The paragraph is from the introduction of Lowe's Companies Third Quarter 2024 Earnings Conference Call. The operator, Rob, hands over the call to Kate Pearlman, Vice President of Investor Relations and Treasurer, who introduces key executives including Marvin Ellison, the CEO. Kate reminds listeners about forward-looking statements and risks mentioned in their filings. Marvin Ellison then expresses condolences for the passing of Bernie Marcus, co-founder of a modern home improvement business model, and acknowledges Marcus's mentorship in his early career.

The paragraph recounts a young executive's early experiences learning from Bernie, who emphasized the importance of people and left a philanthropic legacy. The focus then shifts to Lowe's third quarter financial results, reporting $20.2 billion in sales with a slight decrease in comparable sales by 1.1%. Despite challenges in DIY bigger ticket projects, Lowe's experienced robust growth in Pro and online sales, with Pro sales showing high single-digit positive comps due to strategic investments in customer experience. Online sales also grew by 6%. Joe will provide further details on Pro momentum later in the call.

The paragraph discusses Lowe's efforts to boost online and in-store traffic and sales through initiatives like expanding their mobile app capabilities, enhancing their same-day paint delivery service, and launching the MyLowe's Rewards loyalty program. These strategies are aimed at making shopping more convenient and rewarding for customers. Despite these efforts, the company acknowledges challenges in the home improvement market due to economic factors like inflation and high interest rates, which are affecting consumer affordability.

The paragraph discusses high mortgage rates, a lack of available homes for sale, and the resulting low housing turnover. Despite this, three factors continue to drive the home improvement market: strong home price appreciation, rising disposable income, and the aging housing stock, with the median age of homes at 41 years. These factors suggest that homeowners will invest in home repairs and upgrades, especially as interest rate pressures decrease. The company is optimistic about the future of the home improvement industry, driven by millennial household formation, Baby Boomers aging in place, and remote work. They are investing in their Total Home Strategy to prepare for market recovery. The paragraph concludes by offering thoughts and thanks to those impacted by recent hurricanes.

The paragraph details Lowe's response to hurricanes in the Southeast, highlighting their $12 million pledge for disaster relief through nonprofit organizations. The company announced $2.5 million in grants to aid small business recovery in Western North Carolina. It expresses gratitude to frontline associates, especially in Florida and North Carolina, for their dedication. Joe McFarland, from Lowe's, shares insights on coordinating hundreds of store operations during the hurricanes, emphasizing improvements in disaster response, supply chain investments, and Pro job site delivery to expedite recovery efforts.

The paragraph details the company's response to recent storm impacts, highlighting the coordination efforts of the command center team and the voluntary contributions of over 1,000 emergency response team members and hundreds of associates in Western North Carolina. The company managed to maintain high customer satisfaction through tech-driven enhancements and strong associate commitment. Additionally, it reported positive high single-digit growth in Pro comp sales, with significant online sales growth driven by the new "Shop the Job" digital platform for Pro loyalty customers. The program initially focuses on kitchen, bath, and flooring projects and will expand based on customer feedback. Despite challenges, survey results indicate that Pro backlogs remain strong.

The paragraph highlights the company's confidence in accessing financing, labor, and materials, which are crucial for business success. They completed an annual engagement survey with a high response rate, indicating improved associate engagement and leadership effectiveness, correlating with better business results. The company is focused on becoming a preferred retail employer, enhancing the MyLowe's Rewards programs, and recognizing first responders. Upcoming discussions at an analyst and investor conference will address improvements in customer experience and labor productivity through technology. The paragraph concludes with gratitude to associates and a transition to another speaker, Bill Boltz, who notes strong performance in professional and online sectors despite challenges in DIY demand.

The paragraph discusses the positive sales performance in hardlines, driven by hurricane-related product sales and outdoor lawn care items. The company reports strong quarterly comps in seasonal, outdoor living, and hardware categories and prepares for the holiday season with events like the Black Friday buildup and exclusive deals, especially for tools ideal as gifts. They highlight special offers for MyLowe's Rewards members and feature top-performing DEWALT products. Building Products also saw strong sales, particularly with Pro services and hurricane-related items.

