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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended October 29, 2021
or
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| ☐ | 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
LOWE’S COMPANIES, INC.
(Exact name of registrant as specified in its charter)
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| North Carolina | | 56-0578072 |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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1000 Lowes Blvd., Mooresville, North Carolina | | 28117 |
| (Address of principal executive offices) | | (Zip Code) |
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| Registrant’s telephone number, including area code: | | (704) 758-1000 |
Securities registered pursuant to Section 12(b) of the Act:
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| 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 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.
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| 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
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| | | | | | | | |
| CLASS | | OUTSTANDING AT 11/22/2021 |
| Common Stock, $0.50 par value | | 673,747,189 |
LOWE’S COMPANIES, INC.
- TABLE OF CONTENTS -
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FORWARD-LOOKING STATEMENTS
This Form 10-Q 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”, “outlook”, “scenario”, “guidance”, and similar expressions are forward-looking statements. Forward-looking statements involve, among other things, expectations, projections, and assumptions about future financial and operating results, objectives, business outlook, priorities, sales growth, shareholder value, capital expenditures, cash flows, the housing market, the home improvement industry, demand for products and services, share repurchases, Lowe’s strategic initiatives, including those relating to acquisitions and dispositions and the impact of such transactions on our strategic and operational plans and financial results. Such statements involve risks and uncertainties and we can give no assurance that they will prove to be correct. Actual results may differ materially from those expressed or implied in such statements.
A wide variety of potential risks, uncertainties, and other factors could materially affect our ability to achieve the results either expressed or implied by these forward-looking statements including, but not limited to, changes in general economic conditions, such as the rate of unemployment, interest rate and currency fluctuations, fuel and other energy costs, slower growth in personal income, changes in consumer spending, changes in the rate of housing turnover, the availability of consumer credit and of mortgage financing, changes in commodity prices, trade policy changes or additional tariffs, outbreaks of public health crises, such as the COVID-19 pandemic, availability and cost of goods from suppliers, and other factors that can negatively affect our customers.
Investors and others should carefully consider the foregoing factors and other uncertainties, risks and potential events including, but not limited to, those described in “Item 1A - Risk Factors” in our most recent Annual Report on Form 10-K and as may be updated from time to time in Item 1A in our quarterly reports on Form 10-Q or other subsequent filings with the SEC, and in “Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” of this report on Form 10-Q. All such forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update these statements other than as required by law.
