Company Quick10K Filing
Lowe's
Price109.54 EPS5
Shares783 P/E23
MCap85,770 P/FCF21
Net Debt15,841 EBIT4,848
TEV101,611 TEV/EBIT21
TTM 2019-11-01, in MM, except price, ratios
10-K 2020-01-31 Filed 2020-03-23
10-Q 2019-11-01 Filed 2019-12-04
10-Q 2019-08-02 Filed 2019-09-03
10-Q 2019-05-03 Filed 2019-06-03
10-K 2019-02-01 Filed 2019-04-02
10-Q 2018-11-02 Filed 2018-12-06
10-Q 2018-08-03 Filed 2018-09-04
10-Q 2018-05-04 Filed 2018-06-05
10-K 2018-02-02 Filed 2018-04-02
10-Q 2017-11-03 Filed 2017-12-05
10-Q 2017-08-04 Filed 2017-09-05
10-Q 2017-05-05 Filed 2017-06-06
10-K 2017-02-03 Filed 2017-04-04
10-Q 2016-10-28 Filed 2016-11-29
10-Q 2016-07-29 Filed 2016-09-02
10-Q 2016-04-29 Filed 2016-05-31
10-K 2016-01-29 Filed 2016-03-29
10-Q 2015-10-30 Filed 2015-12-02
10-Q 2015-07-31 Filed 2015-09-01
10-Q 2015-05-01 Filed 2015-06-02
10-K 2015-01-30 Filed 2015-03-31
10-Q 2014-10-31 Filed 2014-12-02
10-Q 2014-08-01 Filed 2014-09-02
10-Q 2014-05-02 Filed 2014-06-03
10-K 2014-01-31 Filed 2014-03-31
10-Q 2013-11-01 Filed 2013-12-03
10-Q 2013-08-02 Filed 2013-09-03
10-Q 2013-05-03 Filed 2013-06-04
10-K 2013-02-01 Filed 2013-04-02
10-Q 2012-11-02 Filed 2012-12-04
10-Q 2012-08-03 Filed 2012-09-04
10-Q 2012-05-04 Filed 2012-06-06
10-K 2012-02-03 Filed 2012-04-02
10-Q 2011-10-28 Filed 2011-12-01
10-Q 2011-07-29 Filed 2011-08-30
10-Q 2011-04-29 Filed 2011-05-31
10-K 2011-01-28 Filed 2011-03-29
10-Q 2010-10-29 Filed 2010-12-01
10-Q 2010-07-30 Filed 2010-08-31
10-Q 2010-04-30 Filed 2010-06-02
10-K 2010-01-29 Filed 2010-03-30
8-K 2020-05-20 Earnings, Exhibits
8-K 2020-04-29 Amend Bylaw, Exhibits
8-K 2020-04-06 Officers
8-K 2020-03-24 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2020-03-23 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2020-02-26 Earnings, Exhibits
8-K 2020-01-03 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-11-20 Earnings, Exhibits
8-K 2019-11-08 Officers, Amend Bylaw
8-K 2019-10-23 Officers
8-K 2019-09-09 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-08-21 Earnings, Exhibits
8-K 2019-05-31 Shareholder Vote
8-K 2019-05-22 Earnings, Exhibits
8-K 2019-04-03 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2019-02-27 Earnings, Exhibits
8-K 2019-01-25 Amend Bylaw, Exhibits
8-K 2018-12-12 Regulation FD, Exhibits
8-K 2018-11-20 Earnings, Exhibits
8-K 2018-11-19 Officers
8-K 2018-11-08 Officers
8-K 2018-10-31 Exit Costs, Impairments, Regulation FD, Exhibits
8-K 2018-10-02 Officers
8-K 2018-09-27 Officers
8-K 2018-09-10 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-08-16 Earnings, Exit Costs, Impairments, Officers, Amend Bylaw, Code of Ethics, Regulation FD, Exhibits
8-K 2018-07-20 Officers, Regulation FD, Exhibits
8-K 2018-07-09 Officers, Regulation FD, Exhibits
8-K 2018-06-18 Officers
8-K 2018-06-04 Officers, Regulation FD, Exhibits
8-K 2018-05-31 Officers
8-K 2018-05-23 Earnings, Exhibits
8-K 2018-05-20 Officers, Amend Bylaw, Regulation FD, Exhibits
8-K 2018-03-26 Officers, Exhibits
8-K 2018-02-28 Earnings, Exhibits
8-K 2018-01-18 Officers, Exhibits

LOW 10K Annual Report

Part I
Item 1 - Business
Item 1A - Risk Factors
Item 1B - Unresolved Staff Comments
Item 2 - Properties
Item 3 - Legal Proceedings
Item 4 - Mine Safety Disclosures
Part II
Item 5 - Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6 - Selected Financial Data
Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A - Quantitative and Qualitative Disclosures About Market Risk
Item 8 - Financial Statements and Supplementary Data
Note 1: Summary of Significant Accounting Policies
Note 3: Acquisitions
Note 4: Investment in Australian Joint Venture
Note 5: Leases
Note 6: Fair Value Measurements
Note 7: Property and Accumulated Depreciation
Note 8: Exit Activities
Note 9: Short - Term Borrowings
Note 10: Long - Term Debt
Note 11: Shareholders' Equity
Note 12: Accounting for Share - Based Payments
Note 13: Employee Retirement Plans
Note 14: Income Taxes
Note 15: Earnings per Share
Note 16: Commitments and Contingencies
Note 17: Related Parties
Note 18: Other Information
Note 19: Subsequent Events
Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A - Controls and Procedures
Item 9B - Other Information
Part III
Item 10 - Directors, Executive Officers and Corporate Governance
Item 11 - Executive Compensation
Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13 - Certain Relationships and Related Transactions, and Director Independence
Item 14 - Principal Accountant Fees and Services
Part IV
Item 15 - Exhibits and Financial Statement Schedules
Item 16 - Form 10 - K Summary
EX-4.21 exhibit42101312020.htm
EX-10.22 exhibit102201312020.htm
EX-10.28 exhibit102801312020.htm
EX-21.1 exhibit21101312020.htm
EX-23.1 exhibit23101312020.htm
EX-31.1 exhibit31101312020.htm
EX-31.2 exhibit31201312020.htm
EX-32.1 exhibit32101312020.htm
EX-32.2 exhibit32201312020.htm
EX-99.1 exhibit99101312020.htm

Lowe's Earnings 2020-01-31

Balance SheetIncome StatementCash Flow
45362718902012201420172020
Assets, Equity
25201510502012201420172020
Rev, G Profit, Net Income
3.52.31.1-0.2-1.4-2.62012201420172020
Ops, Inv, Fin