The paragraph discusses Lowe's expansion of its product offerings with innovative tools and systems designed for both professionals and DIYers. This includes the addition of industry-leading drywall tools and the Pella Steady Set Interior Installation System, which simplifies and speeds up window installations. The text also highlights challenges in larger DIY home decor projects but notes improvements in appliance sales, particularly in laundry with all-in-one units and integrated wash towers. Additionally, it mentions consumer interest in LG's new refrigeration line that allows for installation in tight spaces.

The paragraph highlights the success and strategic initiatives of Lowe's MyLowe's Rewards loyalty program, emphasizing improved performance metrics and the use of insights for targeted marketing. Exclusive member benefits, such as access to new product launches and tailored offers, are noted. The introduction of a flexible event schedule, independent of the calendar, aims to boost customer engagement and sales. The paragraph closes with appreciation for supplier partners, specifically commending Niagara Water and FIRMAN Power Equipment for their prompt support in storm recovery efforts by providing essential supplies swiftly.

In the third quarter, Lowe's reported a GAAP diluted earnings per share of $2.99, with an adjusted EPS of $2.89 excluding a $54 million pretax gain from the sale of its Canadian retail business. Sales reached $20.2 billion, with a 1.1% decrease in comparable sales, though hurricanes Helene and Milton boosted sales by about 100 basis points. The company saw strength in Pro and online sales, as well as outdoor projects. Comparable average ticket rose by 0.2%, while transactions declined by 1.3%. Monthly comparable sales varied, influenced by hurricane-related demand. Additionally, Lowe's deployed storm trailers to assist customers in Georgia, North Carolina, and South Carolina. Gross margin slightly increased to 33.7% of sales compared to the previous year.

The paragraph discusses the financial performance and strategic initiatives of a company in Q3. The gross margin improved due to PPI initiatives but was impacted by supply chain investments and storm-related challenges, including costs for lower-margin products and inventory losses. Adjusted SG&A expenses increased slightly due to storm-related expenses, and the operating margin rate declined. Inventory levels were stable at $17.6 billion. The company generated $728 million in free cash flow, spent $571 million on capital expenditures, repurchased $758 million worth of shares, and paid $654 million in dividends, totaling over $1.4 billion returned to shareholders. They repaid a $450 million bond and reported a 31% return on invested capital. The company updated its financial outlook for 2024, expecting sustained performance into Q4.

The paragraph discusses the company's third-quarter results, which exceeded expectations largely due to hurricane-related sales, while underlying DIY demand remains weak, particularly for discretionary projects. Considering these factors, the company projects 2024 sales between $83 billion and $83.5 billion, with comparable sales expected to decrease by 3% to 3.5%. The adjusted operating margin is anticipated to be between 12.3% and 12.4%, accounting for ongoing PPI initiatives and the costs of storm-related activities. The company also forecasts a net interest expense of approximately $1.3 billion, capital expenditures of around $2 billion, and an adjusted effective income tax rate of about 24.5%. This results in an expected adjusted diluted earnings per share of $11.80 to $11.90. The CEO expresses confidence in the company's investments and ability to manage market uncertainty to deliver long-term shareholder value. In a Q&A session, Peter Benedict from Baird inquires about the company's DIY loyalty program, specifically regarding its penetration, renewal rates, and plans for the program's second year. Marvin Ellison responds, expressing satisfaction with the program's progress.

In the paragraph, the company discusses the success of their loyalty program since its launch in March, highlighting achievements such as record enrollment during their first member week in October, increased repeat purchases, higher average order values, and larger purchases by loyalty members. They plan to provide more details on the program's progress and future at the upcoming Analyst and Investor Conference. Bill Boltz mentions tailored events, including early access to offers for members during Black Friday and Thanksgiving, and insights gained from the October member-only week. Peter Benedict then shifts the discussion towards the company's strategies around potential tariff increases, seeking insights on their approach given historical experiences.

