Lowe’s 3Q16 Earnings Call Notes

Lowe’s Companies’ (LOW) CEO Robert Niblock on Q3 2016 Results

Traffic slowed more than anticipated in August and September, but improved in October

“Good morning, and thanks for your interest in Lowe’s. Our third quarter operating results were below our expectations due to slower sales in the first two months of the quarter. While we expected moderation in the second-half of the year as reflected in our guidance, traffic slowed more than we anticipated in August and September before improving in October, which put pressure on our profitability.”

See positives in our consumer sentiment survey

“Our third quarter consumer sentiment survey shows a similar trend with consumers’ favorable use around the personal finances holding steady. We continue to see supportive trends for the home improvement industry, specifically we found that over half of homeowners believe that value of their home is increasing, and home improvement spending intentions held steady continuing to outpace overall spending intentions.”

Home price appreciation this year is forecast as 4.9%

“Home price appreciation this year is forecasted as 4.9% versus 5.5% last year, so still strong numbers but moderating disposable income at 2.6% annualized this year versus 3.5% last year. And part of that was driven by the increased turnover that we saw a year ago. We knew that, that would moderate some. So we still expect it to be very healthy environment. We still think the number one driver that’s out there is continued appreciation in homes, but it has moderated some. So still a very healthy industry, but not to the extent that we would have seen the numbers supporting a year ago.”

There are areas where we can shift investment dollars

“There are other areas where in today’s environment that we have invested in the past. We don’t need to invest in the future that we can rationalize that that spending that helps drive the ability to invest in areas that resonate with the consumer, and also help to drive better productivity across the organization.”

[Analyst Comment]

Performance was worse than industry

“Good morning. Thanks a lot for taking my question. So the growth you put up in the second quarter was a little less than half of the growth in the industry with pronounced underperformance in traffic. Do you think that was more due to draw or conversion and how do you improve each of those factors, while improving your cost structure?”