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Lowe’s Companies, Inc.
Consolidated Statements of Earnings (Unaudited)
In Millions, Except Per Share and Percentage Data
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| | Three Months Ended | | Nine Months Ended |
| | October 29, 2021 | | October 30, 2020 | | October 29, 2021 | | October 30, 2020 |
| Current Earnings | Amount | | % Sales | | Amount | | % Sales | | Amount | | % Sales | | Amount | | % Sales |
| Net sales | $ | 22,918 | | | 100.00 | % | | $ | 22,309 | | | 100.00 | % | | $ | 74,911 | | | 100.00 | % | | $ | 69,286 | | | 100.00 | % |
| Cost of sales | 15,331 | | | 66.90 | | | 15,009 | | | 67.28 | | | 49,882 | | | 66.59 | | | 46,170 | | | 66.64 | |
| Gross margin | 7,587 | | | 33.10 | | | 7,300 | | | 32.72 | | | 25,029 | | | 33.41 | | | 23,116 | | | 33.36 | |
| Expenses: | | | | | | | | | | | | | | | |
| Selling, general and administrative | 4,373 | | | 19.08 | | | 4,770 | | | 21.38 | | | 13,559 | | | 18.10 | | | 13,985 | | | 20.18 | |
| Depreciation and amortization | 425 | | | 1.85 | | | 355 | | | 1.59 | | | 1,226 | | | 1.64 | | | 1,008 | | | 1.46 | |
| Operating income | 2,789 | | | 12.17 | | | 2,175 | | | 9.75 | | | 10,244 | | | 13.67 | | | 8,123 | | | 11.72 | |
| Interest – net | 223 | | | 0.97 | | | 221 | | | 0.99 | | | 650 | | | 0.86 | | | 644 | | | 0.93 | |
| Loss on extinguishment of debt | — | | | — | | | 1,060 | | | 4.75 | | | — | | | — | | | 1,060 | | | 1.53 | |
| Pre-tax earnings | 2,566 | | | 11.20 | | | 894 | | | 4.01 | | | 9,594 | | | 12.81 | | | 6,419 | | | 9.26 | |
| Income tax provision | 670 | | | 2.93 | | | 202 | | | 0.91 | | | 2,359 | | | 3.15 | | | 1,562 | | | 2.25 | |
| Net earnings | $ | 1,896 | | | 8.27 | % | | $ | 692 | | | 3.10 | % | | $ | 7,235 | | | 9.66 | % | | $ | 4,857 | | | 7.01 | % |
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Weighted average common shares outstanding – basic | 690 | | | | | 752 | | | | | 704 | | | | | 753 | | | |
Basic earnings per common share | $ | 2.74 | | | | | $ | 0.92 | | | | | $ | 10.23 | | | | | $ | 6.42 | | | |
Weighted average common shares outstanding – diluted | 692 | | | | | 754 | | | | | 706 | | | | | 754 | | | |
Diluted earnings per common share | $ | 2.73 | | | | | $ | 0.91 | | | | | $ | 10.21 | | | | | $ | 6.41 | | | |
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See accompanying notes to the consolidated financial statements (unaudited).
Lowe’s Companies, Inc.
Consolidated Statements of Comprehensive Income (Unaudited)
In Millions, Except Percentage Data
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | October 29, 2021 | | October 30, 2020 | | October 29, 2021 | | October 30, 2020 |
| | Amount | | % Sales | | Amount | | % Sales | | Amount | | % Sales | | Amount | | % Sales |
| Net earnings | $ | 1,896 | | | 8.27 | % | | $ | 692 | | | 3.10 | % | | $ | 7,235 | | | 9.66 | % | | $ | 4,857 | | | 7.01 | % |
Foreign currency translation adjustments – net of tax | 19 | | | 0.08 | | | 18 | | | 0.08 | | | 78 | | | 0.10 | | | (27) | | | (0.04) | |
Cash flow hedges – net of tax | 41 | | | 0.18 | | | 24 | | | 0.11 | | | 56 | | | 0.07 | | | (84) | | | (0.12) | |
Other | (1) | | | — | | | (2) | | | (0.01) | | | (4) | | | — | | | 2 | | | — | |
| Other comprehensive income/(loss) | 59 | | | 0.26 | | | 40 | | | 0.18 | | | 130 | | | 0.17 | | | (109) | | | (0.16) | |
| Comprehensive income | $ | 1,955 | | | 8.53 | % | | $ | 732 | | | 3.28 | % | | $ | 7,365 | | | 9.83 | % | | $ | 4,748 | | | 6.85 | % |
| | | | | | | | | | | | | | | |
See accompanying notes to the consolidated financial statements (unaudited).
Lowe’s Companies, Inc.