Document
false--01-31FY20190000060667P1YP1Y64P7Y13000000130000000.505600000000.0801000000763000000801000000763000000P5YP5YP5YP7YP20YP1YP5YP1YP5Y55000000.000P40YP15YP5YP2YP3YP3YP2YP3YP3YP2YP3Y 0000060667 2019-02-02 2020-01-31 0000060667 2020-03-13 0000060667 2019-08-02 0000060667 2018-02-03 2019-02-01 0000060667 2017-02-04 2018-02-02 0000060667 2020-01-31 0000060667 2019-02-01 0000060667 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-31 0000060667 us-gaap:RetainedEarningsMember 2018-02-03 2019-02-01 0000060667 us-gaap:RetainedEarningsMember 2019-02-01 0000060667 us-gaap:AdditionalPaidInCapitalMember 2019-02-02 2020-01-31 0000060667 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-02-04 2018-02-02 0000060667 us-gaap:AdditionalPaidInCapitalMember 2017-02-04 2018-02-02 0000060667 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-02-02 0000060667 us-gaap:AdditionalPaidInCapitalMember 2018-02-03 2019-02-01 0000060667 us-gaap:RetainedEarningsMember 2019-02-02 2020-01-31 0000060667 us-gaap:AdditionalPaidInCapitalMember 2018-02-02 0000060667 us-gaap:AdditionalPaidInCapitalMember 2020-01-31 0000060667 us-gaap:CommonStockMember 2017-02-04 2018-02-02 0000060667 us-gaap:CommonStockMember 2017-02-03 0000060667 us-gaap:RetainedEarningsMember 2017-02-04 2018-02-02 0000060667 us-gaap:CommonStockMember 2020-01-31 0000060667 us-gaap:CommonStockMember 2019-02-01 0000060667 us-gaap:RetainedEarningsMember 2019-02-02 0000060667 2019-02-02 0000060667 us-gaap:CommonStockMember 2018-02-03 2019-02-01 0000060667 us-gaap:AdditionalPaidInCapitalMember 2017-02-03 0000060667 us-gaap:CommonStockMember 2018-02-02 0000060667 2017-02-03 0000060667 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-02-03 0000060667 us-gaap:RetainedEarningsMember 2018-02-03 0000060667 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-02-01 0000060667 us-gaap:AdditionalPaidInCapitalMember 2019-02-01 0000060667 us-gaap:CommonStockMember 2019-02-02 2020-01-31 0000060667 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-02-03 2019-02-01 0000060667 us-gaap:RetainedEarningsMember 2020-01-31 0000060667 2018-02-03 0000060667 2018-02-02 0000060667 us-gaap:RetainedEarningsMember 2017-02-03 0000060667 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-02-02 2020-01-31 0000060667 us-gaap:RetainedEarningsMember 2018-02-02 0000060667 srt:MaximumMember us-gaap:LandAndBuildingMember 2020-01-31 0000060667 srt:MaximumMember us-gaap:EquipmentMember 2020-01-31 0000060667 us-gaap:AccountingStandardsUpdate201602Member 2019-02-02 0000060667 us-gaap:AccountingStandardsUpdate201602Member 2019-02-02 2019-02-02 0000060667 srt:MinimumMember us-gaap:LandAndBuildingMember 2020-01-31 0000060667 srt:MaximumMember 2019-02-02 2020-01-31 0000060667 us-gaap:LandAndBuildingMember 2020-01-31 0000060667 2018-11-03 2019-02-01 0000060667 low:UnitedStatesAndCanadaMember 2020-01-31 0000060667 srt:MaximumMember us-gaap:LandAndBuildingMember 2019-02-02 2020-01-31 0000060667 srt:MinimumMember us-gaap:EquipmentMember 2020-01-31 0000060667 srt:MinimumMember us-gaap:LandAndBuildingMember 2019-02-02 2020-01-31 0000060667 srt:MinimumMember 2019-02-02 2020-01-31 0000060667 low:BuildingProductsMember 2018-02-03 2019-02-01 0000060667 low:OtherProductsMember 2017-02-04 2018-02-02 0000060667 low:HardlinesMember 2017-02-04 2018-02-02 0000060667 low:BuildingProductsMember 2019-02-02 2020-01-31 0000060667 low:BuildingProductsMember 2017-02-04 2018-02-02 0000060667 low:HomeDecorMember 2017-02-04 2018-02-02 0000060667 low:HardlinesMember 2019-02-02 2020-01-31 0000060667 low:OtherProductsMember 2019-02-02 2020-01-31 0000060667 low:HomeDecorMember 2019-02-02 2020-01-31 0000060667 low:HomeDecorMember 2018-02-03 2019-02-01 0000060667 low:HardlinesMember 2018-02-03 2019-02-01 0000060667 low:OtherProductsMember 2018-02-03 2019-02-01 0000060667 us-gaap:ProductMember 2017-02-04 2018-02-02 0000060667 us-gaap:ProductMember 2019-02-02 2020-01-31 0000060667 us-gaap:ServiceMember 2017-02-04 2018-02-02 0000060667 us-gaap:ServiceMember 2019-02-02 2020-01-31 0000060667 us-gaap:ProductAndServiceOtherMember 2018-02-03 2019-02-01 0000060667 us-gaap:ProductMember 2018-02-03 2019-02-01 0000060667 us-gaap:ProductAndServiceOtherMember 2017-02-04 2018-02-02 0000060667 us-gaap:ProductAndServiceOtherMember 2019-02-02 2020-01-31 0000060667 us-gaap:ServiceMember 2018-02-03 2019-02-01 0000060667 country:US 2019-02-02 2020-01-31 0000060667 country:US 2018-02-03 2019-02-01 0000060667 us-gaap:NonUsMember 2017-02-04 2018-02-02 0000060667 country:US 2017-02-04 2018-02-02 0000060667 us-gaap:NonUsMember 2019-02-02 2020-01-31 0000060667 us-gaap:NonUsMember 2018-02-03 2019-02-01 0000060667 low:MaintenanceSupplyHeadquartersMember us-gaap:TrademarksMember 2017-06-23 0000060667 low:MaintenanceSupplyHeadquartersMember 2017-06-23 0000060667 low:MaintenanceSupplyHeadquartersMember us-gaap:TrademarksMember 2017-06-23 2017-06-23 0000060667 low:MaintenanceSupplyHeadquartersMember us-gaap:CustomerListsMember 2017-06-23 2017-06-23 0000060667 low:MaintenanceSupplyHeadquartersMember us-gaap:CustomerListsMember 2017-06-23 0000060667 low:MaintenanceSupplyHeadquartersMember 2017-06-23 2017-06-23 0000060667 low:HydroxHoldingsPtyLtdMember 2017-05-06 2017-08-04 0000060667 us-gaap:UnsecuredDebtMember 2019-02-01 0000060667 us-gaap:SecuredDebtMember 2020-01-31 0000060667 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-02-01 0000060667 us-gaap:SecuredDebtMember 2019-02-01 0000060667 us-gaap:UnsecuredDebtMember 2020-01-31 0000060667 us-gaap:FairValueInputsLevel1Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:UnsecuredDebtMember 2019-02-01 0000060667 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2020-01-31 0000060667 us-gaap:FairValueInputsLevel2Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:SecuredDebtMember 2020-01-31 0000060667 us-gaap:FairValueInputsLevel2Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:SecuredDebtMember 2019-02-01 0000060667 us-gaap:FairValueInputsLevel1Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:UnsecuredDebtMember 2020-01-31 0000060667 us-gaap:ShortTermInvestmentsMember us-gaap:FairValueInputsLevel2Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2019-02-01 0000060667 us-gaap:OtherLongTermInvestmentsMember us-gaap:FairValueInputsLevel2Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2020-01-31 0000060667 us-gaap:OtherLongTermInvestmentsMember us-gaap:FairValueInputsLevel2Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2019-02-01 0000060667 us-gaap:OtherLongTermInvestmentsMember us-gaap:FairValueInputsLevel1Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasurySecuritiesMember 2020-01-31 0000060667 us-gaap:ShortTermInvestmentsMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember 2020-01-31 0000060667 us-gaap:OtherLongTermInvestmentsMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember 2020-01-31 0000060667 us-gaap:ShortTermInvestmentsMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember 2019-02-01 0000060667 us-gaap:OtherLongTermInvestmentsMember us-gaap:FairValueInputsLevel2Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember 2020-01-31 0000060667 us-gaap:ShortTermInvestmentsMember us-gaap:FairValueInputsLevel2Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember 2020-01-31 0000060667 us-gaap:ShortTermInvestmentsMember us-gaap:FairValueInputsLevel2Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember 2019-02-01 0000060667 us-gaap:ShortTermInvestmentsMember us-gaap:FairValueInputsLevel2Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2020-01-31 0000060667 us-gaap:ShortTermInvestmentsMember us-gaap:FairValueInputsLevel1Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasurySecuritiesMember 2020-01-31 0000060667 us-gaap:ShortTermInvestmentsMember us-gaap:FairValueInputsLevel1Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:MoneyMarketFundsMember 2020-01-31 0000060667 us-gaap:ShortTermInvestmentsMember us-gaap:FairValueInputsLevel1Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:MoneyMarketFundsMember 2019-02-01 0000060667 us-gaap:OtherLongTermInvestmentsMember us-gaap:FairValueInputsLevel1Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasurySecuritiesMember 2019-02-01 0000060667 us-gaap:OtherLongTermInvestmentsMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember 2019-02-01 0000060667 us-gaap:OtherLongTermInvestmentsMember us-gaap:FairValueInputsLevel2Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember 2019-02-01 0000060667 us-gaap:ShortTermInvestmentsMember us-gaap:FairValueInputsLevel1Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasurySecuritiesMember 2019-02-01 0000060667 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-02-01 0000060667 us-gaap:FairValueMeasurementsNonrecurringMember 2019-02-02 2020-01-31 0000060667 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2018-02-03 2019-02-01 0000060667 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2020-01-31 0000060667 low:MexicoOperationLocationsAndCorporateFacilityMember 2019-02-02 2020-01-31 0000060667 us-gaap:FairValueInputsLevel3Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember srt:RetailSiteMember 2019-02-01 0000060667 us-gaap:FairValueInputsLevel3Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2020-01-31 0000060667 low:MexicoOperationLocationsAndCorporateFacilityMember 2018-02-03 2019-02-01 0000060667 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-02-02 2020-01-31 0000060667 us-gaap:FairValueInputsLevel3Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-02-01 0000060667 us-gaap:FairValueMeasurementsNonrecurringMember srt:RetailSiteMember 2019-02-02 2020-01-31 0000060667 us-gaap:FairValueMeasurementsNonrecurringMember 2018-02-03 2019-02-01 0000060667 us-gaap:FairValueMeasurementsNonrecurringMember srt:RetailSiteMember 2018-02-03 2019-02-01 0000060667 us-gaap:FairValueInputsLevel3Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember srt:RetailSiteMember 2020-01-31 0000060667 us-gaap:FairValueMeasurementsNonrecurringMember low:U.S.AndCanadaOperatingLocationsAndExitOfNonCoreActivitiesMember 2018-08-04 2018-11-02 0000060667 low:StrategicReassessmentClosuresMember 2018-11-02 0000060667 us-gaap:FairValueInputsLevel3Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember low:MexicoOperationLocationsAndCorporateFacilityMember 2018-11-02 0000060667 low:MexicoOperationLocationsAndCorporateFacilityMember 2019-02-01 0000060667 us-gaap:FairValueInputsLevel3Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember low:CanadianStoreLocationsMember 2019-11-01 0000060667 low:LongLivedAssetImpairmentMember low:OrchardSupplyHardwareMember 2018-05-05 2018-08-03 0000060667 us-gaap:FairValueInputsLevel3Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember low:LocationClosuresMember 2018-11-02 0000060667 us-gaap:FairValueMeasurementsNonrecurringMember low:CanadianStoreLocationsMember 2019-08-03 2019-11-01 0000060667 low:MexicoOperationLocationsAndCorporateFacilityMember 2018-11-03 2019-02-01 0000060667 low:MexicoOperationLocationsAndCorporateFacilityMember 2018-08-04 2018-11-02 0000060667 us-gaap:FairValueInputsLevel3Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember low:OrchardSupplyHardwareMember 2018-08-03 0000060667 us-gaap:FairValueMeasurementsNonrecurringMember low:MexicoOperationLocationsAndCorporateFacilityMember 2018-08-04 2018-11-02 0000060667 us-gaap:LandMember 2020-01-31 0000060667 us-gaap:EquipmentMember 2020-01-31 0000060667 us-gaap:BuildingAndBuildingImprovementsMember 2019-02-01 0000060667 us-gaap:EquipmentMember 2019-02-01 0000060667 us-gaap:BuildingAndBuildingImprovementsMember 2020-01-31 0000060667 us-gaap:LandMember 2019-02-01 0000060667 us-gaap:ConstructionInProgressMember 2019-02-01 0000060667 us-gaap:ConstructionInProgressMember 2020-01-31 0000060667 srt:MaximumMember us-gaap:EquipmentMember 2019-02-02 2020-01-31 0000060667 srt:MaximumMember us-gaap:BuildingAndBuildingImprovementsMember 2019-02-02 2020-01-31 0000060667 srt:MinimumMember us-gaap:EquipmentMember 2019-02-02 2020-01-31 0000060667 srt:MinimumMember us-gaap:BuildingAndBuildingImprovementsMember 2019-02-02 2020-01-31 0000060667 low:CanadaRestructuringMember 2019-08-03 2019-11-01 0000060667 low:StrategicReassessmentClosuresMember 2018-10-31 0000060667 low:OrchardSupplyHardwareMember 2018-08-17 2018-08-17 0000060667 low:LongLivedAssetImpairmentMember low:ExitOfNonCoreActivitiesMember 2018-02-03 2019-02-01 0000060667 low:ExitOfNonCoreActivitiesMember 2018-02-03 2019-02-01 0000060667 us-gaap:EmployeeSeveranceMember low:ExitOfNonCoreActivitiesMember 2018-02-03 2019-02-01 0000060667 us-gaap:OtherRestructuringMember low:ExitOfNonCoreActivitiesMember 2018-02-03 2019-02-01 0000060667 low:AcceleratedDepreciationAndAmortizationMember low:OrchardSupplyHardwareMember 2018-02-03 2019-02-01 0000060667 us-gaap:ContractTerminationMember low:OrchardSupplyHardwareMember 2018-02-03 2019-02-01 0000060667 low:DiscontinuedProjectWriteOffsMember low:OrchardSupplyHardwareMember 2018-02-03 2019-02-01 0000060667 low:LongLivedAssetImpairmentMember low:OrchardSupplyHardwareMember 2018-02-03 2019-02-01 0000060667 us-gaap:EmployeeSeveranceMember low:OrchardSupplyHardwareMember 2018-02-03 2019-02-01 0000060667 low:OrchardSupplyHardwareMember 2018-02-03 2019-02-01 0000060667 low:AcceleratedDepreciationAndAmortizationMember low:CanadaRestructuringMember 2019-02-02 2020-01-31 0000060667 low:LongLivedAssetImpairmentMember low:CanadaRestructuringMember 2019-02-02 2020-01-31 0000060667 low:CanadaRestructuringMember 2019-02-02 2020-01-31 0000060667 us-gaap:EmployeeSeveranceMember low:CanadaRestructuringMember 2019-02-02 2020-01-31 0000060667 us-gaap:OtherRestructuringMember low:CanadaRestructuringMember 2019-02-02 2020-01-31 0000060667 us-gaap:ContractTerminationMember 2018-02-02 0000060667 us-gaap:ContractTerminationMember 2018-02-03 2019-02-01 0000060667 us-gaap:ContractTerminationMember 2019-02-02 2020-01-31 0000060667 us-gaap:ContractTerminationMember 2020-01-31 0000060667 us-gaap:ContractTerminationMember 2019-02-01 0000060667 low:MexicoRetailOperationsMember 2018-02-03 2019-02-01 0000060667 low:LongLivedAssetImpairmentMember low:MexicoRetailOperationsMember 2018-02-03 2019-02-01 0000060667 low:AcceleratedDepreciationAndAmortizationMember low:StrategicReassessmentClosuresMember 2018-02-03 2019-02-01 0000060667 us-gaap:ContractTerminationMember low:StrategicReassessmentClosuresMember 2018-02-03 2019-02-01 0000060667 low:DiscontinuedProjectWriteOffsMember low:StrategicReassessmentClosuresMember 2018-02-03 2019-02-01 0000060667 low:LongLivedAssetImpairmentMember low:StrategicReassessmentClosuresMember 2018-02-03 2019-02-01 0000060667 us-gaap:EmployeeSeveranceMember low:StrategicReassessmentClosuresMember 2018-02-03 2019-02-01 0000060667 low:StrategicReassessmentClosuresMember 2018-02-03 2019-02-01 0000060667 low:TheTermLoanMember 2020-01-31 0000060667 low:TheTermLoanMember 2020-01-01 2020-01-31 0000060667 low:TheTermLoanMember us-gaap:BaseRateMember 2020-01-01 2020-01-31 0000060667 us-gaap:RevolvingCreditFacilityMember low:SecondAmendedAndRestatedCreditAgreementMember 2019-01-31 0000060667 low:TheTermLoanMember us-gaap:EurodollarMember 2020-01-01 2020-01-31 0000060667 low:SecondAmendedAndRestatedCreditAgreementMember 2020-01-31 0000060667 us-gaap:CommercialPaperMember 2019-02-01 0000060667 us-gaap:CommercialPaperMember 2020-01-31 0000060667 us-gaap:RevolvingCreditFacilityMember low:A2019CreditAgreementMember 2019-09-30 0000060667 us-gaap:RevolvingCreditFacilityMember low:A2018CreditAgreementMember 2018-09-30 0000060667 us-gaap:RevolvingCreditFacilityMember low:SecondAmendedAndRestatedCreditAgreementMember 2018-09-30 0000060667 us-gaap:RevolvingCreditFacilityMember low:A2019CreditAgreementMember 2019-09-01 2019-09-30 0000060667 us-gaap:RevolvingCreditFacilityMember low:A2018CreditAgreementMember 2018-09-01 2018-09-30 0000060667 us-gaap:RevolvingCreditFacilityMember low:SecondAmendedAndRestatedCreditAgreementMember 2018-09-01 2018-09-30 0000060667 low:MayTwoThousandTwentySevenFixedRateNotesMember 2017-05-31 0000060667 low:MayTwoThousandFortySevenFixedRateNotesMember 2017-05-31 0000060667 low:CorporateDebtSecuritiesDueInTwentySixToThirtyYearsMember us-gaap:UnsecuredDebtMember 2020-01-31 0000060667 low:CorporateDebtSecuritiesDueInOneToFiveYearsMember us-gaap:UnsecuredDebtMember 2019-02-01 0000060667 low:CorporateDebtSecuritiesDueInTwentyOneToTwentyFiveYearsMember us-gaap:UnsecuredDebtMember 2019-02-01 0000060667 low:MortgageNotesDueMember us-gaap:SecuredDebtMember 2019-02-01 0000060667 low:CapitalizedLeaseObligationsDueMember us-gaap:UnsecuredDebtMember 2020-01-31 0000060667 low:CorporateDebtSecuritiesDueInTwentySixToThirtyYearsMember us-gaap:UnsecuredDebtMember 2019-02-01 0000060667 low:CorporateDebtSecuritiesDueInSixteenToTwentyYearsMember us-gaap:UnsecuredDebtMember 2020-01-31 0000060667 low:MortgageNotesDueMember us-gaap:SecuredDebtMember 2020-01-31 0000060667 low:CorporateDebtSecuritiesDueInSixteenToTwentyYearsMember us-gaap:UnsecuredDebtMember 2019-02-01 0000060667 low:CorporateDebtSecuritiesDueInOneToFiveYearsMember us-gaap:UnsecuredDebtMember 2020-01-31 0000060667 low:CorporateDebtSecuritiesDueInTwentyOneToTwentyFiveYearsMember us-gaap:UnsecuredDebtMember 2020-01-31 0000060667 low:CorporateDebtSecuritiesDueInSixToTenYearsMember us-gaap:UnsecuredDebtMember 2020-01-31 0000060667 low:CorporateDebtSecuritiesDueInSixToTenYearsMember us-gaap:UnsecuredDebtMember 2019-02-01 0000060667 low:CapitalizedLeaseObligationsDueMember us-gaap:UnsecuredDebtMember 2019-02-01 0000060667 us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2020-01-31 0000060667 low:MortgageNotesDueMember 2020-01-31 0000060667 low:TwoThousandSixteenSeventeenCombinedNotesMember 2019-02-02 2020-01-31 0000060667 low:AprilTwoThousandTwentyNineFixedRateNotesMember 2019-04-30 0000060667 low:AprilTwoThousandFortyNineFixedRateNotesMember 2019-04-30 0000060667 2017-02-04 2017-05-05 0000060667 srt:MinimumMember 2019-02-02 2019-05-03 0000060667 2018-05-05 2018-08-03 0000060667 2019-02-02 2019-05-03 0000060667 2017-05-06 2017-08-04 0000060667 2018-08-04 2018-11-02 0000060667 2019-08-03 2019-11-01 0000060667 2019-05-04 2019-08-02 0000060667 2017-08-05 2017-11-03 0000060667 srt:MaximumMember 2019-08-03 2019-11-01 0000060667 srt:MinimumMember 2019-08-03 2019-11-01 0000060667 srt:MaximumMember 2019-02-02 2019-05-03 0000060667 srt:MaximumMember 2019-05-04 2019-08-02 0000060667 srt:MinimumMember 2019-05-04 2019-08-02 0000060667 2019-11-01 0000060667 2019-05-03 0000060667 2018-12-12 0000060667 low:OpenMarketPurchasesMember 2019-02-02 2020-01-31 0000060667 low:AcceleratedShareRepurchaseAgreementPurchasesMember 2019-02-02 2020-01-31 0000060667 low:SharesRepurchasedFromEmployeesMember 2017-02-04 2018-02-02 0000060667 low:SharesRepurchasedFromEmployeesMember 2019-02-02 2020-01-31 0000060667 low:SharesRepurchasedFromEmployeesMember 2018-02-03 2019-02-01 0000060667 low:ShareRepurchaseProgramMember 2017-02-04 2018-02-02 0000060667 low:ShareRepurchaseProgramMember 2019-02-02 2020-01-31 0000060667 low:ShareRepurchaseProgramMember 2018-02-03 2019-02-01 0000060667 us-gaap:RestrictedStockUnitsRSUMember 2019-02-02 2020-01-31 0000060667 us-gaap:RestrictedStockUnitsRSUMember 2020-01-31 0000060667 us-gaap:RestrictedStockUnitsRSUMember 2019-02-01 0000060667 us-gaap:RestrictedStockMember 2019-02-02 2020-01-31 0000060667 us-gaap:RestrictedStockMember 2020-01-31 0000060667 us-gaap:RestrictedStockMember 2019-02-01 0000060667 us-gaap:PerformanceSharesMember 2019-02-02 2020-01-31 0000060667 us-gaap:PerformanceSharesMember 2020-01-31 0000060667 us-gaap:PerformanceSharesMember 2019-02-01 0000060667 us-gaap:RestrictedStockMember 2017-02-04 2018-02-02 0000060667 us-gaap:EmployeeStockMember 2018-02-03 2019-02-01 0000060667 low:StockIncentivePlansMember 2020-01-31 0000060667 low:ROICPerformanceAwardMember 2020-01-31 0000060667 us-gaap:EmployeeStockMember 2019-02-02 2020-01-31 0000060667 us-gaap:EmployeeStockOptionMember 2017-02-04 2018-02-02 0000060667 low:DeferredStockUnitsMember 2017-02-04 2018-02-02 0000060667 us-gaap:RestrictedStockMember us-gaap:ShareBasedCompensationAwardTrancheOneMember 2019-02-02 2020-01-31 0000060667 us-gaap:RestrictedStockUnitsRSUMember 2018-02-03 2019-02-01 0000060667 us-gaap:EmployeeStockOptionMember 2019-02-02 2020-01-31 0000060667 us-gaap:RestrictedStockUnitsRSUMember 2017-02-04 2018-02-02 0000060667 us-gaap:EmployeeStockMember 2020-01-31 0000060667 us-gaap:RestrictedStockMember 2018-02-03 2019-02-01 0000060667 us-gaap:RestrictedStockUnitsRSUMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember 2019-02-02 2020-01-31 0000060667 us-gaap:PerformanceSharesMember 2018-02-03 2019-02-01 0000060667 us-gaap:PerformanceSharesMember 2017-02-04 2018-02-02 0000060667 low:DeferredStockUnitsMember 2019-02-02 2020-01-31 0000060667 srt:MaximumMember us-gaap:PerformanceSharesMember 2020-01-31 0000060667 srt:MinimumMember us-gaap:PerformanceSharesMember 2020-01-31 0000060667 low:DeferredStockUnitsMember 2018-02-03 2019-02-01 0000060667 low:RONCAAPerformanceAwardMember 2020-01-31 0000060667 srt:MaximumMember us-gaap:EmployeeStockOptionMember 2019-02-02 2020-01-31 0000060667 us-gaap:RestrictedStockUnitsRSUMember us-gaap:ShareBasedCompensationAwardTrancheOneMember 2019-02-02 2020-01-31 0000060667 us-gaap:EmployeeStockOptionMember 2018-02-03 2019-02-01 0000060667 us-gaap:RestrictedStockMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember 2019-02-02 2020-01-31 0000060667 us-gaap:EmployeeStockMember 2017-02-04 2018-02-02 0000060667 low:DeferredStockUnitsMember 2020-01-31 0000060667 srt:MinimumMember us-gaap:EmployeeStockOptionMember 2019-02-02 2020-01-31 0000060667 us-gaap:ForeignCountryMember 2019-02-01 0000060667 low:RONAincMember us-gaap:CanadaRevenueAgencyMember 2020-01-31 0000060667 us-gaap:ForeignCountryMember 2020-01-31 0000060667 low:HydroxHoldingsPtyLtdMember 2020-01-31 0000060667 low:ConsumerPackagedGoodsVendorMember 2019-02-02 2020-01-31 0000060667 low:TransportationandBusinessServicesVendorMember 2018-02-03 2019-02-01 0000060667 low:TransportationandBusinessServicesVendorMember 2019-02-02 2020-01-31 0000060667 low:ConsumerPackagedGoodsVendorMember 2018-02-03 2019-02-01 0000060667 low:ConsumerPackagedGoodsVendorMember 2017-02-04 2018-02-02 0000060667 low:PaintSalesMember 2017-02-04 2018-02-02 0000060667 low:OtherSalesMember 2018-02-03 2019-02-01 0000060667 low:OtherSalesMember 2017-02-04 2018-02-02 0000060667 low:LumberAndBuildingMaterialsMember 2017-02-04 2018-02-02 0000060667 low:PaintSalesMember 2019-02-02 2020-01-31 0000060667 low:FlooringMember 2019-02-02 2020-01-31 0000060667 low:ToolsSalesMember 2019-02-02 2020-01-31 0000060667 low:HardwareMember 2019-02-02 2020-01-31 0000060667 low:MillworkMember 2018-02-03 2019-02-01 0000060667 low:SeasonalAndOutdoorLivingMember 2017-02-04 2018-02-02 0000060667 low:LawnAndGardenMember 2018-02-03 2019-02-01 0000060667 low:ToolsSalesMember 2018-02-03 2019-02-01 0000060667 low:LawnAndGardenMember 2017-02-04 2018-02-02 0000060667 low:DecorMember 2018-02-03 2019-02-01 0000060667 low:LumberAndBuildingMaterialsMember 2019-02-02 2020-01-31 0000060667 low:KitchenAndBathMember 2017-02-04 2018-02-02 0000060667 low:KitchenAndBathMember 2018-02-03 2019-02-01 0000060667 low:RoughPlumbingAndElectricalMember 2017-02-04 2018-02-02 0000060667 low:LightingMember 2018-02-03 2019-02-01 0000060667 low:FlooringMember 2018-02-03 2019-02-01 0000060667 low:RoughPlumbingAndElectricalMember 2019-02-02 2020-01-31 0000060667 low:ToolsSalesMember 2017-02-04 2018-02-02 0000060667 low:RoughPlumbingAndElectricalMember 2018-02-03 2019-02-01 0000060667 low:LumberAndBuildingMaterialsMember 2018-02-03 2019-02-01 0000060667 low:SeasonalAndOutdoorLivingMember 2019-02-02 2020-01-31 0000060667 low:AppliancesMember 2018-02-03 2019-02-01 0000060667 low:PaintSalesMember 2018-02-03 2019-02-01 0000060667 low:OtherSalesMember 2019-02-02 2020-01-31 0000060667 low:DecorMember 2017-02-04 2018-02-02 0000060667 low:LightingMember 2019-02-02 2020-01-31 0000060667 low:AppliancesMember 2017-02-04 2018-02-02 0000060667 low:MillworkMember 2017-02-04 2018-02-02 0000060667 low:LightingMember 2017-02-04 2018-02-02 0000060667 low:HardwareMember 2017-02-04 2018-02-02 0000060667 low:AppliancesMember 2019-02-02 2020-01-31 0000060667 low:KitchenAndBathMember 2019-02-02 2020-01-31 0000060667 low:HardwareMember 2018-02-03 2019-02-01 0000060667 low:FlooringMember 2017-02-04 2018-02-02 0000060667 low:MillworkMember 2019-02-02 2020-01-31 0000060667 low:DecorMember 2019-02-02 2020-01-31 0000060667 low:SeasonalAndOutdoorLivingMember 2018-02-03 2019-02-01 0000060667 low:LawnAndGardenMember 2019-02-02 2020-01-31 0000060667 us-gaap:RevolvingCreditFacilityMember low:A2020CreditAgreementMember us-gaap:SubsequentEventMember 2020-03-23 0000060667 us-gaap:RevolvingCreditFacilityMember low:A2020CreditAgreementMember us-gaap:SubsequentEventMember 2020-03-23 2020-03-23 0000060667 low:ReserveForInventoryShrinkageMember 2019-02-02 2020-01-31 0000060667 us-gaap:SalesReturnsAndAllowancesMember 2018-02-03 2019-02-01 0000060667 low:ReserveForLossOnObsoleteInventoryMember 2017-02-04 2018-02-02 0000060667 low:ReserveForLossOnObsoleteInventoryMember 2018-02-03 2019-02-01 0000060667 us-gaap:SalesReturnsAndAllowancesMember 2018-02-02 0000060667 low:ReserveForLossOnObsoleteInventoryMember 2019-02-01 0000060667 us-gaap:SalesReturnsAndAllowancesMember 2019-02-01 0000060667 low:SelfInsuranceReserveMember 2019-02-02 2020-01-31 0000060667 low:ReserveForLossOnObsoleteInventoryMember 2019-02-02 2020-01-31 0000060667 us-gaap:BusinessRestructuringReservesMember 2017-02-04 2018-02-02 0000060667 low:ReserveForInventoryShrinkageMember 2018-02-02 0000060667 low:ReserveForInventoryShrinkageMember 2017-02-04 2018-02-02 0000060667 us-gaap:BusinessRestructuringReservesMember 2018-02-02 0000060667 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2018-02-03 2019-02-01 0000060667 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2017-02-04 2018-02-02 0000060667 us-gaap:BusinessRestructuringReservesMember 2019-02-01 0000060667 low:SelfInsuranceReserveMember 2017-02-04 2018-02-02 0000060667 us-gaap:BusinessRestructuringReservesMember 2018-02-03 2019-02-01 0000060667 us-gaap:SalesReturnsAndAllowancesMember 2019-02-02 2020-01-31 0000060667 us-gaap:BusinessRestructuringReservesMember 2017-02-03 0000060667 low:SelfInsuranceReserveMember 2018-02-02 0000060667 low:ReserveForInventoryShrinkageMember 2019-02-01 0000060667 low:SelfInsuranceReserveMember 2018-02-03 2019-02-01 0000060667 us-gaap:SalesReturnsAndAllowancesMember 2017-02-04 2018-02-02 0000060667 low:SelfInsuranceReserveMember 2020-01-31 0000060667 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2018-02-02 0000060667 low:ReserveForInventoryShrinkageMember 2018-02-03 2019-02-01 0000060667 low:SelfInsuranceReserveMember 2019-02-01 0000060667 low:ReserveForLossOnObsoleteInventoryMember 2020-01-31 0000060667 low:ReserveForInventoryShrinkageMember 2017-02-03 0000060667 us-gaap:SalesReturnsAndAllowancesMember 2017-02-03 0000060667 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2019-02-02 2020-01-31 0000060667 low:ReserveForInventoryShrinkageMember 2020-01-31 0000060667 us-gaap:BusinessRestructuringReservesMember 2019-02-02 2020-01-31 0000060667 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2017-02-03 0000060667 low:ReserveForLossOnObsoleteInventoryMember 2017-02-03 0000060667 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2019-02-01 0000060667 low:ReserveForLossOnObsoleteInventoryMember 2018-02-02 0000060667 low:SelfInsuranceReserveMember 2017-02-03 0000060667 us-gaap:BusinessRestructuringReservesMember 2020-01-31 0000060667 us-gaap:SalesReturnsAndAllowancesMember 2020-01-31 0000060667 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2020-01-31 xbrli:shares low:store xbrli:pure low:option iso4217:USD xbrli:shares iso4217:USD low:location
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file number   1-7898
lowesgraphicimage01.jpg
LOWE’S COMPANIES, INC.
(Exact name of registrant as specified in its charter)
North Carolina
 
