The paragraph is a transcript from Lowe's Companies, Inc. Fourth Quarter 2024 Earnings Conference Call. It begins with the operator, Rob, introducing the call and mentioning it is being recorded. Kate Pearlman, Vice President of Investor Relations and Treasurer, takes over, acknowledging the presence of key executives and reminding the audience about the forward-looking statements notice and non-GAAP financial measures. Marvin Ellison, the CEO, then shares that Lowe's delivered $18.6 billion in sales for the fourth quarter and $83.7 billion for the 2024 fiscal year, reporting an adjusted operating margin of 12.3% and adjusted earnings per share of $11.99. He expresses satisfaction with the company's performance despite challenging market conditions.

The paragraph discusses positive sales growth for the quarter, driven by strong performance in professional and online sectors, seasonal DIY demand, and post-hurricane rebuilding efforts. Despite impressive fourth-quarter results, there is cautious consumer behavior impacting DIY discretionary spending. The company focuses on strong operating performance and long-term investments, specifically in their Pro business with high single-digit growth, and a nationwide launch of the MyLowe's Pro Rewards program. Online sales grew by 9.5%, with successful participation during Black Friday and Cyber Monday. The new MyLowe's Rewards loyalty program is increasing excitement and traffic to their site, bolstered by improved app and online experiences and enhanced delivery options.

Lowe's is gaining recognition for digital innovations, such as its mobile app being rated the top US retail app by Forrester, and the upcoming launch of an AI-powered virtual advisor in collaboration with OpenAI to assist customers with home improvement projects. This technology aims to enhance customer experience by providing project advice and product recommendations. Despite current challenges in the home improvement market due to high mortgage rates and low home sales, Lowe's remains optimistic about its long-term prospects, supported by factors such as home price appreciation, increased disposable income, and an aging housing stock.

The paragraph discusses the optimistic outlook for the home improvement industry, driven by factors such as millennial household formation, baby boomers aging in place, and the rise of remote work, which are expected to increase home renovation projects. The company has refined its strategy, focusing on pro penetration, expanding online sales and home services, fostering a loyalty ecosystem, and improving space productivity. They're also implementing productivity initiatives to reduce costs. Confident in their strategic plan, they anticipate outperforming the market by 2025 across various economic scenarios. Additionally, Lowe's demonstrated community support by donating $2 million for wildfire relief in Southern California.

The paragraph discusses the commitment of a company, likely Lowe's, to support their frontline associates and improve customer experiences. This includes awarding $80 million in year-end bonuses to show appreciation for store managers and assistant managers. The company's sales performance in the fourth quarter was strong, with positive comps in professional services and seasonal offers. They excelled in home decor, particularly in appliances, by capturing market share despite cautious consumer spending. Investments in an omnichannel customer experience, offering leading brands, and improving delivery models have facilitated this success, including doubling next-day deliveries for large items.

The paragraph highlights the company's direct delivery and installation capability for major appliances, offering next-day service across most regions, which is crucial for immediate replacement needs. This strengthens their market position as over 70% of appliance sales are urgent. The company is also expanding its private brand offerings, such as Stainmaster luxury vinyl flooring and Lowe's Essentials, which promise affordable home basics. These efforts aim to enhance customer experience, provide value, and improve profit margins. Additionally, growth is seen in building products due to strong demand from professional customers and recovery efforts in the Southeast, particularly in outdoor categories like roofing and decking.

In the fourth quarter, the hardlines category, particularly trim and tree sales, performed well with improved margins supported by the merchandising services team. The seasonal offerings, including holiday nursery items, tools, and pre-lit trees, were well-received. Unique products like a ten-foot animatronic yeti and mini toolboxes drove social media engagement. Apparel growth was strong, especially the expanded Carhartt workwear lineup. Looking forward to spring, the company is prepared with a robust product lineup, especially in home improvement and outdoor equipment, featuring exclusive brands like Toro and Ego. The garden centers offer customers engaging new project ideas and interactive signage for plant selection, along with an expanded assortment of Stay Green products.

The paragraph highlights Lowe's strong position to meet customer needs for patio and grill products, with localized assortments and exclusive offerings such as the Weber Stealth grills. The company's DIY loyalty program, boasting 30 million members who spend significantly more than non-members, is noted as a success. This spring, Lowe's plans to offer exclusive deals for loyalty members, supported by tech-driven marketing. The paragraph also mentions the redesign of the pro loyalty program, with more details to follow. Additionally, Lowe's is aiding California communities affected by wildfires by providing essential supplies.

