Lowe's pushes profits in quarter

Don Hogsett, June 2, 2003

Picking up traction and winning share from its larger rival in the home improvement segment, Lowe's Companies Inc. pushed first-quarter sales up at a double-digit pace and drove profits higher by almost 22 percent.

Stealing some of the limelight from its big competitor, The Home Depot, Lowe's said profits raced ahead by 21.7 percent, to $421 million from $346 million last year, improving on stronger sales and wider margins.

Riding a strong housing market, sales at the world's largest home improvement retailer perked up by 11.4 percent, to $7.2 billion from $6.5 billion last year. Virtually all of the sales gain came from continued expansion, and the crucial gauge of same-store sales was virtually flat, edging up just one-tenth of a percent. During the opening quarter, Lowe's opened 21 new stores, and as of May 2 operated 875 units in 45 states.

"A strong housing market and improving consumer confidence continue to support the American conviction to invest in the home despite the effect of adverse weather and uncertain world events," said Robert Tillman, chairman and ceo.

Pumping up the bottom line, in addition to the stronger sales, average gross margin widened by 130 basis points, or 1.3 percentage points, to 31.0 percent from 29.7 percent in the same period a year ago. Stronger margins more than offset moderately higher costs, which rose by 30 basis points, or three-tenths of a percentage point, to 18.5 percent of sales from 18.2 percent a year ago.

Lending strength to the bottom line, inventories remained well balanced with sales rising by 11.6 percent, to $4.9 billion from $4.4 billion, compared with the 11.4 percent increase at the top line.

Scoping out the current second quarter, Lowe's said it plans to open about 25 new units, reflecting square-footage growth of about 13 percent. Total sales are expected to increase at the same pace, with same-store sales growing by 2 percent to 4 percent.

Lowe's Companies Inc.

Qtr. 5/2 (x000) 2003 2002 % change
Sales $7,211,000 $6,471,000 11.4
Oper. income (EBIT) 725,000 600,000 20.8
Net income 421,000 346,000 21.7
Per share (diluted) 0.53 0.44 20.5
Average gross margin 31.0% 29.7
SG&A expenses 18.5% 18.2%

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