56-0578072
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
 
 
 
 
1000 Lowe’s Blvd.
 
 
 
 
Mooresville
 
North Carolina
 
28117
(Address of principal executive offices)
 
(Zip Code)
 
 
 
 
 
 
 
Registrant’s telephone number, including area code
 
(704)
 
758-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.50 per share
LOW
New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes   No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.   Yes    No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes   No

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer
Non-accelerated filer
 
Smaller reporting company
 
 
 
Emerging growth company



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes    No

As of August 2, 2019, the last business day of the Company’s most recent second quarter, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $77.0 billion based on the closing sale price as reported on the New York Stock Exchange.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 
CLASS
 
OUTSTANDING AT 3/20/2020
Common Stock, $0.50 par value
 
754,948,648

DOCUMENTS INCORPORATED BY REFERENCE

Document
 
Parts Into Which Incorporated
Portions of the Proxy Statement for Lowe’s 2020 Annual Meeting of Shareholders
 

Part III




LOWE’S COMPANIES, INC.
- TABLE OF CONTENTS -
 
Page No.
PART I
 
 
Item 1.
 
Item 1A.
 
Item 1B.
 
Item 2.
 
Item 3.
 
Item 4.
 
 
 
 
 
 
PART II
 
 
Item 5.
 
Item 6.
 
Item 7.
 
Item 7A.
 
Item 8.
 
Item 9.
 
Item 9A.
 
Item 9B.
 
 
 
 
PART III
 
 
Item 10.
 
Item 11.
 
Item 12.
 
Item 13.
 
Item 14.
 
 
 
PART IV
 
 
Item 15.
 
Item 16.
 
 
 
 
 
 



DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements including words such as “believe”, “expect”, “anticipate”, “plan”, “desire”, “project”, “estimate”, “intend”, “will”, “should”, “could”, “would”, “may”, “strategy”, “potential”, “opportunity” and similar expressions are forward-looking statements. Forward-looking statements involve estimates, expectations, projections, goals, forecasts, assumptions, risks and uncertainties. Forward-looking statements include, but are not limited to, statements about future financial and operating results, Lowe’s plans, objectives, business outlook, priorities, expectations and intentions, expectations for sales growth, comparable sales, earnings and performance, shareholder value, capital expenditures, cash flows, the housing market, the home improvement industry, demand for services, share repurchases, Lowe’s strategic initiatives, including those relating to acquisitions and dispositions by Lowe’s and the expected impact of such transactions on our strategic and operational plans and financial results, and any statement of an assumption underlying any of the foregoing and other statements that are not historical facts.  Although we believe that the expectations, opinions, projections and comments reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and we can give no assurance that such statements will prove to be correct. Actual results may differ materially from those expressed or implied in such statements.

For a detailed description of the risks and uncertainties that we are exposed to, you should read Item 1A, “Risk Factors” included elsewhere in this Annual Report. All forward-looking statements speak only as of the date of this Annual Report or, in the case of any document incorporated by reference, the date of that document.  All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are qualified by the cautionary statements in this section and in Item 1A, “Risk Factors” included elsewhere in this Annual Report.  We do not undertake any obligation to update or publicly release any revisions to forward-looking statements to reflect events, circumstances or changes in expectations after the date of this Annual Report.


4


Part I

Item 1 - Business
 
General Information

Lowe’s Companies, Inc. and subsidiaries (the Company or Lowe’s) is a Fortune® 50 company and the world’s second largest home improvement retailer. As of January 31, 2020, Lowe’s operated 1,977 home improvement and hardware stores, representing approximately 208 million square feet of retail selling space. These operations included 1,728 stores located across 50 U.S. states, as well as 249 stores in Canada. During 2018 and 2019, the Company initiated a strategic reassessment of its business which has resulted in the exit of Orchard Supply Hardware and its operations in Mexico, as well as the closure of under-performing stores across the U.S. and Canada.

The Canadian stores include RONA inc. (RONA) which was acquired by Lowe’s in 2016. RONA operates 185 stores in Canada as of January 31, 2020, as well as services approximately 237 dealer-owned stores. The RONA stores represent various complementary store formats operating under various banners.

Lowe’s was incorporated in North Carolina in 1952 and has been publicly held since 1961. The Company’s common stock is listed on the New York Stock Exchange - ticker symbol “LOW”.

See Item 6, “Selected Financial Data”, of this Annual Report on Form 10-K (Annual Report), for historical revenues, profits and identifiable assets. For additional information about the Company’s performance and financial condition, see also Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, of this Annual Report.

Customers, Market and Competition

Our Customers

We serve homeowners, renters, and professional customers (Pro customers). Individual homeowners and renters complete a wide array of projects and vary along the spectrum of do-it-yourself (DIY) and do-it-for-me (DIFM). The Pro customer consists of two broad categories: construction trades; and maintenance, repair & operations.

Our Market

The U.S. market remains our predominant market, accounting for approximately 93% of consolidated sales for the fiscal year ended January 31, 2020. We are among the many businesses, including home centers, paint stores, hardware stores, lumber yards and garden centers, whose revenues are included in the Building Material and Garden Equipment and Supplies Dealers Subsector (444) of the Retail Trade Sector of the North American Industry Classification System (NAICS), the standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy.  

NAICS 444 represents roughly half of what we consider the total U.S. market for our products and services.  The broader market in which Lowe’s operates includes home-related sales through a variety of companies beyond those in NAICS 444.  These consist of other companies in the retail sector, including mass retailers, home goods specialty stores, and online retailers, as well as wholesalers that provide home-related products and services to homeowners, businesses, and the government.  
 
There are many variables that affect consumer demand for the home improvement products and services Lowe’s offers.  Key indicators we monitor include real disposable personal income, employment, home prices, and housing turnover.  We also monitor demographic and societal trends that shape home improvement industry growth.
 
Our Competition

The home improvement industry includes a broad competitive landscape that continues to evolve.  Lowe’s competes with national and international home improvement warehouse chains and lumber yards in most of the markets we serve.  We also compete with traditional hardware, plumbing, electrical, home supply retailers, and maintenance and repair organizations.  In addition, we compete with general merchandise retailers, warehouse clubs, online, and other specialty retailers as well as service providers that install home improvement products.  Location of stores, product assortment, product pricing and customer service continue to be key competitive factors in our industry, while the evolution of technology and customer

5


expectations also underscores the importance of omni-channel capabilities as a competitive factor.  To ensure ongoing competitiveness, Lowe’s focuses on delivering the right home improvement products, with the best service and value, across every channel and community we serve. See further discussion of competition in Item 1A, “Risk Factors”, of this Annual Report.
 
Products and Services

Our Products

Product Selection
To meet customers’ varying needs, we offer a complete line of products for construction, maintenance, repair, remodeling, and decorating.  We offer home improvement products in the following categories: Appliances, Décor, Paint, Hardware, Millwork, Lawn & Garden, Lighting, Lumber & Building Materials, Flooring, Kitchens & Bath, Rough Plumbing & Electrical, Seasonal & Outdoor Living, and Tools.  A typical Lowe’s-branded home improvement store stocks approximately 35,000 items, with hundreds of thousands of additional items available through our Special Order Sales system and various online selling channels. See Note 18 of the Notes to Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data”, of this Annual Report for historical revenues by product category for each of the last three fiscal years.