Consolidated Balance Sheets (Unaudited)
In Millions, Except Par Value Data
| | | | | | | | | | | | | | | | | | | | |
| | October 29,
2021 | | October 30,
2020 | | January 29,
2021 |
| Assets | | | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 6,121 | | | $ | 8,249 | | | $ | 4,690 | |
| Short-term investments | | 552 | | | 1,852 | | | 506 | |
| Merchandise inventory – net | | 16,685 | | | 15,712 | | | 16,193 | |
| Other current assets | | 1,491 | | | 1,103 | | | 937 | |
| Total current assets | | 24,849 | | | 26,916 | | | 22,326 | |
| Property, less accumulated depreciation | | 18,925 | | | 18,798 | | | 19,155 | |
| Operating lease right-of-use assets | | 4,161 | | | 3,823 | | | 3,832 | |
| Long-term investments | | 213 | | | 202 | | | 200 | |
| Deferred income taxes – net | | 220 | | | 241 | | | 340 | |
| Other assets | | 1,032 | | | 900 | | | 882 | |
| Total assets | | $ | 49,400 | | | $ | 50,880 | | | $ | 46,735 | |
| | | | | | |
| Liabilities and shareholders' (deficit)/equity | | | | | | |
| Current liabilities: | | | | | | |
| Short-term borrowings | | $ | 1,000 | | | $ | — | | | $ | — | |
| Current maturities of long-term debt | | 1,352 | | | 609 | | | 1,112 | |
| Current operating lease liabilities | | 573 | | | 530 | | | 541 | |
| Accounts payable | | 11,334 | | | 12,759 | | | 10,884 | |
| Accrued compensation and employee benefits | | 1,353 | | | 1,117 | | | 1,350 | |
| Deferred revenue | | 1,954 | | | 1,614 | | | 1,608 | |
| Other current liabilities | | 3,268 | | | 2,935 | | | 3,235 | |
| Total current liabilities | | 20,834 | | | 19,564 | | | 18,730 | |
| Long-term debt, excluding current maturities | | 23,881 | | | 21,185 | | | 20,668 | |
| Noncurrent operating lease liabilities | | 4,136 | | | 3,907 | | | 3,890 | |
| Deferred revenue – Lowe's protection plans | | 1,119 | | | 1,007 | | | 1,019 | |
| Other liabilities | | 1,006 | | | 1,144 | | | 991 | |
| Total liabilities | | 50,976 | | | 46,807 | | | 45,298 | |
| | | | | | |
| Shareholders' (deficit)/equity: | | | | | | |
Preferred stock, $5 par value: Authorized – 5.0 million shares; Issued and outstanding – none | | — | | | — | | | — | |
Common stock, $0.50 par value: Authorized – 5.6 billion shares; Issued and outstanding – 686 million, 752 million, and 731 million shares, respectively | | 343 | | | 376 | | | 366 | |
| Capital in excess of par value | | — | | | — | | | 90 | |
| (Accumulated deficit)/retained earnings | | (1,913) | | | 3,942 | | | 1,117 | |
| Accumulated other comprehensive loss | | (6) | | | (245) | | | (136) | |
| Total shareholders' (deficit)/equity | | (1,576) | | | 4,073 | | | 1,437 | |
| Total liabilities and shareholders' (deficit)/equity | | $ | 49,400 | | | $ | 50,880 | | | $ | 46,735 | |
| | | | | | |
See accompanying notes to the consolidated financial statements (unaudited).
Lowe’s Companies, Inc.
Consolidated Statements of Shareholders’ (Deficit)/Equity (Unaudited)
In Millions
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended October 29, 2021 |
| Common Stock | | Capital in Excess
of Par Value | | Accumulated Deficit | | Accumulated Other
Comprehensive Loss | | | | | | Total |
| Shares | | Amount | | | | | | |
| Balance July 30, 2021 | 699 | | | $ | 350 | | | $ | — | | | $ | (460) | | | $ | (65) | | | | | | | $ | (175) | |
| | | | | | | | | | | | | | | |
| Net earnings | — | | | — | | | — | | | 1,896 | | | — | | | | | | | 1,896 | |
| Other comprehensive income | — | | | — | | | — | | | — | | | 59 | | | | | | | 59 | |
Cash dividends declared, $0.80 per share | — | | | — | | | — | | | (551) | | | — | | | | | | | (551) | |
| Share-based payment expense | — | | | — | | | 50 | | | — | | | — | | | | | | | 50 | |