The paragraph features a discussion among executives Marvin Ellison, Bill Boltz, and Brandon Sink about their company's approach to potential tariff increases under the incoming Trump administration. Marvin acknowledges the uncertainty but expresses confidence in their existing processes to manage such challenges. Bill highlights efforts to diversify sourcing with supplier and private brand partnerships, which strengthens their adaptability. Brandon adds that approximately 40% of their cost of goods is sourced internationally, and despite possible increased product costs, they feel well-prepared to handle any future developments.

In the paragraph, Marvin Ellison addresses a question from Steven Forbes regarding the outlook for the DIY segment of the business. Ellison acknowledges that the company is heavily reliant on the DIY market and is implementing a loyalty program to gain more control over this segment and reduce dependency on external factors like macroeconomic conditions or weather. The company is especially focused on big-ticket discretionary items like appliances and flooring, which are sensitive to the broader economic environment. While they anticipate some positive trends with changes in the macro environment, their strategy includes continued investment in their Pro services and online platforms, areas they are currently satisfied with.

In the paragraph, the speaker discusses the positive financial performance of the company, highlighting high single-digit growth in certain areas and a 6% increase in online sales. The business strategy focuses on growing the Pro segment, expanding online sales, and stabilizing the DIY business. An upcoming Analyst and Investor Conference will provide more details on these initiatives. Additionally, Brandon Sink addresses storm-related impacts, noting a 100 basis point impact on comps in Q3, primarily affecting the latter half of the quarter. This impact resulted from increased demand for items like generators and cleaning supplies and affected gross margins due to product mix, transportation costs, damaged inventory, and additional operational expenses related to storm recovery efforts.

In the paragraph, Brandon Sink addresses a question from Simeon Gutman concerning the impact of a hurricane on Q4 sales and margins. Sink acknowledges that there will be a modest storm-related benefit to Q4's sales but expects operating margins to remain in line with the previous year's outlook, with no significant drags anticipated. Gutman follows up with a question about growth in the Pro segment, noting high single-digit increases. Marvin Ellison responds by saying that the growth in the Pro segment is a result of their Total Home Strategy, initiated in 2018, which has enhanced their Pro penetration from less than 20% and is now showing tangible benefits.

The company is focusing on expanding and improving services for small to medium-sized Pro customers, a market valued at $250 billion. Efforts include enhancing Pro brand offerings, boosting store service levels, ensuring stock availability for key items, and strengthening their loyalty program. Digital sales for Pro customers have grown significantly, and the company aims to grow Pro business at twice the market rate, capitalizing on the fragmented marketplace. Looking ahead, the company plans to focus on the DIY big ticket and do-it-for-me market recovery and will discuss related initiatives at an upcoming investor conference.

The paragraph discusses Lowe's company strategy, focusing on their Pro customers and initiatives to enhance service through their Total Home Strategy. Joe McFarland emphasizes investments in tools, easy store access, and Pro fulfillment centers, which are helping them capture market share as Pro customer backlogs remain strong with smaller projects. Then, the discussion transitions to a question from Christopher Horvers of JPMorgan about the DIY segment's performance, noting a decline in DIY sales and speculating on future trends. Horvers questions if the current DIY cycle will resemble the post-financial crisis period from 2010 to 2013, considering current interest rates.

Brandon discusses the performance of DIY projects, noting strength in smaller outdoor projects while highlighting pressure in big-ticket categories like kitchen, bath, and flooring due to macroeconomic factors such as elevated mortgage rates and housing affordability. The company anticipates a shift from small repairs to larger projects, but the timing remains uncertain. Marvin Ellison adds that their capital investments focus on IT infrastructure and store improvements, ensuring a strong presentation and experience both in-store and online, particularly in kitchen, bath, and appliances. They boast a best-in-class product assortment and next-day shipping capabilities nationwide.