We are committed to offering a wide selection of national brand-name merchandise complemented by our selection of private brands.  In addition, we are dedicated to ensuring the products we sell are sourced in a socially responsible, efficient, and cost-effective manner.

National Brand-Name Merchandise
In many product categories, customers look for a familiar and trusted national brand to instill confidence in their purchase.  Lowe’s home improvement stores carry a wide selection of national brand-name merchandise such as Whirlpool®, GE®, LG®, and Samsung® appliances, Stainmaster® carpets, Sherwin-Williams® and Valspar® paints and stains, Pella® windows and doors, Pergo® hardwood flooring, DeWALT® power tools, Metabo® pneumatic tools, Weber® and Char-Broil® grills, Owens Corning® insulation and roofing, GAF® roofing, James Hardie® fiber cement siding, Marshalltown® masonry tools and concrete, Husqvarna® outdoor power equipment, John Deere® riding lawn mowers, Werner® ladders, Quoizel® lighting, Nest® products, SharkBite® plumbing products, A. O. Smith® water heaters, Norton® abrasives, and many more.  In 2019, we completed our rollout of CRAFTSMAN® tools.  Our merchandise selection provides the retail and Pro customer a one-stop shop for a wide variety of national brand-name merchandise needed to complete home improvement, repair, maintenance, or construction projects.

Private Brands
Private brands are an important element of our overall portfolio, helping to increase customer loyalty, drive sales, and expand differentiation.  We have a strong private brand presence across core categories, including some of our most valuable brands such as: Kobalt® tools, allen+roth® home décor products, Project Source® high-value project completers, Holiday Living® seasonal products, Harbor Breeze® ceiling fans, Sta-Green® lawn and garden products, Moxie® cleaning products, Reliabilt® doors, windows, and hardware, and Utilitech® electrical and utility products.

Supply Chain
We source our products from vendors worldwide and believe that alternative and competitive suppliers are available for virtually all of our products.  Whenever possible, we purchase directly from manufacturers to provide savings for customers and improve our gross margin.
To efficiently move product from our vendors to our stores and maintain in-stock levels, we own and operate distribution facilities that enable products to be received from vendors, stored and picked, or cross-docked, and then shipped to our retail locations or directly to customers. These facilities include 15 regional distribution centers (RDC) and 15 flatbed distribution centers (FDC) in the United States. The FDCs distribute merchandise that requires special handling due to size or type of packaging such as lumber, boards, panel products, pipe, siding, ladders, and building materials. On average, each RDC and FDC serves approximately 115 stores. We also own and operate seven distribution centers, including four lumber yards, to serve our Canadian market.
In addition to the RDCs and FDCs, we also operate coastal holding and transload facilities to handle import product, bulk distribution centers (BDC) to handle appliances and other big and bulky product, cross-dock delivery terminals (XDT) to fulfill final mile box truck deliveries, and a direct fulfillment center focused on parcel post eligible products. In fiscal 2019, we enhanced our distribution network by adding four XDTs and two BDCs, in addition to relocating one BDC.


6


Collectively, our facilities enable our import and e-commerce, as well as parcel post eligible products, to get to their destination as efficiently as possible. Most parcel post items can be ordered by a customer and delivered within two business days at standard shipping rates.
In fiscal 2019, on average, approximately 75% of the total dollar amount of merchandise we purchased was shipped through our distribution network, while the remaining portion was shipped directly to our stores from vendors.
Our Services

Installed Sales
We offer installation services through independent contractors in many of our product categories, with Appliances, Flooring, Kitchens & Bath, Lumber & Building Materials, and Millwork accounting for the majority of installed sales.  Our Installed Sales model, which separates selling and project administration tasks, allows our sales associates to focus on project selling, while project managers ensure that the details related to installing the products are efficiently executed.  Installed Sales, which includes both product and labor, accounted for approximately 6% of total sales in fiscal 2019.

Extended Protection Plans and Repair Services
We offer extended protection plans for various products within the Appliances, Kitchens & Bath, Décor, Millwork, Rough Plumbing & Electrical, Seasonal & Outdoor Living, Tools, and Hardware categories. These protection plans provide customers with product protection that enhances or extends coverage offered by the manufacturer’s warranty and provides additional customer-friendly benefits that go beyond the scope of a manufacturer’s warranty. The protection plans provide in-warranty benefits and out-of-warranty repair services for major appliances, outdoor power equipment, tools, grills, fireplaces, air conditioners, water heaters, and other eligible products through our stores or in the home through the Lowe’s Authorized Service Repair Network. We offer replacement plans for products in most of these categories when priced below $300, or otherwise specified category-specific price points. Our contact center takes customers’ calls, assesses the problems, and facilitates resolutions, making after-sales service easier for our customers by managing the entire process.

Selling Channels

We are continuing to enhance our omni-channel capabilities, which allows our customers to move from channel to channel with simple and seamless transitions even within the same transaction. For example, for many projects, more than half of our customers conduct research online before making an in-store purchase. For purchases made on Lowes.com, customers may pick up their purchase in-store, have their purchase delivered from a store, or have their purchase parcel shipped. In addition, flexible fulfillment options are available for in-store purchases and those made through the contact center. Regardless of the channels through which customers choose to engage with us, we strive to provide them with a seamless experience across channels and an endless aisle of products, enabled by our flexible fulfillment capabilities. Our ability to sell products in-store, online, on-site, or through our contact centers speaks to our ability to leverage our existing infrastructure with the omni-channel capabilities we continue to introduce.

In-Store
Our 1,792 Lowe’s-branded home improvement stores, inclusive of 1,728 in the U.S. and 64 in Canada, are generally open seven days per week and average approximately 112,000 square feet of retail selling space, plus approximately 32,000 square feet of outdoor garden center selling space.  The 185 RONA stores operate under various complementary store formats that address target customers and occasions. Our home improvement stores in the U.S. and Canada offer similar products and services, with certain variations based on local market factors.  We continue to develop and implement tools to make our sales associates more efficient and to integrate our order management and fulfillment processes.  Our home improvement stores have Wi-Fi capabilities that provide customers with internet access, making information available quickly to further simplify the shopping experience.

Online
Through our websites and mobile applications, we seek to empower consumers by providing a 24/7 shopping experience, online product information, customer ratings and reviews, online buying guides and how-to videos and other information.  These tools help consumers make more informed purchasing decisions and give them increased confidence to undertake home improvement projects. We enable customers to choose from a variety of fulfillment options, including buying online and picking up in-store, as well as delivery or parcel shipment to their homes.

On-Site
We have on-site specialists available for retail and Pro customers to assist them in selecting products and services for their projects.  Our Pro Sales Managers meet with Pro customers at their place of business or on a job site and leverage nearby stores

7


and our distribution network to ensure we meet customer needs for products and resources.  In addition, our Project Specialist Exteriors (PSE) program is available in a majority of U.S. Lowe’s home improvement stores to discuss exterior projects such as roofing, siding, fencing, and windows, whose characteristics lend themselves to an in-home consultative sales approach. 

Contact Centers
Lowe’s operates three contact centers which are located in Wilkesboro, NC; Albuquerque, NM; and Indianapolis, IN. These contact centers help Lowe’s enable an omni-channel customer experience by providing the ability to tender sales, coordinate deliveries, manage after-sale installations, facilitate repair services for Appliances and Outdoor Power Equipment, and answer general customer questions via phone, mail, e-mail, live chat, and social media.

Employees
 
As of January 31, 2020, we employed approximately 200,000 full-time and 120,000 part-time employees. Certain employees in Canada are subject to collective bargaining agreements.  No other employees are subject to collective bargaining agreements.  Management considers its relations with employees to be good.

Seasonality and Working Capital

The retail business in general is subject to seasonal influences, and our business is, to some extent, seasonal.  Historically, we have realized the highest volume of sales during our second fiscal quarter (May, June, and July) and the lowest volume of sales during our fourth fiscal quarter (November, December, and January).  Accordingly, our working capital requirements have historically been greater during our fourth fiscal quarter as we build inventory in anticipation of the spring selling season and as we experience lower fourth fiscal quarter sales volumes.  We fund our working capital requirements primarily through cash flows generated from operations, but also with short-term borrowings, as needed.  For more detailed information, see the Financial Condition, Liquidity and Capital Resources section in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, of this Annual Report.

Intellectual Property

The name “Lowe’s” is a registered service mark of one of our wholly owned subsidiaries. We consider this mark and the accompanying name recognition to be valuable to our business. This subsidiary and other wholly owned subsidiaries own and maintain various additional registered and unregistered trademarks, trade names and service marks, including but not limited to retail names “RONA” and “Reno Depot”, and private brand product names “Kobalt” and “allen+roth”. These subsidiaries also maintain various Internet domain names that are important to our business, and we also own registered and unregistered copyrights. In addition, we maintain patent portfolios related to some of our products and services and seek to patent or otherwise protect certain innovations that we incorporate into our products, services, or business operations.

Sustainability

Lowe’s is committed to leveraging our time, talents and resources to make our world better by making our communities stronger and encouraging people to want to connect with us as their partner in home improvement.

Sustainability and environmental matters are overseen by the Sustainability Committee of the Board of Directors. The Sustainability Committee monitors sustainability and environmental related trends and risks. The Company also has a Sustainability Council, led by senior executives focused on efficiently integrating sustainability into day-to-day operations. Our strategy focuses on responsible sourcing, offering safe and eco-friendly products, maintaining a diverse, healthy, engaged, and skilled workforce, supporting our local communities through safe and affordable housing, and operating ethically and responsibly. We have established goals to advance our corporate responsibility efforts, which can be found in our annual corporate responsibility report available at Newsroom.Lowes.com/Responsibility.

In fiscal 2019, Lowe’s was added to the Dow Jones Sustainability North America Index based on environmental, social, and governance practices. We want our customers to feel good about the high-quality products they choose at Lowe’s. Our products undergo a thorough selection process, beginning with our sourcing decisions. We give considerable attention to how our products are created and to the people who make them. Through collaboration and established management systems, we monitor our suppliers’ practices to secure high-quality products from suppliers who support worker rights and protect the environment. In fiscal 2019, we published a human rights policy and a revised conflict minerals policy to hold all suppliers to our rigorous standards. We also include innovative, efficient and eco-certified products in our portfolio that provide health and environmental benefits to meet the needs of an increasing customer demand. We continue to work with local and regional

8


utilities to offer customers assorted rebates for a variety of environmentally efficient products including ENERGY STAR and WaterSense®. As a responsible corporate citizen, Lowe’s takes environmental sustainability and product safety seriously. Lowe’s upholds a wood sourcing policy that provides that all wood products sold in our stores originate from well-managed, non-endangered forests and are seeking to achieve 100 percent Forest Stewardship Council (FSC) certification for all wood products sourced from identified regions at risk by the end of 2020. In fiscal 2019, we conducted a pilot audit for compliance verification to Lowe’s wood sourcing policy and plan to roll out the audit process broadly in 2020. Also, Lowe’s updated our safer chemicals policy, which guides our actions toward offering safer, more eco-friendly alternatives. In addition, Lowe’s stopped the sale of all products containing methylene chloride and N-Methyl-2-Pyrrolidone (NMP) online and from our stores and stopped purchasing residential carpet and rugs containing polyfluoroalkyl substances (PFAS).

We are committed to reducing our climate impact through sustainable practices and conservation. In fiscal 2019, 363 retail locations upgraded to interior light-emitting diode (LED) lighting.  We also replaced 118 stores’ aging HVAC units with high-efficiency models.  Our renewable energy portfolio will expand in the first quarter of 2020 when 100 megawatts of wind energy becomes operational in central Texas. The wind turbines will produce the equivalent amount of energy to power all 144 Lowe’s stores in Texas. We met both of our 2020 climate goals ahead of schedule and developed a more aggressive goal for 2030, to reduce our absolute scope 1 and 2 emissions by 40% below 2016 levels.

We are dedicated to promoting sustainable practices in the transportation industry, and we collaborate with the Environmental Protection Agency’s SmartWay program to reduce transportation emissions by managing and reducing fuel usage by creating incentives for freight contractors to improve efficiency and are proud to be the first retailer to achieve the Environmental Protection Agency’s SmartWay Excellence Award ten years in a row.

Lowe’s participates in the Carbon Disclosure Project’s (CDP) climate, forestry, and water security questionnaires to benchmark and quantify our environmental practices in an effort to be transparent in our progress and assist in the reduction of our contributions to climate change. In fiscal 2019, Lowe’s externally verified its greenhouse gas emissions data to validate our findings and increase confidence in our reporting. At a local level, store waste, including cardboard, broken appliances, wood pallets, and more, are recycled through national and regional partners, and we provide in-store recycling centers for our customers to bring in plastic planter pots, compact fluorescent lamp bulbs, plastic bags, and rechargeable batteries.

For more information about Lowe’s sustainability efforts, please visit Newsroom.Lowes.com/Responsibility.

Investing in Our Communities

Lowe’s believes in giving back to the neighborhoods where its associates live and work. Through charitable contributions, associate volunteerism and nonprofit partnerships, Lowe's has invested in communities since its inception.

As a Fortune® 50 home improvement company, Lowe’s is committed to creating safe and affordable housing and helping develop the next generation of skilled trade experts. Lowe’s and the Lowe’s Foundation donated more than $42 million in 2019 to nonprofit organizations supporting local communities in these areas, as well as military and disaster response.

This year, Lowe’s worked with organizations like Habitat for Humanity International, Rebuilding Together, Sleep In Heavenly Peace, Purple Heart Homes and Operation Finally Home to identify and address critical housing needs nationwide as part of its safe and affordable housing initiatives. By partnering with AMVETS, USO, National Urban League and SkillsUSA, Lowe's is working to address the skilled trades education gap through education, job creation, and community investments.

Lowe's support for communities impacted by disaster goes far beyond clean-up and recovery supplies. Lowe's partners with the American Red Cross, Reach Out WorldWide, Operation BBQ Relief, Federal Alliance for Safe Homes (FLASH) and others to not only respond to immediate needs, but to support impacted areas with rebuilding efforts in the months and years to come. In 2019, Lowe’s contributed more than $2 million to disaster relief and mobilized employee volunteers to help communities recovering from natural disasters like Hurricane Dorian, Texas flooding, California wildfires, and tornadoes across the southeast.

Lowe's is also passionate about serving its communities and encourages associates to support the neighborhoods where they live and work. Through the Lowe’s Heroes program, funds are allocated to each U.S. and Canadian store for a project in its community that associates can complete together. In 2019, all Lowe’s stores were able to give back to their communities due to this funding.


9


In addition, associates at company headquarters participated in on-campus community projects during the year, including assembling disaster cleanup buckets to be deployed to impacted areas after natural disasters and building beds that were donated to Sleep in Heavenly Peace, a nonprofit partner with a goal to end child bedlessness across the United States.

Lowe's is also dedicated to helping each other in times of need. Our Lowe’s Employee Relief Fund, made possible through associate donations and company matching, supports associates in times of significant, unforeseen financial hardship. In 2019, Lowe’s distributed over $2 million, helping 2,151 associates in need.
 
For more information on Lowe’s partnerships and latest community improvement projects, visit Newsroom.Lowes.com/Responsibility.