| Repurchases of common stock | (13) | | | (7) | | | (59) | | | (2,798) | | | — | | | | | | | (2,864) | |
| Issuance of common stock under share-based payment plans | — | | | — | | | 9 | | | — | | | — | | | | | | | 9 | |
| Balance October 29, 2021 | 686 | | | $ | 343 | | | $ | — | | | $ | (1,913) | | | $ | (6) | | | | | | | $ | (1,576) | |
| | | | | | | | | | | | | | | |
| Nine Months Ended October 29, 2021 |
| Common Stock | | Capital in Excess
of Par Value | | Retained Earnings/ (Accumulated Deficit) | | Accumulated Other
Comprehensive Loss | | | | | | Total |
| Shares | | Amount | | | | | | |
| Balance January 29, 2021 | 731 | | | $ | 366 | | | $ | 90 | | | $ | 1,117 | | | $ | (136) | | | | | | | $ | 1,437 | |
| | | | | | | | | | | | | | | |
| Net earnings | — | | | — | | | — | | | 7,235 | | | — | | | | | | | 7,235 | |
| Other comprehensive income | — | | | — | | | — | | | — | | | 130 | | | | | | | 130 | |
Cash dividends declared, $2.20 per share | — | | | — | | | — | | | (1,544) | | | — | | | | | | | (1,544) | |
| Share-based payment expense | — | | | — | | | 163 | | | — | | | — | | | | | | | 163 | |
| Repurchases of common stock | (46) | | | (24) | | | (324) | | | (8,721) | | | — | | | | | | | (9,069) | |
| Issuance of common stock under share-based payment plans | 1 | | | 1 | | | 71 | | | — | | | — | | | | | | | 72 | |
| Balance October 29, 2021 | 686 | | | $ | 343 | | | $ | — | | | $ | (1,913) | | | $ | (6) | | | | | | | $ | (1,576) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended October 30, 2020 |
| Common Stock | | Capital in Excess
of Par Value | | Retained Earnings | | Accumulated Other
Comprehensive Loss | | | | | | Total |
| Shares | | Amount | | | | | | |
| Balance July 31, 2020 | 756 | | | $ | 378 | | | $ | 129 | | | $ | 4,134 | | | $ | (285) | | | | | | | $ | 4,356 | |
| Net earnings | — | | | — | | | — | | | 692 | | | — | | | | | | | 692 | |
| Other comprehensive income | — | | | — | | | — | | | — | | | 40 | | | | | | | 40 | |
Cash dividends declared, $0.60 per share | — | | | — | | | — | | | (452) | | | — | | | | | | | (452) | |
| Share-based payment expense | — | | | — | | | 39 | | | — | | | — | | | | | | | 39 | |
| Repurchases of common stock | (4) | | | (2) | | | (187) | | | (432) | | | — | | | | | | | (621) | |
| Issuance of common stock under share-based payment plans | — | | | — | | | 19 | | | — | | | — | | | | | | | 19 | |
| Balance October 30, 2020 | 752 | | | $ | 376 | | | $ | — | | | $ | 3,942 | | | $ | (245) | | | | | | | $ | 4,073 | |
| | | | | | | | | | | | | | | |
| Nine Months Ended October 30, 2020 |
| Common Stock | | Capital in Excess
of Par Value | | Retained Earnings | | Accumulated Other
Comprehensive Loss | | | | | | Total |
| Shares | | Amount | | | | | | |
| Balance January 31, 2020 | 763 | | | $ | 381 | | | $ | — | | | $ | 1,727 | | | $ | (136) | | | | | | | $ | 1,972 | |
| | | | | | | | | | | | | | | |
| Net earnings | — | | | — | | | — | | | 4,857 | | | — | | | | | | | 4,857 | |
| Other comprehensive loss | — | | | — | | | — | | | — | | | (109) | | | | | | | (109) | |
Cash dividends declared, $1.70 per share | — | | | — | | | — | | | (1,284) | | | — | | | | | | | (1,284) | |
| Share-based payment expense | — | | | — | | | 103 | | | — | | | — | | | | | | | 103 | |
| Repurchases of common stock | (13) | | | (6) | | | (203) | | | (1,358) | | | — | | | | | | | (1,567) | |
| Issuance of common stock under share-based payment plans | 2 | | | 1 | | | 100 | | | — | | | — | | | | | | | 101 | |
| Balance October 30, 2020 | 752 | | | $ | 376 | | | $ | — | | | $ | 3,942 | | | $ | (245) | | | | | | | $ | 4,073 | |
See accompanying notes to the consolidated financial statements (unaudited).
