaction and becoming an employer of choice. The company has also invested in wages, associate development, and internal mobility to show their appreciation for their associates.

Lowe's has a strong leadership development program and has implemented new routines to strengthen selling culture and skills among department supervisors. The company also has a modernized store operating system that allows associates to close omnichannel sales and improve productivity. Despite misconceptions, Lowe's is only one-third of the way through their transformation and has made progress in reducing return and cancellation rates through improved partnerships and technology.

In the third paragraph, the speaker discusses Lowe's efforts to prevent shrinkage and improve customer experience through new technology and initiatives. They also mention their commitment to supporting the military community and thank veterans for their service. The speaker then hands over the presentation to Brandon, who will discuss the company's first quarter results, including a gain from the sale of their Canadian retail business in the previous year.

The first quarter sales for the company were $21.4 billion with a 4.1% decrease in comparable sales. This was due to homeowners delaying larger discretionary projects and lower DIY bigger ticket sales. The gross margin was 33.2% of sales, down 49 basis points from last year, while SG&A was 18.8% of sales, down 137 basis points. The operating margin declined by 201 basis points compared to last year. The effective tax rate was 23.7%, and inventory decreased by $1.3 billion compared to last year. The company generated $3.9 billion in free cash flow in the first quarter.

In the first quarter, the company made significant investments in strategic growth initiatives and returned $1.4 billion to shareholders through dividends and share repurchases. They ended the quarter with a strong financial position and affirmed their outlook for the full year. The company expects second quarter sales to be similar to the first quarter and improvements in the second half due to easier comparisons. Operating margin may be under pressure in the second quarter but is expected to improve in the second half. The company remains committed to their capital allocation strategy of reinvesting in the business, paying dividends, and returning excess cash to shareholders.

The company plans to use their free cash flow to repay a bond maturity and return remaining cash to shareholders in 2024. They are focused on investing in their Total Home strategy and have a multiyear road map for PPI initiatives. They expect to see improvements in gross margins mainly in the second half of the year, with headwinds from ongoing investments and tailwinds from PPI efforts and private brands. They are also making progress in vendor callbacks.

The company is investing in lower prices, but there will be a delay as the cost change. They also expect to benefit from lower transportation costs and manage any credit pressure. Big ticket items, such as appliances and seasonal items, are still under pressure due to DIY trends and the impact of higher interest rates. The company is working through these challenges.

The company is seeing offsets to the DIY pressures with the growth of their Pro business and the average ticket is expected to remain flat. The front-end transformation initiative is progressing well and has resulted in improved customer satisfaction and associate engagement. The company has a detailed roadmap for the transformation and has already implemented new technology such as self-checkout and gig delivery. The company is pleased with the benefits they have seen so far and are only one-third of the way through the initiative.

The company is seeing higher sales, lower payroll costs, and improved returns as they open up more space on the front end and improve the customer experience with BOPIS. They are pleased with their progress so far and expect continued success as they approach Memorial Day. They are focusing on single item purchases in the appliance market and have seen success in driving units and picking up unit share. They are also seeing positive responses to innovative products on the sales floor.

The company is seeing a mix of value-conscious and innovation-seeking consumers, and they are focused on meeting the needs of both. The current macroeconomic conditions are impacting consumer engagement, and the company is waiting for a catalyst to drive a turnaround. The second half of the year is expected to see an improvement in comps, but this is not dependent on a macroeconomic improvement.

The company has analyzed their performance in various ways and are confident that they will see improvements in the second half of the year. They are also focused on managing through current challenges and investing in their infrastructure to come out stronger in the future. They are committed to their capital allocation strategy and will be prepared to take advantage of positive trends when they arise. They have not pulled back on their long-term roadmap for growth initiatives.

Marvin Ellison and Bill mentioned that the company is committed to investing in the business for the long term. They are focused on meeting the customer's current needs and providing value rather than just low prices. They are confident that they can recover any gross margin decrement in the back half of the year and maintain flat gross margins overall. The company believes that by winning the customer early in the spring season, they will have multiple shopping occasions throughout the year. This is possible due to the efforts of Bill and his team in store execution and supply chain management.

The company's philosophy for the year is focused on adapting to changing customer behavior and highlighting value to win in the market. The company's marketing approach and execution helped them win in Q1, but also caused some margin pressure which was managed through SG&A. The company expects gross margin pressures to decrease and PPI to accelerate in the second half of the year. The DIY loyalty program, which was launched in March, has been successful in terms of enrollment and engagement. The company is not disclosing specific numbers but is pleased with the program's rollout and the benefits of modernizing their store operating system.

The company has recently retired a 30-year operating system and is now focused on using data to improve the customer experience. The company is seeing positive results and expects to see more improvement throughout the year. The majority of the improvement is coming from increased traffic rather than ticket cycling. The company is also experiencing ticket pressure from DIY big-ticket discretionary items, but Pro growth is helping to balance it out.

The second half of the year is expected to see an increase in transactions as the company cycles through certain factors and improves its historical relationship between ticket and transaction. The gross margin is expected to be flat for the year, with a decline in the second quarter and an increase in the back half. The new reward program did not significantly impact gross margin in the first quarter. The quarter started off weaker but saw improvement, which could be attributed to seasonal factors and other areas.

In this paragraph, Marvin Ellison and Bill Boltz discuss the impact of weather on sales in the first quarter. They mention the success of the SpringFest initiatives and a geo-targeted marketing approach. They also note that weather played a role in the sales cadence, with some favorable weather in March and April. The team was able to take advantage of this and saw strong performance from new products and brands such as Toro and EGO. They also mention upcoming events like Memorial Day and Father's Day that they plan to capitalize on in the second quarter.

The lawn and garden team had positive results in the first quarter due to traffic-driving events and taking advantage of customers preparing their yards for spring. The company also saw improvement in their Pro business, which may be attributed to market share gains and investments in inventory, service levels, and national brands. Their digital platform and loyalty program have also helped win back customers.

The company's survey results show that their resilient customers are driving their positive backlog, and they believe it is due to improved execution and initiatives such as investments in job quantity, safety stock, and job set delivery for larger orders. They also mention their loyalty program, CRM program, and Lowe's Pro supply as contributing factors to their success with this customer segment. They are focused on serving the small to medium Pro customer and estimate a $200 billion market opportunity. The company is confident in their strategy and its results.

The speaker is confident that their investments will lead to success despite challenging economic conditions. They mention their DIY loyalty program and the associated lift in private label credit sign-ups, which they believe will increase customer engagement and drive revenue. They are monitoring the success of these programs and believe they offer a win-win situation for both the company and customers.

The speaker discusses the success of the loyalty program during Mother's Day and plans for the go-to-market strategy for the rest of the year. They mention that the promotional environment will remain stable and they will focus on being seasonally relevant. There are no drastic changes planned for the second half of the year.

The peers of the company have noticed that the West region has been performing better than other regions in terms of the housing recession. The company has seen strong performance in the West and overall, there is no significant regional variability in performance. Rural stores continue to perform well and the company is considering expanding categories such as pet and apparel in those locations. The midpoint of the company's annual comp guidance suggests a decline of around 7.5% in big ticket transactions.

The speaker is asked about the expected decline in purchases over $500 for the year, and they respond that they are expecting similar performance as the second half of last year. They do not have any macro improvements embedded, but they do expect the comps to improve significantly due to cycling and the downturn in the second half of last year. The call concludes with a reminder of the second quarter earnings call in August.

This summary was generated with AI and may contain some inaccuracies.