Available Information
 
Our Annual Report, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are made available free of charge through our internet website at www.Lowes.com/investor, as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the Securities and Exchange Commission (SEC).  The SEC maintains an Internet site, www.sec.gov, that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

Item 1A - Risk Factors

We describe below certain risks that could adversely affect our results of operations, financial condition, business reputation or business prospects.  These risk factors may change from time to time and may be amended, supplemented or superseded by updates to the risk factors contained in our future periodic reports on Form 10-K, Form 10-Q and reports on other forms we file with the SEC.  All forward-looking statements about our future results of operations or other matters made by us in this Annual Report, in our Annual Report to Lowe’s Shareholders and in our subsequently filed reports to the SEC, as well as in our press releases and other public communications, are qualified by the risks described below.

You should read these risk factors in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and our consolidated financial statements and related notes in Item 8. There also may be other factors that we cannot anticipate or that are not described in this Annual Report generally because we do not currently perceive them to be material. Those factors could cause results to differ materially from our expectations. In connection with any investment decision with respect to our securities, you should carefully consider the following risk factors, as well as the other information contained in this report and our other filings with the SEC.

We may be unable to adapt our business concept in a rapidly evolving retail environment to address the changing shopping habits, demands and demographics of our customers, or realize the intended benefits of organizational change initiatives.
The home improvement retail environment, like the retail environment generally, is rapidly evolving, and adapting our business concept to respond to our customers’ changing shopping habits and demands and their changing demographics is critical to our future success. Our success is dependent on our ability to identify and respond to the economic, social, style and other trends that affect demographic and consumer preferences in a variety of our merchandise categories and service offerings. Customers’ expectations about how they wish to research, purchase and receive products and services have also evolved. It is difficult to predict the mix of products and services that our customers will demand. Failure to identify such trends, adapt our business concept, and implement change, growth, and productivity initiatives successfully could negatively affect our relationship with our customers, the demand for the home improvement products and services we sell, the rate of growth of our business, our market share and results of operations.

We may not be able to realize the benefits of our strategic initiatives focused on omni-channel sales and marketing presence if we fail to deliver the capabilities required to execute on them.
Our interactions with customers have evolved into an omni-channel experience as they increasingly are using computers, tablets, mobile phones and other electronic devices to shop in our stores and online and provide feedback and public commentary about all aspects of our business. Omni-channel retail is quickly evolving, and we must anticipate and meet our customers’ expectations and counteract new developments and technology investments by our competitors. Our customer-facing technology systems must appeal to our customers, function as designed and provide a consistent customer experience. The success of our strategic initiatives to adapt our business concept to our customers’ changing shopping habits and demands and changing demographics will require us to deliver large, complex programs requiring integrated planning, initiative prioritization and program sequencing. These initiatives will require new competencies in many positions, and our management, employees and contractors will have to adapt and learn new skills and capabilities. To the extent they are unable

10


or unwilling to make these transformational changes, we may be unable to realize the full benefits of our strategic initiatives and expand our relevant market access. Failure to realize the benefits of amounts we invest in new technologies, products, or
services could result in the value of those investments being written down or written off. In addition, to support our strategic
initiatives and the related technology investments needed to implement our strategic investments, we must attract and retain a
large number of skilled professionals, including technology professionals. The market for these professionals is increasingly
competitive. Our results of operations, financial condition or business prospects could also be adversely affected if we fail to provide a consistent experience for our customers, regardless of sales channel, if our technology systems do not meet our customers’ expectations, if we are unable to counteract new developments and innovations implemented by our competitors or if we are unable to attract, retain and manage the talent succession of additional personnel at various levels of the Company who have the skills and capabilities we need to implement our strategic initiatives and drive the changes that are essential to successfully adapting our business concept in the rapidly changing retail environment.

Our business and our reputation could be adversely affected by cybersecurity incidents and the failure to protect customer, employee, vendor or Company information or to comply with evolving regulations relating to our obligation to protect our systems, assets and such information.
Cyber-attacks and tactics designed to gain access to and exploit sensitive information by breaching mission critical systems of large organizations are constantly evolving, and high profile security breaches leading to unauthorized release of sensitive customer information have occurred in recent years with increasing frequency at a number of major U.S. companies, including several large retailers, despite widespread recognition of the cyber-attack threat and improved data protection methods.  As with many other retailers, we collect, process, transmit and store certain personal information about our customers, employees and vendors, as well as confidential, sensitive, proprietary and business, personal and payment card information. Additionally, we use third-party service providers for certain services, such as authentication, content delivery, back-office support and other functions, and we provide such third-party service providers with personal and other confidential information necessary for the services concerned. Despite our continued vigilance and investment in information security, we, like others in our industry, are subject to the risk that unauthorized parties will attempt to gain access to our systems or our information through fraud or other means of deceiving our associates, third party providers, or vendors, and we or our third-party service providers cannot guarantee that we or they are able to adequately anticipate or prevent a future breach in our or their systems that results in the unauthorized access to, destruction, misuse or release of personal information or other sensitive data. It can be difficult to preempt or detect ever-evolving forms of cyber-attacks. If a ransomware attack occurs, it is possible that we could be prevented from accessing our own data. Our information security or our service providers’ information security may also be compromised because of human errors, including by employees, or system errors. Our systems and our service providers’ systems are additionally vulnerable to a number of other causes, such as critical infrastructure outages, computer viruses, technology system failures, catastrophic events or cyber-attacks, including the use of malicious codes, worms, phishing and ransomware. In the event that our systems are breached or damaged for any reason, we may also suffer loss or unavailability of data and interruptions to our business operations while such breach or damage is being remedied. Should these events occur, the unauthorized disclosure, loss or unavailability of data and disruption to our business may have a material adverse effect on our reputation, drive existing and potential customers away and lead to financial losses from remedial actions, or potential liability, including possible litigation and punitive damages.  A security breach resulting in the unauthorized release of data from our information systems or our third-party service providers’ information systems could also materially increase the costs we already incur to protect against such risks and require dedication of substantial resources to manage the aftermath of such a breach.  Data privacy and cybersecurity laws in the United States and internationally are constantly changing, and the implementation of these laws has become more complex.

In the United States alone, we may be subject to regulation at both the federal and state level. In order to maintain our compliance with such laws as they come to fruition, we may sustain increased costs in order to continually evaluate our policies and processes and adapt to new requirements that are or become applicable to us. As the regulatory environment relating to retailers’ and other companies’ obligation to protect personal information becomes stricter, a material failure on our part to comply with applicable regulations could subject us to fines, other regulatory sanctions or government investigation, and potentially to lawsuits brought by private individuals, regulators or states’ attorney general.

We could be adversely affected by the failure to adequately protect and maintain our intellectual property rights or by claims of third parties that we infringe their intellectual property rights.
Our proprietary rights in our trademarks, trade names, service marks, domain names, copyrights, patents, trade secrets and other intellectual property rights are valuable assets of our business. We rely on a combination of trademark law, patent law, copyright law, trade secret protections and contractual arrangements, such as nondisclosure and confidentiality agreements, to protect our proprietary rights. Maintenance and, when necessary, enforcement of our intellectual property rights require expenditure of financial and managerial resources, and despite our efforts, we may not always be able to effectively protect all such rights. We may not be able to prevent or even discover every instance of unauthorized third party uses of our intellectual property or dilution of our brand names, such as when a third party uses trademarks that are identical or similar to our own.

11


Additionally, our trade secrets are vulnerable to public disclosure by our own employees or as a result of a breach of or damage to our systems, which could result in theft of our proprietary property. We may also be subject to intellectual property infringement lawsuits, brought by third parties against us claiming that our operations, products or services infringe third party rights (whether meritorious or not), including patent and trademark rights, which can be time consuming and costly to defend or settle and may cause significant diversion of management attention and result in substantial monetary damages, injunctive orders against us, unfavorable royalty-bearing licensing agreements or bad publicity.

We are subject to payments-related risks that could increase our operating costs, expose us to fraud, subject us to potential liability and potentially disrupt our business.
We accept payments using a variety of methods, including credit cards, debit cards, credit accounts, our private label and co-branded credit cards, gift cards, consumer invoicing and physical bank checks, and we may offer different payment options over time. These payment options subject us to many compliance requirements, including, but not limited to, compliance with payment card association operating rules, including data security rules, certification requirements, rules governing electronic funds transfers and Payment Card Industry Data Security Standards. They also subject us to potential fraud by criminal elements seeking to discover and take advantage of security vulnerabilities that may exist in some of these payment systems. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs. We rely on third parties to provide payment processing services, including the processing of credit cards, debit cards, electronic checks, gift cards and promotional financing, and it could disrupt our business if these companies become unwilling or unable to provide these services to us. If we fail to comply with these rules or requirements, or if our data security systems are breached or compromised, we may be liable for card issuing banks’ costs, subject to fines and higher transaction fees, and lose our ability to accept credit and debit card payments from our customers, process electronic funds transfers, or facilitate other types of online payments, and our business and operating results could be adversely affected.

As customer-facing technology systems become an increasingly important part of our omni-channel sales and marketing strategy, the failure of those systems to perform effectively and reliably could keep us from delivering positive customer experiences.
Access to the Internet from computers, tablets, smart phones and other mobile communication devices has empowered our customers and changed the way they shop and how we interact with them.  Our websites, including Lowes.com and Lowesforpros.com, are a sales channel for our products, and are also a method of making product, project and other relevant information available to our customers that impacts our in-store sales.  Additionally, we have multiple affiliated websites and mobile apps through which we seek to inspire, inform, cross-sell, establish online communities among and otherwise interact with our customers.  Performance issues with these customer-facing technology systems, including temporary outages caused by distributed denial of service, ransomware or other cyber-attacks, or a complete failure of one or more of them without a disaster recovery plan that can be quickly implemented, could quickly destroy the positive benefits they provide to our home improvement business and negatively affect our customers’ perceptions of Lowe’s as a reliable online vendor and source of information about home improvement products and services.

If we fail to hire, train, manage and retain qualified sales associates and specialists with expanded skill sets or corporate support staff with the capabilities of delivering on strategic objectives, we could lose sales to our competitors, and our labor costs, resulting from operations or the execution of corporate strategies, could be negatively affected.
Our customers, whether they are homeowners, renters or commercial businesses, expect our sales associates and specialists to be well trained and knowledgeable about the products we sell and the home improvement services we provide. We compete with other retailers for many of our sales associates and specialists, and we invest significantly in them with respect to training and development to strive for high engagement. Increasingly, our sales associates and specialists must have expanded skill sets, including, in some instances, the ability to do in-home or telephone sales. A challenge we face is attracting and retaining a sufficiently diverse workforce that can deliver relevant, culturally competent and differentiated experiences for a wide variety of culturally diverse customers. In fact, in many of our stores, our employees must be able to serve customers whose primary language and cultural traditions are different from their own. Additionally, in order to deliver on the omni-channel expectations of our customers, we rely on the specialized training and capabilities of corporate support staff, which are broadly sought after by our competitors. If we are unable to hire, train, manage and retain qualified sales associates and specialists, the quality of service we provide to our customers may decrease and our results of operations could be negatively affected. Furthermore, our ability to meet our labor needs, particularly in a competitive labor market, while controlling our costs is subject to a variety of external factors, including wage rates, the availability of and competition for talent, health care and other benefit costs, our brand image and reputation, changing demographics and adoption of new or revised immigration, employment, and labor laws and regulations. Periodically, we are subject to labor organizing efforts, and if we become subject to collective bargaining agreements in the future, it could adversely affect how we operate our business and adversely affect our labor costs and our ability to retain a qualified workforce.

12



Positively and effectively managing our public image and reputation is critical to our business success, and, if our public image and reputation are damaged, it could negatively impact our relationships with our customers, vendors and store associates and specialists and, consequently, our business and results of operations.
Our public image and reputation are critical to ensuring that our customers shop at Lowe’s, our vendors want to do business with Lowe’s and our sales associates and specialists want to work for Lowe’s. We must continue to manage, preserve and grow Lowe’s public image and reputation. Any negative incident can erode trust and confidence quickly, and adverse publicity about us could damage our reputation and brand image, undermine our customers’ confidence, reduce demand for our products and services, affect our relationships with current and future vendors, impact our results of operations and affect our ability to retain and recruit store associates and specialists. The significant expansion in the use of social media over recent years has compounded the potential scope of the negative publicity that could be generated by such negative incidents.

Strategic transactions, such as our acquisition of RONA and Maintenance Supply Headquarters, involve risks, and we may not realize the expected benefits because of numerous uncertainties and risks.  
We regularly consider and enter into strategic transactions, including mergers, acquisitions, joint ventures, investments and other growth, market and geographic expansion strategies, with the expectation that these transactions will result in increases in sales, cost savings, synergies and other various benefits.  Our ability to deliver the expected benefits from any strategic transaction is subject to numerous uncertainties and risks, including our ability to integrate personnel, labor models, financial, IT and other systems successfully; disruption of our ongoing business and distraction of management; hiring additional management and other critical personnel; and increasing the scope, geographic diversity and complexity of our operations.  Effective internal controls are necessary to provide reliable and accurate financial reports, and the integration of businesses may create complexity in our financial systems and internal controls and make them more difficult to manage. Integration of businesses into our internal control system could cause us to fail to meet our financial reporting obligations.  Additionally, any impairment of goodwill or other assets acquired or divested in a strategic transaction or charges to earnings associated with any strategic transaction, may materially reduce our earnings.  Our shareholders may react unfavorably to our strategic transactions. We may not realize any anticipated benefits from such transactions, we may be exposed to additional liabilities of any acquired business or joint venture, and we may be exposed to litigation in connection with the strategic transaction.  Further, we may finance these strategic transactions by incurring additional debt, which could increase leverage or impact our ability to access capital in the future.

Failure to achieve and maintain a high level of product and service quality could damage our image with customers and negatively impact our sales, profitability, cash flows and financial condition.
Product and service quality issues could result in a negative impact on customer confidence in Lowe’s and our brand image.  If our product and service offerings do not meet applicable safety standards or our customers’ expectations regarding safety or quality, we could experience lost sales and increased costs and be exposed to legal, financial and reputational risks. Actual, potential or perceived product safety concerns could expose us to litigation, as well as government enforcement action, and result in costly product recalls and other liabilities. As a result, Lowe’s reputation as a retailer of high-quality products and services, including both national and Lowe’s private brands, could suffer and impact customer loyalty.

Our business could be affected by uncharacteristic or significant weather conditions, including natural disasters, could impact our operations.
Natural disasters, such as hurricanes and tropical storms, fires, floods, tornadoes, and earthquakes; unseasonable, or
unexpected or extreme weather conditions; or similar disruptions and catastrophic events can affect consumer spending and
confidence and consumers’ disposable income, particularly with respect to home improvement or construction projects, and
could have an adverse effect on our financial performance. These types of events can also adversely affect our work force and
prevent associates and customers from reaching our stores and other facilities. They can also disrupt or disable operations of stores, support centers, and portions of our supply chain and distribution network, including causing reductions in the availability of inventory and disruption of utility services. In addition, these events may affect our information systems, resulting in disruption to various aspects of our operations, including our ability to transact with customers and fulfill orders and to communicate with our stores. As a consequence of these or other catastrophic or uncharacteristic events, we may experience interruption to our operations, increased costs, or losses of property, equipment or inventory, which would adversely affect our revenue and profitability.

We have many competitors who could take sales and market share from us if we fail to execute our merchandising, marketing and distribution strategies effectively, or if they develop a substantially more effective or lower cost means of meeting customer needs, resulting in a negative impact on our business and results of operations.
We operate in a highly competitive market for home improvement products and services and have numerous large and small, direct and indirect competitors.  The principal competitive factors in our industry include convenience, customer service, quality and price of merchandise and services, in-stock levels, and merchandise assortment and presentation.  We face growing

13


competition from online and omni-channel retailers who have a similar product or service offering. Customers are increasingly able to quickly comparison shop and determine real-time product availability and price using digital tools. Further, online and omni-channel retailers continue to focus on delivery services, as customers are increasingly seeking faster, guaranteed delivery times and low-price or free shipping, and we must make investments to keep up with our customers’ evolving shopping preferences. Our ability to be competitive on delivery times, delivery costs, and delivery options depends on many factors, including successful implementation of our initiatives related to supply chain transformation. Our failure to respond effectively to competitive pressures and changes in the markets for home improvement products and services could affect our financial performance.  Moreover, changes in the promotional pricing and other practices of our competitors, including the effects of competitor liquidation activities, may impact our results.