Lowe’s Companies, Inc.
Consolidated Statements of Cash Flows (Unaudited)
In Millions
| | | | | | | | | | | |
| Nine Months Ended |
| October 29, 2021 | | October 30, 2020 |
| Cash flows from operating activities: | | | |
| Net earnings | $ | 7,235 | | | $ | 4,857 | |
Adjustments to reconcile net earnings to net cash provided by operating activities: | | | |
| Depreciation and amortization | 1,388 | | | 1,152 | |
| Noncash lease expense | 383 | | | 356 | |
| Deferred income taxes | 96 | | | 5 | |
| Loss on property and other assets – net | 25 | | | 114 | |
| Loss on extinguishment of debt | — | | | 1,060 | |
| Share-based payment expense | 169 | | | 107 | |
| Changes in operating assets and liabilities: | | | |
| Merchandise inventory – net | (446) | | | (2,545) | |
| Other operating assets | (130) | | | 147 | |
| Accounts payable | 436 | | | 5,099 | |
| Deferred revenue | 444 | | | 508 | |
| Other operating liabilities | (421) | | | 625 | |
| Net cash provided by operating activities | 9,179 | | | 11,485 | |
| | | |
| Cash flows from investing activities: | | | |
| Purchases of investments | (2,325) | | | (2,548) | |
| Proceeds from sale/maturity of investments | 2,261 | | | 1,032 | |
| Capital expenditures | (1,256) | | | (1,172) | |
| Proceeds from sale of property and other long-term assets | 94 | | | 60 | |
| | | |
| Other – net | (134) | | | (24) | |
| Net cash used in investing activities | (1,360) | | | (2,652) | |
| | | |
| Cash flows from financing activities: | | | |
| Net change in commercial paper | — | | | (941) | |
| Net proceeds from issuance of debt | 4,972 | | | 7,929 | |
| Repayment of debt | (595) | | | (5,582) | |
| Proceeds from issuance of common stock under share-based payment plans | 72 | | | 102 | |
| Cash dividend payments | (1,433) | | | (1,252) | |
| Repurchases of common stock | (8,999) | | | (1,528) | |
| Other – net | (408) | | | (32) | |
| Net cash used in financing activities | (6,391) | | | (1,304) | |
| | | |
| Effect of exchange rate changes on cash | 3 | | | 4 | |
| | | |
| Net increase in cash and cash equivalents | 1,431 | | | 7,533 | |
| Cash and cash equivalents, beginning of period | 4,690 | | | 716 | |
| Cash and cash equivalents, end of period | $ | 6,121 | | | $ | 8,249 | |
| | | |
See accompanying notes to the consolidated financial statements (unaudited).
Lowe’s Companies, Inc.
Notes to Consolidated Financial Statements (Unaudited)
Note 1: Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements (unaudited) and notes to the condensed consolidated financial statements (unaudited) are presented in accordance with the rules and regulations of the Securities and Exchange Commission and do not include all the disclosures normally required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The condensed consolidated financial statements (unaudited), in the opinion of management, contain all normal recurring adjustments necessary to present fairly the financial position as of October 29, 2021, and October 30, 2020, and the results of operations, comprehensive income, and shareholders’ (deficit)/equity for the three and nine months ended October 29, 2021, and October 30, 2020, and cash flows for the nine months ended October 29, 2021, and October 30, 2020. The January 29, 2021 consolidated balance sheet was derived from the audited financial statements.
These interim condensed consolidated financial statements (unaudited) should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Lowe’s Companies, Inc. (the Company) Annual Report on Form 10-K for the fiscal year ended January 29, 2021 (the Annual Report). The financial results for the interim periods may not be indicative of the financial results for the entire fiscal year.
Reclassifications
Certain prior period amounts have been reclassified to conform to current period presentation as follows: the reclassification of excess property from other assets to property, less accumulated depreciation on the consolidated balance sheet as of October 30, 2020, and the separate disclosure of changes in deferred revenue within operating activities on the consolidated statement of cash flows for the nine months ended October 30, 2020.