The paragraph acknowledges the dedication of store and supply chain associates who have supported customers while managing personal responsibilities. It highlights strong customer satisfaction scores, particularly with the improved buy online pickup in-store process, which was part of a front-end transformation. This improvement contributed to record sales on Black Friday and Cyber Monday. The text also details the company's efforts to enhance freight flow through new technology and redesigned labels and carts, making unloading and stocking more efficient for associates. These changes aim to streamline operations and speed up product shelving, driven by perpetual productivity improvement initiatives discussed at a recent analyst conference.

The paragraph highlights Lowe's recent improvements to its pro loyalty program, MyLowe's Pro Rewards, which is designed to benefit small to medium-sized professional customers by providing rewards with lower spending thresholds compared to competitors. The program features an intuitive design and offers exclusive perks like member-only deals and volume discounts. Both DIY and pro programs now operate on the same platform, simplifying the experience and allowing for better data utilization to tailor offers. This integration aims to increase customer engagement and drive repeat purchases, enhancing the overall value of Lowe's loyalty ecosystem.

The paragraph highlights Lowe's distinct programs for DIY and professional customers, aimed at saving time and money, especially as they prepare for their major spring selling season. The company appreciates its frontline staff, notably store managers and assistant managers, rewarding them with year-end bonuses for their service. Additionally, Lowe's reported fourth-quarter GAAP earnings per share of $1.99, including a $80 million pretax gain from the sale of its Canadian retail business in 2022. Excluding this, the adjusted earnings per share is $1.93. Fourth-quarter sales reached $18.6 billion, supported by growth in the pro sector and online, and by demand from storm-related activities.

In the fourth quarter, the company experienced a 100 basis points boost in comp sales due to hurricane-related demand, although comparable transactions declined by 1.3% due to persistent DIY discretionary pressure. Monthly comp sales showed variability, influenced by calendar shifts and unfavorable winter weather in January. The gross margin increased to 32.9% thanks to productivity improvements, despite supply chain costs. Adjusted SG&A rose slightly due to higher compensation and healthcare expenses, while the operating margin improved by 36 basis points. The adjusted tax rate was 23.5%, and inventory levels increased by $515 million to prepare for spring. In 2024, the company generated $7.7 billion in free cash flow, returning $6.5 billion to shareholders through dividends and share repurchases, including $650 million in dividends and $1.4 billion in buybacks in Q4.

In the quarter, the company invested $548 million in technology and growth initiatives, ending the year with an adjusted debt to EBITDAR ratio of 3.01 and a 32% return on invested capital. Looking ahead to 2025, they outlined scenarios influenced by the home improvement market's performance, considering factors like real income growth, high home prices, and an aging housing stock. Despite market uncertainties and high mortgage rates impacting large discretionary spending, they forecast a flat home improvement market, with professional services outpacing DIY due to repair and maintenance demand. They're confident in growth from new initiatives and expect 2025 sales of $83.5 to $84.5 billion, with comparable sales flat to up 1%, an operating margin of 12.3% to 12.4%, and $1 billion in productivity improvements.

The company anticipates offsetting various cost pressures, including merit increases, inflation, healthcare expenses, and $100 million in higher depreciation costs due to tech investments, through increased productivity. They expect a net interest expense of about $1.3 billion, factoring in the repayment of $2.5 billion in debt, and project diluted earnings per share of $12.15 to $12.40 for the year. Capital expenditures are estimated at $2.5 billion, with plans to open five to ten new stores by 2025. They forecast flat comp sales in the first half, with a shift in spring demand affecting quarterly results, and expect a first-quarter operating margin rate roughly 50 basis points below their annual guide. The company is committed to its total home strategy, focusing on productivity and cost management to ensure long-term shareholder value despite market challenges.

The paragraph is a transcript from a Q&A session where Christopher Horvers from JPMorgan asks about the factors contributing to the strong performance in the fourth quarter, considering various influences like election deferral, weather conditions, and tariff impacts. Marvin Ellison responds by expressing satisfaction with the company's performance despite a challenging home improvement market, highlighting the execution by merchants and store associates that led to positive comparable sales. He maintains confidence in their outlook for 2025, even without market growth. Brandon Sink adds that the company is pleased with exceeding expectations in Q4, achieving positive comparable sales and earnings per share growth for the first time in a few years.