Our inability to effectively and efficiently manage and maintain our relationships with selected suppliers of brand name products could negatively impact our business operations and financial results.
We form strategic relationships with selected suppliers to market and develop products under a variety of recognized and respected national and international brand names.  We also have relationships with certain suppliers to enable us to sell proprietary products which differentiate us from other retailers. The inability to effectively and efficiently manage and maintain our relationships with these suppliers could negatively impact our business operations and financial results.

Failure of a key vendor or service provider that we cannot quickly replace could disrupt our operations and negatively impact our business, financial condition and results of operations.
We rely upon a number of vendors as the sole or primary source of some of the products we sell.  We also rely upon many independent service providers for technology solutions and other services that are important to many aspects of our business.  Many of these vendors and service providers have certain products or specialized skills needed to support our business concept and our strategies. If these vendors or service providers discontinue operations or are unable to perform as expected or if we fail to manage them properly or we are unable to replace them quickly, our business could be adversely affected, at least temporarily, until we are able to replace them.

If our domestic or international supply chain or our fulfillment network for our products is ineffective or disrupted for any reason, or if these operations are subject to trade policy changes, our results of operations could be adversely affected.
We source, stock and sell products from domestic and international vendors, and their ability to reliably and efficiently fulfill our orders is critical to our business success. We source a large number of our products from foreign manufacturers, with China being the dominant import source. The current United States administration has enacted, and signaled the possibility of additional, changes in certain tax and trade policies, tariffs and other regulations affecting trade between the United States and other countries, such as the imposition of additional tariffs or duties on imported products and the exit or renegotiation of certain trade agreements and the rules of the World Trade Organization. While it is not possible to predict the long term impacts such changes may have, because we source a large percentage of our merchandise from outside the United States, future changes in tax or trade policies, tariffs or trade relations could adversely affect our business, results of operations, effective income tax rate, liquidity and net income. In addition, other countries may change their business and trade policies in anticipation of or in response to increased import tariffs and other changes in United States trade policy and regulations. The degree of our exposure is dependent on, among other things, the type of goods, rates imposed, and timing of tariffs. The impact to our business, including net sales and gross margin, will be influenced in part by merchandising and pricing strategies in response to potential costs increases by us and our competitors. While these potential impacts are uncertain, they could have an adverse impact on our financial results.

Financial instability among key vendors, political instability and labor unrest in source countries or elsewhere in our supply chain, changes in the total costs in our supply chain (fuel, labor and currency exchange rates), port labor disputes and security, the outbreak of pandemics, weather-related events, natural disasters, work stoppages, shipping capacity restraints, changes in trade policy, retaliatory trade restrictions imposed by either the United States or a major source country, tariffs or duties, fluctuations in currency exchange rates and transport availability, capacity and costs are beyond our control and could negatively impact our business if they seriously disrupted the movement of products through our supply chain or increased their costs. Additionally, as we add fulfillment capabilities or pursue strategies with different fulfillment requirements, our fulfillment network becomes increasingly complex and operating it becomes more challenging. If our fulfillment network does not operate properly or if a vendor fails to deliver on its commitments, we could experience delays in inventory, increased delivery costs or merchandise out-of-stocks that could lead to lost sales and decreased customer confidence, and adversely affect our results of operations.

Failure to effectively manage our third-party installers could result in increased operational and legal risks and negatively impact our business, financial condition and results of operations.
We use third-party installers to provide installation services to our customers, and, as the general contractor, we are subject to regulatory requirements and risks applicable to general contractors, including the management of the permitting, licensing and

14


quality of our third-party installers. Our failure to effectively manage such requirements, the third-party installers, and our internal processes regarding installation services could result in lost sales, fines and lawsuits, as well as damage to our reputation, which could negatively affect our business.

Operating internationally presents unique challenges, including some that have required us to adapt our store operations, merchandising, marketing and distribution functions to serve customers in Canada. Our business and results of operations could be negatively affected if we are unable to effectively address these challenges.
We operate stores in Canada. Expanding and operating internationally presents unique challenges that may increase the anticipated costs and risks of operation and expansion and slow the anticipated rate of expansion. Our future operating results in Canada or in other countries or regions in which we may operate in the future could be negatively affected by a variety of factors, including unfavorable political or economic factors, adverse tax consequences, volatility in foreign currency exchange rates, increased difficulty in enforcing intellectual property rights, costs and difficulties of managing international operations, challenges with identifying and contracting with local suppliers and other risks created as a result of differences in culture, laws and regulations. These factors could restrict our ability to operate our international businesses profitably and therefore have a negative impact on our results of operations and financial position. In addition, our reported results of operations and financial position could also be negatively affected by exchange rates when the activities and balances of our foreign operations are translated into U.S. dollars for financial reporting purposes.

We must comply with various and multiple laws and regulations that differ substantially in each area where we operate. Changes in existing or new laws and regulations or regulatory enforcement priorities, or our inability to comply with such laws and regulations, could adversely affect our business, financial condition and results of operations.
Laws and regulations at the local, regional, state, federal and international levels change frequently, and the changes can impose significant costs and other burdens of compliance on our business and our vendors.  If we fail to comply with these laws, rules and regulations, or the manner in which they are interpreted or applied, we may be subject to government enforcement action, litigation, damage to our reputation, civil and criminal liability, damages, fines and penalties and increased cost of regulatory compliance, any of which could adversely affect our results of operations and financial performance. These laws, rules and regulations include, but are not limited to, import and export requirements, U.S. laws such as the Foreign Corrupt Practices Act and local laws prohibiting corrupt payments to governmental officials. Although we have implemented policies and procedures to help ensure compliance with these laws, rules and regulations, there can be no certainty that our employees and third parties with whom we do business will not take actions in violation of our policies or laws. Many of these laws, rules and regulations are complex, evolving and are subject to varying interpretations and enforcement actions. Any changes in regulations, the imposition of additional regulations, or the enactment of any new legislation could have an adverse impact, directly or indirectly, on our financial condition and results of operations.  We may also be subject to investigations or audits by governmental authorities and regulatory agencies as a result of enforcing existing laws and regulations or changes in enforcement priorities, which can occur in the ordinary course of business or which can result from increased scrutiny from a particular agency towards an industry, country or practice.

Future litigation or governmental proceedings could result in material adverse consequences, including judgments or settlements, negatively affecting our business, financial condition and results of operations.
We are, and in the future will become, involved in lawsuits, regulatory inquiries, and governmental and other legal proceedings arising out of the ordinary course of our business. Some of these proceedings may raise difficult and complicated factual and legal issues and can be subject to uncertainties and complexities. The timing of the final resolutions to lawsuits, regulatory inquiries and governmental and other legal proceedings is typically uncertain. Additionally, the possible outcomes of, or resolutions to, these proceedings could include adverse judgments or settlements, either of which could require substantial payments. Furthermore, defending against these proceedings may require a diversion of management’s attention and resources. None of the legal proceedings in which we are currently involved, individually or collectively, are considered material.

Our financial performance could be adversely affected if our management information systems are seriously disrupted or we fail to properly maintain, improve, upgrade and expand those systems.
Our efforts to provide an omni-channel experience for our customers include investing in, maintaining and making ongoing improvements of our existing management information systems that support operations, such as sales, inventory replenishment, merchandise ordering, project design and execution, transportation, receipt processing and fulfillment.  Our systems are subject to damage or interruption as a result of catastrophic events, power outages, viruses, malicious attacks and telecommunications failures, and as a result we may incur significant expense, data loss as well as an erosion of customer confidence. Additionally, we continually make investments in our systems which may introduce disruption. Our financial performance could be adversely affected if our management information systems are seriously disrupted or we fail to properly maintain, improve, upgrade and expand those systems.


15


Liquidity and access to capital rely on efficient, rational and open capital markets and are dependent on Lowe’s credit strength. Our inability to access capital markets could negatively affect our business, financial performance and results of operations.
We have relied on the public debt markets to fund portions of our capital investments and the commercial paper market and bank credit facilities to fund our working capital needs. Our access to these markets depends on our strong credit ratings, the overall condition of debt capital markets and our operating performance. Disruption in the financial markets or an erosion of our credit strength or declines on our credit rating could impact negatively our ability to meet capital requirements or fund working capital needs.

Our sales are dependent upon the health and stability of the general economy. Adverse changes in economic factors specific to the home improvement industry may negatively impact the rate of growth of our total sales and comparable sales.
Many U.S. and global economic factors may adversely affect our financial performance.  These include, but are not limited to, periods of slow economic growth or recession, decreasing housing turnover or home price appreciation, volatility and/or lack of liquidity from time to time in U.S. and world financial markets and the consequent reduced availability and/or higher cost of borrowing to Lowe’s and its customers, slower rates of growth in real disposable personal income that could affect the rate of growth in consumer spending, high rates of unemployment, consumer debt levels, outbreak of pandemics, fluctuations in fuel and energy costs, inflation or deflation of commodity prices, natural disasters and acts of both domestic and international terrorism. Sales of many of our product categories and services are driven by the activity level of home improvement projects. Adverse development in these factors could result in a decrease in home improvement activity which could reduce demand for our products and services.

In addition, although we are monitoring the effects of a widespread outbreak of a contagious respiratory illness caused by a novel coronavirus first identified in Wuhan, China (COVID-19), we cannot predict whether, for how long, or the extent to which the outbreak may disrupt our supply chain, operations, sales, and/or product shipments and home installations. A prolonged outbreak could negatively impact our vendors and customers, cause interruptions to our operations, including the reduction of store operating hours, temporary store closures and reduced store traffic, and adversely affect our results of operations. More generally, a widespread health crisis could adversely affect the U.S. economy, resulting in an economic downturn that could decrease consumer confidence and affect demand for our products and therefore impact our results, including our business and financial outlook for fiscal 2020. Any adverse impact on our results of operations, business or financial outlook could be material.


 


16


Item 1B - Unresolved Staff Comments

None.

Item 2 - Properties
 
At January 31, 2020, our properties consisted of 1,977 stores in the U.S. and Canada with a total of approximately 208 million square feet of selling space.  Of the total stores operating at January 31, 2020, approximately 84% are owned, which includes stores on leased land, with the remainder being leased from third parties.  We also operate regional distribution centers and other facilities to support distribution and fulfillment, as well as data centers and various support offices.  Our executive offices are located in Mooresville, North Carolina.

Item 3 - Legal Proceedings

The Company is from time to time a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. With respect to such lawsuits, claims and proceedings, the Company records reserves when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. The Company does not believe that any of these proceedings, individually or in the aggregate, would be expected to have a material adverse effect on its results of operations, financial position, or cash flows. The Company maintains liability insurance for certain risks that are subject to certain self-insurance limits.

As previously reported, in May 2019, the Company received a letter from the California South Coast Air Quality Management District (“SCAQMD”) regarding allegations that the Company sold denatured alcohol since 2015 in a manner that is not compliant with applicable rules. The Company has settled the matter with SCAQMD, and the outcome did not have a material adverse effect on our consolidated financial condition, results of operations, or cash flows.

Item 4 - Mine Safety Disclosures

Not applicable.


17


INFORMATION ABOUT OUR EXECUTIVE OFFICERS

Set forth below is a list of names and ages of the executive officers of the registrant indicating all positions and offices with the registrant held by each such person and each person’s principal occupations or employment during the past five years. Each executive officer of the registrant is elected by the board of directors. Each executive officer of the registrant holds office from the date of election until a successor is elected or until his or her death, resignation or removal.

Name
 
Age
 
Title
Marvin R. Ellison
 
55
 
President and Chief Executive Officer since July 2018; Chairman of the Board and Chief Executive Officer, J.C. Penney Company, Inc. (a department store retailer), 2016 - May 2018; Chief Executive Officer, J.C. Penney Company, Inc., 2015 - 2016; President, J.C. Penney Company, Inc., 2014 - 2015; Executive Vice President - U.S. Stores, The Home Depot, Inc. (a home improvement retailer) 2008 - 2014.
 
 
 
 
 
William P. Boltz
 
57
 
Executive Vice President, Merchandising since August 2018; President and CEO, Chervon North America (a global power tool supplier), 2015-2018; President and owner of The Boltz Group, LLC (a retail consulting firm), 2013 - 2015; Senior Vice President, Merchandising, The Home Depot, Inc. (a home improvement retailer), 2006 - 2012.
 
 
 
 
 
David M. Denton
 
54
 
Executive Vice President and Chief Financial Officer since November 2018; Executive Vice President and Chief Financial Officer, CVS Health Corporation (a pharmacy innovation company), 2010 – November 2018.
 
 
 
 
 
Donald E. Frieson
 
61
 
Executive Vice President, Supply Chain since August 2018; Executive Vice President, Operations, Sam’s Club (a general merchandise retailer), 2014 - 2017; Senior Vice President, Replenishment, Planning and Real Estate, Sam’s Club, 2012 - 2014.
 
 
 
 
 
Seemantini Godbole
 
50
 
Executive Vice President, Chief Information Officer since November 2018; Senior Vice President, Technology and Digital, Target Corporation (a department store retailer), January 2017 – November 2018; Vice President, Technology and Digital, Target Corporation, 2013 – December 2016.
 
 
 
 
 
Ross W. McCanless
 
62
 
Executive Vice President, General Counsel and Corporate Secretary since 2017; Chief Legal Officer, Secretary and Chief Compliance Officer, 2016 - 2017; General Counsel, Secretary and Chief Compliance Officer, 2015 - 2016; Chief Legal Officer, Extended Stay America, Inc. (a hotel operating company) and ESH Hospitality, Inc. (a hotel real estate investment company), 2013 - 2014.
 
 
 
 
 
Joseph M. McFarland III
 
50
 
Executive Vice President, Stores since August 2018; Executive Vice President and Chief Customer Officer, J.C. Penney Company, Inc. (a department store retailer), March 2018 – August 2018; Executive Vice President, Stores, J.C. Penney Company, Inc., 2016 – March 2018; Divisional President, The Home Depot, Inc. (a home improvement retailer), 2007 – 2015.
 
 
 
 
 
Marisa F. Thalberg
 
50
 
Executive Vice President, Chief Brand and Marketing Officer since February 2020; Global Chief Brand Officer, Taco Bell Corporation (a fast-food company), January 2018 - February 2020; Chief Marketing Officer, Taco Bell Corporation, January 2016 - January 2018; Chief Brand Engagement Officer, Taco Bell Corporation, May 2015 - January 2016; Vice President, Corporate Digital and Content Marketing Worldwide, The Estee Lauder Companies (a beauty products company), 2007 - May 2015.
 
 
 
 
 
Jennifer L. Weber
 
53
 
Executive Vice President, Chief Human Resources Officer since 2016; Executive Vice President, External Affairs and Strategic Policy, Duke Energy Corporation (an electric power company), 2014 – 2016. Executive Vice President and Chief Human Resources Officer, Duke Energy Corporation, 2011 - 2014.
    


18


Part II

Item 5 - Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Lowe’s common stock is traded on the New York Stock Exchange (NYSE). The ticker symbol for Lowe’s is “LOW”.  As of March 20, 2020, there were 22,129 holders of record of Lowe’s common stock.