Accounting Pronouncements Not Yet Adopted
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting. The ASU, and subsequent clarifications, provide practical expedients for contract modification accounting related to the transition away from the London Interbank Offered Rate (LIBOR) and other interbank offering rates to alternative reference rates. The expedients are applicable to contract modifications made and hedging relationships entered into on or before December 31, 2022. The Company intends to use the expedients where needed for reference rate transition. The Company continues to evaluate this standard update and does not currently expect a material impact to the Company’s financial statements or disclosures.
Recent accounting pronouncements pending adoption not discussed in this Form 10-Q or in the 2020 Form 10-K are either not applicable to the Company or are not expected to have a material impact on the Company.
Note 2: Revenue - Net sales consists primarily of revenue, net of sales tax, associated with contracts with customers for the sale of goods and services in amounts that reflect consideration the Company is entitled to in exchange for those goods and services.
The following table presents the Company’s sources of revenue:
| | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Three Months Ended | | Nine Months Ended |
| October 29, 2021 | | October 30, 2020 | | October 29, 2021 | | October 30, 2020 |
| Products | $ | 21,755 | | | $ | 21,342 | | | $ | 71,655 | | | $ | 66,724 | |
| Services | 597 | | | 552 | | | 1,805 | | | 1,459 | |
| Other | 566 | | | 415 | | | 1,451 | | | 1,103 | |
| Net sales | $ | 22,918 | | | $ | 22,309 | | | $ | 74,911 | | | $ | 69,286 | |
A provision for anticipated merchandise returns is provided through a reduction of sales and cost of sales in the period that the related sales are recorded. The merchandise return reserve is presented on a gross basis, with a separate asset and liability
included in the consolidated balance sheets. The balances and classification within the consolidated balance sheets for anticipated sales returns and the associated right of return assets are as follows:
| | | | | | | | | | | | | | | | | | | | |
| (In millions) | Classification | October 29,
2021 | | October 30,
2020 | | January 29,
2021 |
| Anticipated sales returns | Other current liabilities | $ | 315 | | | $ | 281 | | | $ | 252 | |
| Right of return assets | Other current assets | 191 | | | 180 | | | 164 | |
Deferred revenue - retail and stored-value cards
Retail deferred revenue consists of amounts received for which customers have not yet taken possession of the merchandise or for which installation has not yet been completed. The majority of revenue for goods and services is recognized in the quarter following revenue deferral. Stored-value cards deferred revenue includes outstanding stored-value cards such as gift cards and returned merchandise credits that have not yet been redeemed. Deferred revenue for retail and stored-value cards are as follows:
| | | | | | | | | | | | | | | | | |
| (In millions) | October 29,
2021 | | October 30,
2020 | | January 29,
2021 |
| Retail deferred revenue | $ | 1,446 | | | $ | 1,175 | | | $ | 1,046 | |
| Stored-value cards deferred revenue | 508 | | | 439 | | | 562 | |
| Deferred revenue | $ | 1,954 | | | $ | 1,614 | | | $ | 1,608 | |
Deferred revenue - Lowe’s protection plans
The Company defers revenues for its separately-priced long-term extended protection plan contracts (Lowe’s protection plans) and recognizes revenue on a straight-line basis over the respective contract term. Expenses for claims are recognized in cost of sales when incurred.