The paragraph discusses a company's strategic readiness for an anticipated market shift in the DIY and do-it-for-me sectors, driven by $35 trillion in equity from aging U.S. homes. The company is investing in infrastructure, such as same-day delivery and gig networks, and is focused on capturing market share when this inflection point occurs. They plan to provide more details in their upcoming long-term strategy update. Additionally, there is a discussion about margins, specifically how a hurricane impacted earnings slightly positively, despite lower margins, and the expectation of gross margin growth in the fourth quarter.

The paragraph discusses the company's expectation of flat gross margins for the year, despite pressures from a hurricane, margin headwinds, supply chain investments, and the development of a pro fulfillment network. Offsetting these pressures are merchant supply chain initiatives like expanding private brands, pricing strategies, and improved cost recovery from suppliers. Credit and shrink metrics are expected to remain flat. The next section involves Eric Bosshard from Cleveland Research asking about how the company is addressing consumer affordability challenges, particularly regarding promotions and pricing strategies. Bill Boltz responds by emphasizing the company's focus on providing value through price, new products, and innovations.

The paragraph discusses a company's strategy for driving value through smaller projects and innovative products, particularly during the holiday season. It highlights new product offerings from brands like Klein, DEWALT, CRAFTSMAN, and LG, emphasizing the introduction of an all-in-one laundry appliance. The company aims to differentiate through MyLowe's Rewards by offering exclusive deals to members. Additionally, there's a focus on managing expenses and maintaining margins amidst affordability challenges, tariffs, and sluggish demand, particularly in the DIY market.

In the paragraph, Marvin Ellison and Brandon Sink discuss their company's effective expense management strategies, focusing on cost reduction and maintaining margins despite challenging conditions. Marvin highlights the team's strong reputation for cost management and PPI initiatives, ensuring these efforts persist regardless of external factors. Brandon adds that SG&A is aligned with expectations, emphasizing the organization's disciplined expense management and strategic investments. They are pleased with their performance over the past three years and plan to continue progressing with future PPI initiatives. The segment ends as the operator introduces Karen Short from Melius Research for the next question.

In this dialogue, Karen Short asks about the wide range of operating profit growth and margin expansion for the fourth quarter and the impact of storms on October's performance. Brandon Sink explains that the range accounts for macroeconomic pressures, DIY demand fluctuations, weather volatility, and fewer shopping days between Thanksgiving and Christmas, which could affect holiday demand. He mentions a 100 basis point impact from storms but declines to break it down by month. Regarding Analyst Day, he confirms plans to update financial expectations for the home improvement market and introduce scenario planning for 2025 and beyond.

In the paragraph, Seth Sigman from Barclays asks about the progress and benefits of vendor cost management efforts on margins. Bill Boltz responds by emphasizing that cost management is a continuous process, highlighting the collaboration with suppliers to reduce costs. The savings are being reinvested to stay competitive, drive sales, and improve marketing and merchandising. Brandon Sink further adds that the cost management efforts are meeting expectations, particularly impacting the latter half of the year, and are helping improve gross margin through improved inventory and promotional investments.

The paragraph discusses efforts to improve cost management through data-driven systems and processes introduced by Marvin Ellison's team. This approach aims to facilitate informed discussions with suppliers for managing costs and tariffs effectively. Additionally, Seth Sigman touches on operating margin expansion goals, taking into account the impact of past challenges like hurricanes on earnings, and questions whether the current framework still supports operating leverage. Brandon Sink responds, reinforcing the use of a "flow-through rule of thumb" as a directional guide for navigating various sales environments.

The paragraph discusses the company's ongoing efforts to manage profitability and deliver on PPI commitments, with plans to provide more detailed insights next month at the Analyst and Investor Conference. Marvin Ellison mentions they are still exploring opportunities within PPI and sees it as a continuous benefit driven by technology and processes. Although some regions are outperforming, overall performance is consistent across regions, except in areas affected by hurricanes. More information will be shared at the upcoming December meeting.

The paragraph indicates the end of Lowe's third quarter 2024 earnings call, with the operator thanking participants and instructing that they may disconnect.

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