Lowe's Companies Inc LOW
Q3 2011 Earnings Call Transcript

Transcript Call Date 11/14/2011

Operator: Good morning, everyone, and welcome to Lowe’s Companies Third Quarter 2011 Earnings Conference Call. This call is being recorded. Statements made during this call will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Management’s expectations and opinions reflected in those statements are subject to risks and the Company can give no assurance that they will prove to be correct. Those risks are described in the Company’s earnings release and in its filings with the Securities and Exchange Commission.

Also, during this call, management will be using certain non-GAAP financial measures. You can find a reconciliation to the most directly comparable GAAP financial measures and other information about them posted on Lowe’s Investor Relations website under Corporate Information and Investor Documents.

Hosting today’s conference will be, Mr. Robert Niblock, Chairman, President and CEO; Mr. Rick Damron, Executive Vice President of Store Operations, and Mr. Bob Hull, Executive Vice President and CFO.

I will now turn the program over to Mr. Niblock for opening remarks. Please go ahead, sir.

Robert A. Niblock - Chairman, President and CEO: Good morning and thanks for your interest in Lowe’s. Following my remarks, Rick Damron will review our operational performance and Bob Hull will review our financial results in detail. But first, let me share a summary of our third quarter performance as well as how we are thinking about our business going forward.

Sales for the quarter increased 2.3% while comparable store sales were positive 0.7%. Comp traffic increased 0.7% in the third quarter and comp average ticket was flat. Gross margin contracted 99 basis points in the quarter. Bob Hull will provide more details regarding gross margins in a few minutes.

We (did) operating expense control in the quarter. However, as detailed in today’s release, we recognized charges related to store closings and discontinued project which in aggregate reduce pre-tax earnings for the quarter by $336 million and diluted earnings per share by $0.17. Including this charge, we delivered earnings per share of $0.18 in the third quarter. Excluding the charge, we delivered earnings per share that exceeded our guidance for the quarter.

As I said before, our performance is not at the level we expect relative to the market, but frankly that we demand of ourselves as we defined success, so we’re taking action. The executive team is looking at our business from a fresh perspective and we’re evaluating how we operate on cross functional basis to ensure consistent and connected execution.

During the third quarter, we’ve reorganized our store operations and merchandising organizations to improve efficiencies, increase speed to market for new products and services and enhance the shopping experience for customers. We streamlined our field organizational structure, resulting in fewer districts and regions and we’ve announced the closing of 27 stores this year that were underperforming despite the tremendous effort and hard work of our employees. These were very difficult decisions that unfortunately affected hard working employees and the communities we serve. Although decisions were difficult, they were absolutely necessary to right-size the reorganization for the realities of the economic environment we operate in today.

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