| | | | | | | | | | | | | | | | | |
| (In millions) | October 29,
2021 | | October 30,
2020 | | January 29,
2021 |
| Deferred revenue - Lowe’s protection plans | $ | 1,119 | | | $ | 1,007 | | | $ | 1,019 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| (In millions) | October 29, 2021 | | October 30, 2020 | | October 29, 2021 | | October 30, 2020 |
| Lowe’s protection plans deferred revenue recognized into sales | $ | 123 | | | $ | 106 | | | $ | 359 | | | $ | 314 | |
| Lowe’s protection plans claim expenses | 45 | | | 43 | | | 142 | | | 121 | |
Disaggregation of Revenues
The following table presents the Company’s net sales disaggregated by merchandise division:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| October 29, 2021 | | October 30, 2020 | | October 29, 2021 | | October 30, 2020 |
| (In millions) | Net Sales | | % | | Net Sales | | % | | Net Sales | | % | | Net Sales | | % |
Home Décor 1 | $ | 8,585 | | | 37.5 | % | | $ | 8,168 | | | 36.6 | % | | $ | 26,057 | | | 34.8 | % | | $ | 23,846 | | | 34.4 | % |
Building Products 2 | 7,569 | | | 33.0 | | | 7,607 | | | 34.1 | | | 24,111 | | | 32.2 | % | | 21,559 | | | 31.1 | % |
Hardlines 3 | 6,093 | | | 26.6 | | | 6,029 | | | 27.0 | | | 22,961 | | | 30.6 | % | | 22,512 | | | 32.5 | % |
| Other | 671 | | | 2.9 | | | 505 | | | 2.3 | | | 1,782 | | | 2.4 | % | | 1,369 | | | 2.0 | % |
| Total | $ | 22,918 | | | 100.0 | % | | $ | 22,309 | | | 100.0 | % | | $ | 74,911 | | | 100.0 | % | | $ | 69,286 | | | 100.0 | % |
Note: Merchandise division net sales for the prior period have been reclassified to conform to the current period presentation.
1 Home Décor includes the following product categories: Appliances, Décor, Flooring, Kitchens & Bath, and Paint
2 Building Products includes the following product categories: Building Materials, Electrical, Lighting, Lumber, Millwork, and Rough Plumbing
3 Hardlines includes the following product categories: Hardware, Lawn & Garden, Seasonal & Outdoor Living, and Tools
The following table presents the Company’s net sales disaggregated by geographical area:
| | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Three Months Ended | | Nine Months Ended |
| October 29, 2021 | | October 30, 2020 | | October 29, 2021 | | October 30, 2020 |
| United States | $ | 21,504 | | | $ | 20,832 | | | $ | 70,092 | | | $ | 65,153 | |
| Canada | 1,414 | | | 1,477 | | | 4,819 | | | 4,133 | |
| Net Sales | $ | 22,918 | | | $ | 22,309 | | | $ | 74,911 | | | $ | 69,286 | |
Note 3: Investments
Available-for-sale debt securities are recorded at fair value, and unrealized gains and losses are recorded, net of tax, as a component of accumulated other comprehensive loss. Net unrealized gains on available-for-sale debt securities as of October 29, 2021, October 30, 2020, and January 29, 2021, were not material. Refer to Note 4 for the fair value of the Company’s available-for-sale debt securities by investment type.
Held to maturity securities are U.S. Treasury bills which the Company has the ability and intent to hold until maturity and are stated at amortized cost. Gross unrecognized holding gains and losses on the Company’s held-to-maturity securities were not material for the period ended October 30, 2020.
The Company’s investments are as follows:
| | | | | | | | | | | | | | | | | | | | |
| (In millions) | | October 29, 2021 | | October 30, 2020 | | January 29, 2021 |
| Short-term investments: | | | | | | |
| Available-for-sale debt securities | | $ | 552 | | | $ | 702 | | | $ | 506 | |
| Held-to-maturity securities | | — | | | 1,150 | | | — | |
| Total short-term investments | | $ | 552 | | | $ | 1,852 | | | $ | 506 | |
| Long-term investments: | | | | | | |
| Available-for-sale debt securities | | $ | 213 | | | $ | 202 | | | $ | 200 | |
| Total long-term investments | | $ | 213 | | | $ | 202 | | | $ | 200 | |
Restricted Investments
Short-term and long-term investments include restricted balances pledged as collateral primarily for the Lowe’s protection plans program and are as follows:
| | | | | | | | | | | | | | | | | | | | |
| (In millions) | | October 29, 2021 | | October 30, 2020 | | January 29, 2021 |
| Short-term restricted investments | | $ | 552 | | | $ | 402 | | | $ | 506 | |
| Long-term restricted investments | | 213 | | | 202 | | | 200 |