The paragraph discusses financial results and projections for a company, highlighting high single-digit growth in professional and online sectors. This growth enabled the company to distribute $80 million in discretionary bonuses to employees. Adverse weather impacted performance in January and February, affecting first-quarter projections and outlook for 2025. The company anticipates the home improvement market to remain flat but plans to drive 100 basis points through total home initiatives. Christopher Horvers asks about investment pressures and gross margins. Brandon Sink explains that expected sales deleverage will pressure first-quarter operating margins but forecasts improvements in the following quarters due to shifting $400 million from Q1 to Q2 and other investments.

The paragraph discusses expectations for the company's financial performance, focusing on the Producer Price Index (PPI) and sales guidance. The company expects the PPI to remain flat for the year, with PPI initiatives offsetting pressures from investments in the professional business and supply chain. The company is also prioritizing customer value through investments in sales, traffic-driving, seasonal promotions, and marketing to maintain leadership. Despite a slower start to the year due to weather and other factors, the sales guidance remains roughly unchanged, with market share expectations leaning towards gains. They are also accounting for the previous year's unexpected hurricane benefits.

In the paragraph, Marvin Ellison discusses the financial outlook for the company, highlighting that there were benefits of about 100 basis points in the third and fourth quarters, which might create a slight challenge for 2025. Despite the current challenging conditions, such as elevated rates and cautious consumer behavior, especially in big-ticket discretionary items, they are maintaining their overall strategic framework. Although February's weather was favorable, it still posed some pressure. Marvin is optimistic about outperforming the flat home improvement market in 2025, regardless of market conditions, due to their initiatives and strategic planning. Simeon Gutman questions the relationship between PPI and business performance, asking if the company has plans to adjust spending based on market performance. Brandon Sink confirms there's some flexibility in their plan, but it has already been established.

The paragraph discusses a company's expectation of delivering a billion dollars in productivity by 2025, with $500 million in margin improvements from merchandising and supply chain efforts, and another $500 million from expense reductions primarily through store teams. They express confidence in their plan and mention the flexibility to adjust based on near-term factors. During a Q&A session, Peter Benedict inquires about the impact of hurricane rebuild efforts on financials. Brandon Sink responds that while they expect some benefit, they've adopted a conservative approach due to uncertainties like the timing and spending of insurance proceeds.

In the paragraph, the speakers discuss their readiness to support markets in the Carolinas and Florida, particularly within the professional (pro) segment. They emphasize their strategic inventory planning, engagement with pro customers, and the positive performance of the pro business. Peter Benedict inquires about pro engagement and demand, as well as definitions of small, medium, and large pro clients. Marvin Ellison explains that pro customers are categorized based on shopping patterns and annual spending. Their strategy includes surveying these customers and improving services like product availability and delivery flexibility, resulting in double-digit growth online. They attribute their success to effective branding and enhanced inventory and delivery capabilities, which have bolstered their pro segment growth.

The paragraph discusses the relaunch of the MyLowe's Pro Rewards loyalty program, which has been modified based on customer feedback to be simpler and offer high rewards at lower spending levels, catering to smaller to medium-sized businesses. Bill Boltz mentions positive growth across various merchandising categories such as building materials, lumber, millwork, appliances, and paint, indicating successful efforts in the pro business for both the quarter and the year. Following this, Kate McShane from Goldman Sachs asks about the balance between transaction and ticket prices in 2025, including anticipated inflation and specific factors affecting Q1 margins. Brandon Sink is set to address these inquiries.

The paragraph discusses the expectations for ticket growth in 2025, primarily driven by the professional sector's strength, while DIY traffic may face pressures. Commodity inflation, particularly in lumber and copper, is expected to remain muted, continuing a trend from 2024. The challenges in Q1 are attributed to seasonal sales shifts, wage investments, and the timing of new initiatives such as category accelerators and rural rollout strategies. In response to a question about inflation and tariffs, Brandon Sink mentions that inflation in Q4 was subdued, and the company's guidance does not explicitly account for newly enacted tariffs, though they are actively monitoring and responding to changes in policy.

In the article paragraph, Greg Melich inquires about the leverage framework discussed during Analyst Day, which includes 10 basis points of leverage on the upside and 15 on the downside. Brandon Sink confirms that this framework still applies, particularly when considering the full year rather than a quarterly basis. Michael Lasser from UBS questions the current status of large-ticket remodeling categories for Lowe's, such as kitchen and bathroom remodels, compared to 2019. Marvin Ellison explains that DIY discretionary big-ticket categories, like those mentioned, are under pressure, impacting Lowe's business, as 70% of their revenue is from DIY customers.