Total Return to Shareholders

The following information in Item 5 of this Annual Report is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 or to the liabilities of Section 18 of the Securities Exchange Act of 1934, and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent we specifically incorporate it by reference into such a filing.

The following table and graph compare the total returns (assuming reinvestment of dividends) of the Company’s common stock, the S&P 500 Index (S&P 500) and the S&P Retailing Industry Group Index (S&P Retail Index).  The graph assumes $100 invested on January 30, 2015 in the Company’s common stock and each of the indices.

totalreturnsgraph2019.jpg
 
1/30/2015
 
1/29/2016
 
2/3/2017
 
2/2/2018
 
2/1/2019
 
1/31/2020
Lowe’s
$
100.00

 
$
107.38

 
$
111.78

 
$
157.69

 
$
153.89

 
$
187.74

S&P 500
100.00

 
99.33

 
120.26

 
147.48

 
147.40

 
179.17

S&P Retail Index
$
100.00

 
$
115.56

 
$
134.42

 
$
189.60

 
$
203.54

 
$
243.26



19


Issuer Purchases of Equity Securities

The following table sets forth information with respect to purchases of the Company’s common stock made during the fourth quarter of fiscal 2019:
 
Total Number of
Shares Purchased
 
Average Price
Paid per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 2
 
Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs 2
November 2, 2019 – November 29, 2019
1,639,183

 
$
115.11

 
1,639,183

 
$
10,138,558,200

November 30, 2019 – January 3, 2020
2,545,679

 
118.34

 
2,545,047

 
9,837,384,381

January 4, 2020 – January 31, 2020
1,493,160

 
120.62

 
1,492,237

 
9,657,384,423

As of January 31, 2020
5,678,022

 
$
118.01

 
5,676,467

 
$
9,657,384,423

1 
The total number of shares purchased includes shares withheld from employees to satisfy either the exercise price of stock options or the statutory withholding tax liability upon the vesting of share-based awards.
2 
On December 12, 2018, the Company announced that its Board of Directors authorized an additional $10.0 billion of share repurchases, in addition to the $5.0 billion of share repurchases authorized by the Board of Directors in January 2018, with no expiration.

Item 6 - Selected Financial Data
Selected Statement of Earnings Data
(In millions, except per share data)
2019
 
  20181
 
2017
 
    20162, 3
 
2015
Net sales
$
72,148

 
$
71,309

 
$
68,619

 
$
65,017

 
$
59,074

Gross margin
22,943

 
22,908

 
22,434

 
21,674

 
19,933

Operating income
6,314

 
4,018

 
6,586

 
5,846

 
4,971

Net earnings
4,281

 
2,314

 
3,447

 
3,093

 
2,546

Basic earnings per common share
5.49

 
2.84

 
4.09

 
3.48

 
2.73

Diluted earnings per common share
5.49

 
2.84

 
4.09

 
3.47

 
2.73

Dividends per share
$
2.13

 
$
1.85

 
$
1.58

 
$
1.33

 
$
1.07

Selected Balance Sheet Data
 
 
 
 
 
 
 
 
 
Total assets4
$
39,471

 
$
34,508

 
$
35,291

 
$
34,408

 
$
31,266

Long-term debt, excluding current maturities
$
16,768

 
$
14,391

 
$
15,564

 
$
14,394

 
$
11,545

1 
Effective February 3, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), and all related amendments, using the modified retrospective method. Therefore, results for reporting periods beginning after February 2, 2018 are presented under ASU 2014-09, while comparative prior period amounts have not been restated and continue to be presented under accounting standards in effect in those periods.
2 
Fiscal 2016 contained 53 weeks, while all other years contained 52 weeks.
3 
Fiscal 2016 includes the acquisition of RONA inc.
4 
Effective February 2, 2019, the Company adopted ASU 2016-02, Leases (Topic 842), and all related amendments, using the optional transition approach to not restate comparative periods and recognized the cumulative impact of adoption in the opening balance of retained earnings. Therefore, results for reporting periods beginning after February 1, 2019 are presented under ASU 2016-02, while comparative prior period amounts have not been restated and continue to be presented under accounting standards in effect in those periods.


20


Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis summarizes the significant factors affecting our consolidated operating results, financial condition, liquidity and capital resources during the three-year period ended January 31, 2020 (our fiscal years 2019, 2018 and 2017).   Unless otherwise noted, all references herein for the years 2019, 2018 and 2017 represent the fiscal years ended January 31, 2020, February 1, 2019 and February 2, 2018, respectively.  We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. This discussion should be read in conjunction with our consolidated financial statements and notes to the consolidated financial statements included in this Annual Report that have been prepared in accordance with accounting principles generally accepted in the United States of America.  This discussion and analysis is presented in six sections:


EXECUTIVE OVERVIEW

Net sales for fiscal 2019 increased 1.2% over fiscal year 2018 to $72.1 billion. The increase in total sales was driven by an increase in comparable sales, offset by a decrease in sales due to closed stores and the exit of the Mexico and Orchard Supply Hardware (Orchard) businesses. Comparable sales increased 2.6% over fiscal year 2018, driven by a comparable average ticket increase of 2.1% and an increase in comparable transactions of 0.5%. Net earnings for fiscal 2019 increased 85.0% to $4.3 billion. Diluted earnings per common share increased 93.1% in fiscal year 2019 to $5.49 from $2.84 in 2018. As further discussed below, during fiscal year 2019, we completed a strategic review of the Canadian operations and finalized the closure of the Mexico business, resulting in net pre-tax operating costs and charges of $265 million, which decreased diluted earnings per share by $0.25. Adjusting 2019 and 2018 amounts for certain significant discrete items not contemplated in the business outlooks for those respective years, adjusted diluted earnings per common share increased 12.3% in fiscal year 2019 to $5.74 from $5.11 in 2018 (see the non-GAAP financial measures discussion).

For 2019, cash flows from operating activities were approximately $4.3 billion, with $1.5 billion used for capital expenditures. Continuing to deliver on our commitment to return excess cash to shareholders, the Company repurchased 41.0 million shares of stock through the share repurchase program for $4.3 billion and paid $1.6 billion in dividends during the year.

During the prior year, we announced our intention to exit our Mexico retail operations and our plan to sell the operating business. However, during the first quarter of 2019, after an extensive market evaluation, the decision was made to instead sell the assets of the business. This resulted in an $82 million tax benefit in the first quarter. This benefit was partially offset by $35 million of pretax operating costs during the year associated with the exit and ongoing wind-down of the business.

In the third quarter of 2019, we commenced a strategic review of the Canadian operations to improve execution and deliver long-term improved profitability in Canada. As a result, during the fourth quarter, we completed the closure of 28 under-performing stores with the remaining six planned closures to be completed in early fiscal 2020. In addition, Canadian operations started a SKU rationalization project to present a more coordinated assortment of product to the customer across banners and began the reorganization of the corporate structure to more efficiently serve stores. Total pretax operating costs and charges associated with the strategic review of the Canadian operations were $230 million for fiscal year 2019.

During the year, we made significant progress transforming our Company through our four key focus areas: driving merchandising excellence; transforming our supply chain; delivering operational efficiency; and intensifying customer engagement. Our Merchandise Service Teams (MST) have improved our merchandising reset execution and day-to-day bay and end-cap maintenance at the store level to deliver a better shopping experience to our customers. We made improvements to our store environment, optimizing our layout on the critically important seasonal pad at the front of our stores. We also opened two new bulk distribution centers, relocated a third bulk distribution center, and opened four new cross-dock delivery terminals. In 2019, we focused on improving our customer service and investing in our in-stock position, driving efficiency in our store operations and advancing our Pro service model. We rolled out a customer centric scheduling system that allows us to provide better department coverage and customer service, while ensuring that we are using our payroll efficiently. We have also added scheduling effectiveness tools that measure schedule efficiency and deployed new mobile devices to our store associates with

21


applications to help make our associates more efficient and ultimately allowed them to spend more time interacting with customers. In 2019, our Pro strategy was primarily focused on improving retail fundamentals such as job lot quantities, improved service levels, dedicated loaders, Pro department supervisors and consistent volume pricing. In addition, during the fourth quarter, we added dedicated point of sale terminals at our Pro desk to allow for more convenient, faster service.

In 2019, we made significant progress in transforming our company. Although we are only one year into a multi-year transformation, we believe that we are on the right path to capitalize on demand in the home improvement market, and our planned improvements to the Lowes.com platform will allow these four strategic areas of focus to create a true omni-channel ecosystem for Lowe’s so we can efficiently serve our customers any way they choose to shop.

22


OPERATIONS

The following tables set forth the percentage relationship to net sales of each line item of the consolidated statements of earnings, as well as the percentage change in dollar amounts from the prior year.  This table should be read in conjunction with the following discussion and analysis and the consolidated financial statements, including the related notes to the consolidated financial statements.
 
 
 
Basis Point Increase / (Decrease) in Percentage of Net Sales from Prior Year
 
Percentage Increase / (Decrease) in Dollar Amounts from Prior Year
 
2019
 
2018
 
2019 vs. 2018
 
2019 vs. 2018
Net sales
100.00%
 
100.00%
 
N/A

 
1.2
 %
Gross margin
31.80
 
32.12
 
(32
)
 
0.2

Expenses:
 
 
 
 
 
 
 
Selling, general and administrative
21.30
 
24.41
 
(311
)
 
(11.7
)
Depreciation and amortization
1.75
 
2.07
 
(32
)
 
(14.5
)
Operating income
8.75
 
5.64
 
311

 
57.1

Interest - net
0.96
 
0.88
 
8

 
10.6

Pre-tax earnings
7.79
 
4.76
 
303

 
65.7

Income tax provision
1.86
 
1.52
 
34

 
24.3

Net earnings
5.93%
 
3.24%
 
269

 
85.0
 %
 
 
 
 
 
 
 
 
 
 
 
Basis Point Increase / (Decrease) in Percentage of Net Sales from Prior Year
 
Percentage Increase / (Decrease) in Dollar Amounts from Prior Year
 
2018
 
2017
 
2018 vs. 2017
 
2018 vs. 2017
Net sales
100.00%
 
100.00%
 
N/A

 
3.9
 %
Gross margin
32.12
 
32.69
 
(57
)
 
2.1

Expenses:
 
 
 
 
 
 
 
Selling, general and administrative
24.41
 
21.04
 
337

 
20.6

Depreciation and amortization
2.07
 
2.05
 
2

 
5.2

Operating income
5.64
 
9.60
 
(396
)
 
(39.0
)
Interest - net
0.88
 
0.92
 
(4
)
 
(1.3
)
Loss on extinguishment of debt
 
0.68
 
(68
)
 
(100.0
)
Pre-tax earnings
4.76
 
8.00
 
(324
)
 
(38.2
)
Income tax provision
1.52
 
2.98
 
(146
)
 
(47.1
)
Net earnings
3.24%
 
5.02%
 
(178
)
 
(32.9
)%

23


Other Metrics
2019
 
2018
 
2017
Comparable sales increase 1
2.6
%
 
2.4
%
 
4.0
%
Total customer transactions (in millions)
921

 
941

 
953

Average ticket 2
$
78.36

 
$
75.79

 
$
72.00

At end of year:
 
 
 
 
 
Number of stores
1,977

 
2,015

 
2,152

Sales floor square feet (in millions)
208

 
209

 
215

Average store size selling square feet (in thousands) 3
105

 
104

 
100

Return on average assets 4
10.8
%
 
6.4
%
 
9.5
%
Return on average shareholders’ equity 5
153.4
%
 
43.8
%
 
59.2
%
Net earnings to average debt and equity 6
17.2
%
 
9.0
%
 
13.0
%
Return on invested capital 6
19.9
%
 
11.2
%
 
16.0
%
1 
A comparable location is defined as a retail location that has been open longer than 13 months. A location that is identified for relocation is no longer considered comparable in the month of its relocation.  The relocated location must then remain open longer than 13 months to be considered comparable.  A location we have decided to exit is no longer considered comparable as of the beginning of the month in which we announce its exit. Acquired locations are included in the comparable sales calculation beginning in the first full month following the first anniversary of the date of the acquisition. Comparable sales include online sales, which positively impacted fiscal 2019, fiscal 2018 and fiscal 2017 by approximately 25 basis points, 80 basis points and 120 basis points, respectively.
2 
Average ticket is defined as net sales divided by the total number of customer transactions.
3 
Average store size selling square feet is defined as sales floor square feet divided by the number of stores open at the end of the period. The average Lowe’s-branded home improvement store has approximately 112,000 square feet of retail selling space.
4 
Return on average assets is defined as net earnings divided by average total assets for the last five quarters.
5 
Return on average shareholders’ equity is defined as net earnings divided by average shareholders’ equity for the last five quarters.
6 
Return on invested capital is calculated using a non-GAAP financial measure. Net earnings to average debt and equity is the most comparable GAAP ratio. See below for additional information and reconciliations of non-GAAP measures.


24


Non-GAAP Financial Measures

Return on Invested Capital

Return on Invested Capital (ROIC) is calculated using a non-GAAP financial measure. We believe ROIC is a meaningful metric for investors because it represents management’s measure of how effectively the Company is using capital to generate profits. Although ROIC is a common financial metric, numerous methods exist for calculating ROIC.  Accordingly, the method used by our management may differ from the methods used by other companies.  We encourage you to understand the methods used by another company to calculate its ROIC before comparing to ours.

We define ROIC as rolling 12 months’ lease adjusted net operating profit after tax (Lease adjusted NOPAT) divided by the average of current year and prior year ending debt and equity. Lease adjusted NOPAT is a non-GAAP financial measure, and net earnings is considered to be the most comparable GAAP financial measure. The calculation of ROIC, together with a reconciliation of net earnings to Lease adjusted NOPAT, is as follows:
(In millions, except percentage data)
2019
 
2018
 
2017
Calculation of Return on Invested Capital
 
 
 
 
 
Numerator
 
 
 
 
 
Net earnings
$
4,281

 
$
2,314

 
$
3,447

Plus:
 
 
 
 
 
Interest expense - net
691

 
624

 
633

Operating lease interest
195

 
206

 
209

Loss on extinguishment of debt

 

 
464

Provision for income taxes
1,342

 
1,080

 
2,042

Lease adjusted net operating profit
6,509

 
4,224

 
6,795

Less:
 
 
 
 
 
Income tax adjustment 1
1,554

 
1,344

 
2,528

Lease adjusted net operating profit after tax
$
4,955

 
$
2,880

 
$
4,267

 
 
 
 
 
 
Denominator
 
 
 
 
 
Average debt and equity 2
$
24,950

 
$
25,713

 
$
26,610

Net earnings to average debt and equity
17.2
%
 
9.0
%
 
13.0
%
Return on invested capital
19.9
%
 
11.2
%
 
16.0
%
1 
Income tax adjustment is defined as net operating profit multiplied by the effective tax rate, which was 23.9%, 31.8%, and 37.2% for 2019, 2018, and 2017, respectively.
2 
Average debt and equity is defined as average current year and prior year ending debt, including current maturities, short-term borrowings, and operating lease liabilities, plus the average current year and prior year ending total equity.

Adjusted Diluted Earnings Per Share

Adjusted diluted earnings per share is considered a non-GAAP financial measure. The Company believes this non-GAAP financial measure provides useful insight for analysts and investors in evaluating what management considers the Company’s core financial performance. Adjusted diluted earnings per share excludes the impact of certain discrete items not contemplated in the Company’s business outlooks for 2019 and 2018. Unless otherwise noted, the income tax effect of these adjustments is calculated using the marginal rates for the respective periods.

Adjusted diluted earnings per share should not be considered an alternative to, or more meaningful indicator of, the Company’s diluted earnings per common share as prepared in accordance with GAAP. The Company’s methods of determining this non-GAAP financial measure may differ from the method used by other companies for this or similar non-GAAP financial measures. Accordingly, these non-GAAP measures may not be comparable to the measures used by other companies.