The paragraph discusses the trends and expectations related to larger ticket sales in categories like flooring, decor, and kitchen and bath over the past five years. There is optimism about potential pent-up demand once the market improves, although no immediate recovery is predicted for 2025. Larger ticket sales have stabilized, showing no significant change recently. Michael Lasser asks about efforts to boost the DIY business through promotions and advertising. Marvin Ellison responds that there is no plan to alter promotional strategies, but emphasizes the launch of a DIY loyalty program in March, highlighting the retailer's unique dual loyalty program for professionals and DIY customers.

The paragraph discusses the company's approach to maintaining competitiveness in the market, emphasizing that they do not plan to invest more aggressively in DIY marketing. They highlight the advantages of a loyalty program for personalized marketing. Brandon Sink and Michael Lasser mention that cost factors like promotional spending and pricing will be considered for financial expectations by 2025, aiming for leadership and financial guidance. Zach Fadem from Wells Fargo questions if consumer excitement in Q4 might have decreased in 2025, attributing recent business slowdown to weather. Marvin Ellison responds, stating there is no evidence of consumer exuberance during holidays and attributes business impact primarily to weather conditions.

The paragraph discusses two main topics. First, it highlights how weather, specifically seasonal and normal spring conditions, positively affects business performance, while adverse weather like cool and wet conditions leads to poorer performance. It clarifies that this is more of a weather-related issue rather than due to election impacts or macroeconomic shocks. Marvin Ellison, in response to a question about the policy environment, emphasizes their attentiveness and preparedness for any policy changes, such as tariffs and immigration, that might impact their business. He reassures that they have a strong government relations team and are agile enough to handle any political or policy shifts. The conversation ends with Zach Fadem and Marvin Ellison expressing appreciation, and the operator moves on to Brian Nagel for the next question.

The paragraph discusses the potential indicators of positive business trends amid macroeconomic challenges, as addressed by Marvin Ellison. While acknowledging various external factors, Ellison highlights two key indicators for a return to normal home improvement spending: an increase in discretionary big-ticket purchases for DIY projects and a rise in home services like installations. He suggests that a normalization of the high mortgage rate environment might lead homeowners to tap into their home equity to modernize their existing homes, which would reflect positively in these areas. Continuous positive signs in these indicators would suggest an improved business outlook.

In the paragraph, Brian Nagel asks about the sustainability of Lowe's market share gains in the Pro segment, given the internal initiatives they have implemented. Marvin Ellison explains that the Pro market is a $500 billion market, with half of it being small to medium professionals, which Lowe's targets. Despite political and macroeconomic uncertainties, customers remain confident about their sales and backlogs. This confidence, along with the market's fragmentation, presents continued growth opportunities for Lowe's. Joe McFarland is then called upon to elaborate on initiatives boosting their confidence.

The paragraph discusses Lowe's business strategies and expectations. It highlights their focus on pro customers through initiatives like pro fulfillment centers and leveraging Lowe's ProSupply. The CEO, Marvin Ellison, mentions confidence in the return of DIY customers and their new total home strategy, which, combined with their omnichannel approach, will drive future success. The conversation then shifts to appliances, where Bill Boltz reports strong results, crediting unit growth and innovation, and notes that the demand is largely driven by customers purchasing due to necessity.

The paragraph discusses the company's delivery model and online business, highlighting its ability to deliver appliances nationwide and the strong engagement from consumers. The company is optimistic about its performance going into 2025, with new innovations and product launches across categories. In response to a question about anticipated changes in category performance for 2025, it mentions that despite some weather-related challenges early in the quarter, the company is optimistic about its spring business. Collaboration across teams, including stores, inventory, and supply chain, is emphasized as key to their preparedness and excitement for the upcoming spring season, with new products targeting both DIY and professional customers.

The paragraph discusses new innovations and product launches across various merchandising categories at Lowe's. It highlights easy-to-install windows from Pella, new drywall tools from Walmart, composite decking brands like Trex, TimberTech, and Deckorators, and Whirlpool's entry into water softeners and rough plumbing. It also mentions exclusive spring products from Weber, 14 new products from Ego in the outdoor power category, new patio collections, and new Valspar products for metal applications and garage floor paint. The speaker expresses optimism about future prospects and readiness for upcoming opportunities. The paragraph concludes with a thank you note from Brandon Sink and the end of Lowe's Q4 2024 earnings call.

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