Fiscal 2019 Impacts
For fiscal 2019, the Company has recognized financial impacts from the following discrete items, not contemplated in the Company’s Business Outlook for 2019:

25



Prior to the beginning of fiscal 2019, the Company announced its intention to exit its Mexico retail operations and had planned to sell the operating business. However, in the first quarter of fiscal 2019, after an extensive market evaluation, the decision was made to instead sell the assets of the business. That decision resulted in an $82 million tax benefit in the first quarter, which was partially offset by $12 million of pre-tax operating costs associated with the exit and ongoing wind-down of the Mexico retail operations. During the second quarter of fiscal 2019, the Company recognized additional pre-tax operating losses of $14 million. For the third quarter, the pre-tax operating losses for the Mexico retail operations were insignificant. For the fourth quarter, the Company recognized additional pre-tax operating losses of $9 million. Total pre-tax operating costs and charges for fiscal year 2019 were $35 million (Mexico adjustments), and;

During the third quarter of fiscal 2019, the Company began a strategic review of its Canadian operations, and as a result, recognized pre-tax charges of $53 million associated with long-lived asset impairment. During the fourth quarter, the Company made the decision to close 34 under-performing stores and take additional actions to improve future performance and profitability of its Canadian operations. As a result of these actions, in the fourth quarter of fiscal 2019, the Company recognized pre-tax operating costs and charges of $176 million, consisting of inventory liquidation, accelerated depreciation and amortization, severance, and other costs, as well as a net $26 million impact to income tax expense related to income tax valuation allowance. Total pre-tax operating costs and charges for fiscal year 2019 were $230 million (2019 Canada restructuring).

Fiscal 2018 Impacts
During fiscal 2018, the Company recognized financial impacts from the following discrete items, not contemplated in the Company's Business Outlook for 2018:

During the fourth quarter of fiscal 2018, the Company recorded $952 million of goodwill impairment associated with its Canadian operations (Canadian goodwill impairment);

On August 17, 2018, the Company committed to exit its Orchard Supply Hardware operations. As a result, the Company recognized pre-tax charges of $230 million during the second quarter of fiscal 2018 associated with long lived asset impairment and discontinued projects. During the third quarter of fiscal 2018, the Company recognized pre-tax charges of $123 million associated with accelerated depreciation and amortization, severance and lease obligations. During the fourth quarter of fiscal 2018, the Company recognized additional pre-tax charges of $208 million primarily related to lease obligations. Total pre-tax charges for fiscal year 2018 were $561 million (Orchard Supply Hardware charges);

On October 31, 2018, the Company committed to close 20 under-performing stores across the U.S. and 31 locations in Canada, including 27 under-performing stores. As a result, the Company recognized pre-tax charges of $121 million during the third quarter of fiscal 2018 associated with long-lived asset impairment and severance obligations. During the fourth quarter of fiscal 2018, the company recognized additional pre-tax charges of $150 million, primarily associated with severance and lease obligation costs, as well as accelerated depreciation. Total pre-tax charges for fiscal year 2018 were $271 million (U.S. and Canada closing charges);

As previously discussed above, on November 20, 2018, the Company announced its plans to exit retail operations in Mexico and was exploring strategic alternatives. During the third quarter, $22 million of long-lived asset impairment was recognized on certain assets in Mexico as a result of the strategic evaluation. During the fourth quarter, an additional $222 million of impairment was recognized. Total pre-tax charges for fiscal year 2018 were $244 million (Mexico impairment charges);

During the third quarter of fiscal 2018, the Company identified certain non-core activities within its U.S. home improvement business to exit, including Alacrity Renovation Services and Iris Smart Home. As a result, during the third quarter of 2018, the Company recognized pre-tax charges of $14 million associated with long-lived asset impairment and inventory write-down. During the fourth quarter of fiscal 2018, the Company recognized additional pre-tax charges of $32 million. Total pre-tax charges for fiscal year 2018 were $46 million (Non-core activities charges), and;

During the fourth quarter of fiscal 2018, the Company recorded a pre-tax charge of $13 million, associated with severance costs due to the elimination of the Project Specialists Interiors position (Project Specialists Interiors charge).

26



 
2019
 
2018
 
Pre-Tax Earnings
 
Tax
 
Net Earnings
 
Pre-Tax Earnings
 
Tax
 
Net Earnings
Diluted earnings per share, as reported
 
 
 
 
$
5.49

 
 
 
 
 
$
2.84

Non-GAAP Adjustments - per share impacts
 
 
 
 
 
 
 
 
 
 
 
2019 Canada restructuring
0.29

 
0.02

 
0.31

 

 

 

Mexico adjustments
0.05

 
(0.11
)
 
(0.06
)
 

 

 

Canadian goodwill impairment

 

 

 
1.17

 
(0.03
)
 
1.14

Orchard Supply Hardware charges

 

 

 
0.68

 
(0.17
)
 
0.51

U.S. & Canada charges

 

 

 
0.33

 
(0.08
)
 
0.25

Mexico impairment charges

 

 

 
0.30

 
0.01

 
0.31

Non-core activities charges

 

 

 
0.06

 
(0.02
)
 
0.04

Project Specialists Interiors charge

 

 

 
0.02

 

 
0.02

Adjusted diluted earnings per share
 
 
 
 
$
5.74

 
 
 
 
 
$
5.11


Fiscal 2019 Compared to Fiscal 2018

Net Sales – Net sales increased 1.2% to $72.1 billion in 2019. The increase in total sales was driven primarily by 2.6% comparable sales growth and new stores (+0.2%), offset by the impact from closed stores and exit of the Mexico & Orchard operations (-1.6%). The comparable sales increase of 2.6% in 2019 was driven primarily by a 2.1% increase in comparable average ticket and a 0.5% increase in comparable customer transactions. Comparable sales increases during each quarter of the fiscal year, as reported, were 3.5% in the first quarter, 2.3% in the second quarter, 2.2% in the third quarter, and 2.5% in the fourth quarter.

During 2019, we experienced comparable sales increases in ten of 13 product categories. We experienced mid single-digit negative comparable sales in Lighting and Kitchens & Bath, primarily due to the exit of the Project Specialist Interiors (PSI) business in 2018. Lighting also experienced decreased volume of sales due to price increases to offset tariff pressure. Comparable sales increases were above the company average in Lawn & Garden, Décor, Tools, Paint, Appliances, Millwork, Seasonal & Outdoor Living, Hardware, Rough Plumbing & Electrical, and Lumber & Building Materials. Favorable weather driven demand was a key comparable sales driver for Lawn & Garden, Seasonal & Outdoor Living, Hardware, and Paint. Décor comparable sales were driven by strong performance in Blinds & Shades, promotional activity, and improved inventory position. Strong refrigerator and laundry performance during major holiday promotion events in Appliances drove strong comparable sales during the year. Tools benefited from the CRAFTSMAN® reset in the prior year, as well as strong performance during promotional events during the year. Geographically, all 15 U.S. regions experienced positive comparable sales with the strongest results in the West and South.

During the fourth quarter of 2019, we experienced comparable sales increases in nine of 13 product categories. Comparable sales increases were above the company average in Décor, Lawn & Garden, Paint, Millwork, Lumber & Building Materials, Tools, Hardware, and Appliances. Strength in Décor was driven primarily by the Winter Reorganization promotional event, particularly in-home organization products. Unseasonably warm weather drove strong comparable sales in Lawn & Garden, Paint, and Lumber & Building Materials. We experienced low single-digit negative comparable sales in Seasonal & Outdoor Living, Kitchens & Bath, and Lighting due primarily to the exit of the PSI business in the prior year. Seasonal & Outdoor Living experienced softness in Seasonal and Outdoor Heat due to warmer than expected weather. Geographically, 14 of 15 U.S. regions experienced increases in fourth quarter comparable sales.

Gross Margin – Gross margin as a percentage of sales for 2019 decreased 32 basis points compared to 2018. Gross margin was negatively impacted by approximately 35 basis points due to tariff pressure, 20 basis points from supply chain costs associated with new facilities, transportation and customer deliveries, and 10 basis points associated with increased inventory shrink. This was partially offset by a gross margin increase of approximately 40 basis points due to our prior year inventory rationalization efforts to eliminate less productive SKUs and reduce clutter in our stores.

During the fourth quarter of 2019, gross margin decreased 22 basis points as a percentage of sales. Gross margin was negatively impacted by approximately 80 basis points from the impact of store closures and inventory liquidation associated with the Canadian restructuring, 25 basis points from supply chain costs associated with new facilities, transportation and

27


customer deliveries, and 25 basis points associated with increased inventory shrink. This was partially offset by 105 basis points due to the use of rate mitigation strategies.

SG&A – SG&A expense for 2019 leveraged 311 basis points as a percentage of sales compared to 2018. This was primarily driven by 265 basis points of leverage due to prior year goodwill and long-lived asset impairments and discontinued projects associated with the Company’s prior year strategic reassessment of Orchard, USHI, Canada, and Mexico locations. There was an additional 45 basis points of leverage in salaries expenses, and 15 basis points of leverage in advertising due to improved advertising efficiency. These were partially offset by 10 basis points of deleverage associated with current year long-lived asset impairment, severance and other costs associated with the Company’s strategic review of the Canadian operations.

For the fourth quarter of 2019, SG&A expense leveraged 959 basis points as a percentage of sales compared to the fourth quarter of 2018. This was primarily driven by 960 basis points of leverage due to prior year goodwill and long-lived asset impairments and discontinued projects associated with the Company’s prior year strategic reassessment of Orchard, USHI, Canada, and Mexico locations, as well as 20 basis points of leverage in salaries expenses. These were partially offset by 20 basis points of deleverage associated with the current year long-lived asset impairment, severance and other costs associated with the Company’s strategic review of the Canadian operations.

Depreciation and Amortization – Depreciation and amortization expense leveraged 32 basis points for 2019 as a percentage of sales compared to 2018, primarily due to store closures in the prior year and assets becoming fully depreciated. Property, less accumulated depreciation, increased to $18.7 billion at January 31, 2020, compared to $18.4 billion at February 1, 2019.  As of January 31, 2020 and February 1, 2019, we owned 84% and 83% of our stores, respectively, which included stores on leased land.

Interest – Net – Net interest expense is comprised of the following:
(In millions)
2019
 
2018
Interest expense, net of amount capitalized
$
706

 
$
642

Amortization of original issue discount and loan costs
12

 
10

Interest income
(27
)
 
(28
)
Interest - net
$
691

 
$
624


Net interest expense in 2019 deleveraged 8 basis points primarily as a result of interest expense related to the issuance of $3.0 billion unsecured notes in April 2019 and a $1.0 billion term loan issued in January 2020, partially offset by a decrease in expense associated with the adoption of ASU 2016-02, Leases (Topic 842), in the first quarter of 2019.

Income Tax Provision - Our effective income tax rate was 23.9% in 2019 compared to 31.8% in 2018. For 2019, the rate was favorably impacted by the tax benefit associated with the Company’s decision to sell the assets of the Mexico business, which was offset by a valuation allowance established for the Company’s RONA operations. For 2018, the favorable impact of tax reform was offset by the majority of the Canadian goodwill impairment not being deductible for tax purposes, as well as negative tax impacts associated with the initial decision to exit Mexico. 

Our effective income tax rate for the fourth quarter of 2019 was negatively impacted by the valuation allowances established for the Company’s RONA operations. The fourth quarter of 2018 was negatively impacted by the non-deductibility of a majority of the goodwill impairment charge related to our Canadian business, as well as the negative tax consequences of exiting our retail operations in Mexico. 

Fiscal 2018 Compared to Fiscal 2017

For a comparison of our results of operations for the fiscal years ended February 1, 2019 and February 2, 2018, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended February 1, 2019, filed with the SEC on April 2, 2019.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Sources of Liquidity

Cash flows from operations, supplemented with our short-term and long-term borrowings, have been sufficient to fund our operations while allowing us to make strategic investments that will grow our business, and to return excess cash to

28


shareholders in the form of dividends and share repurchases. We believe that our sources of liquidity will continue to be adequate to fund our operations and investments to grow our business, repay our debt as it becomes due, pay dividends, and fund our share repurchases over the next 12 months.

Cash Flows Provided by Operating Activities
(In millions)
2019
 
2018
 
2017
Net cash provided by operating activities
$
4,296

 
$
6,193

 
$
5,065


Cash flows from operating activities continued to provide the primary source of our liquidity.  The decrease in net cash provided by operating activities for the year ended January 31, 2020, versus the year ended February 1, 2019, was due primarily to changes in working capital, driven by accounts payable and inventory, which decreased operating cash flow for fiscal 2019 by approximately $1.2 billion, compared to an increase of approximately $430 million for fiscal 2018. In fiscal year 2019, inventory increased at the same time that accounts payable decreased. The increase in inventory was driven by strategic investments in the first half of fiscal 2019, including earlier seasonal purchases, resets, and increased job lot quantities, to increase sales. The decrease in accounts payable is due to timing of payments, partially related to the inventory build in late fiscal 2018. In fiscal 2018, the increase in accounts payable exceeded the increase in inventory driven by inventory rationalization efforts during the second half of fiscal 2018, and an acceleration of spring purchases in the fourth quarter of fiscal 2018.

The increase in net cash provided by operating activities for the year ended February 1, 2019, versus the year ended February 2, 2018, was due primarily to changes in working capital, driven by accounts payable and inventory, which increased operating cash flow for 2018 by approximately $430 million, compared to a decrease of approximately $883 million for 2017. In fiscal 2018, the increase in accounts payable exceeded the increase in inventory driven by inventory rationalization efforts during the second half of fiscal 2018, and an acceleration of spring purchases in the fourth quarter of fiscal 2018.

Cash Flows Used in Investing Activities
(In millions)
2019
 
2018
 
2017
Net cash used in investing activities
$
(1,369
)
 
$
(1,080
)
 
$
(1,441
)

Net cash used in investing activities primarily consist of transactions related to capital expenditures and business acquisitions.

Capital expenditures

Our capital expenditures generally consist of investments in our strategic initiatives to enhance our ability to serve customers, existing stores, and expansion plans. Capital expenditures were $1.5 billion in 2019, $1.2 billion in 2018, and $1.1 billion in 2017. The following table provides the allocation of capital expenditures for 2019, 2018, and 2017:
 
2019
 
2018
 
2017
Existing store investments ¹
80
%
 
60
%
 
50
%
Strategic initiatives ²
10
%
 
20
%
 
10
%
New stores, new corporate facilities and international 3
10
%
 
20
%
 
40
%
Total capital expenditures
100
%
 
100
%
 
100
%
1 
Includes merchandising resets, facility repairs, replacements of IT and store equipment, among other specific efforts.
2 
Represents investments related to our strategic focus areas aimed at improving customers’ experience and driving improved performance.
3 
Represents expenditures primarily related to land purchases, buildings, and personal property for new store projects and new corporate facilities projects, as well as expenditures related to our international operations.


29


Our 2020 capital expenditures forecast is approximately $1.6 billion. The following table provides the allocation of our fiscal 2020 capital expenditures forecast:
 
 
2020
Existing store investments
 
70
%
Strategic initiatives
 
15
%
New stores, new corporate facilities and international
 
15
%

Cash Flows Used in Financing Activities
(In millions)
2019
 
2018
 
2017
Net cash used in financing activities
$
(2,735
)
 
$
(5,124
)
 
$
(3,607
)

Net cash used in financing activities primarily consist of transactions related to our commercial paper, debt, share repurchases, and cash dividend payments.

Short-term Borrowing Facilities
(In millions)
2019
 
2018
 
2017
Net proceeds from issuance of short-term debt
$
1,000

 
$

 
$