Lowe’s 4Q15 Earnings Call Notes

Lowe’s Cos. (LOW) Robert A. Niblock on Q4 2015 Results

Consumers continue to benefit from improved household financial conditions

“As we head into 2016, the outlook for the home improvement industry remains positive. Continued support from steady job gains and improved incomes as well as favorable trends in housing should keep home improvement growth buoyant. Further, despite recent volatility in the financial markets, the fundamentals for continued growth in consumer spending remain intact, consumers who continue to benefit from improved household financial conditions and lower gas prices on top of broader job and income gains. These trends aligned with the results of our most recent consumer sentiment survey where favorable perceptions around personal finances remains stable even though respondent’s assessment of the national economy declined slightly.”

Saw a significant increase in future home value expectations

“Roughly half of homeowners believe the value of their home has increased, which is double the number feeling that way in 2009 and many believe this trend will continue as we saw a significant increase in future home value expectations. And while most homeowners indicated their spending levels are saying the same, they’re more likely to allocate funds to home improvement compared to other areas. ”

Warmer weather benefitted outdoor

“if you think about the quarter, El Niño year or what, but certainly, overall warmer weather for the majority of the quarter. That extended the season for the outdoor product categories, which is what we went through here kind of lawn and garden, lumber and building material, those that we saw a really strong – outdoor power equipment that we saw really strong performance for. ”

Michael A. Jones – Chief Customer Officer

Promotions were in line with expectations

” We planned to do promotions within the quarter. We promoted to the level that we planned to promote to. And one of the adjustments that we made in the quarter was less financing and more towards discounts is what we did in the quarter. So total level is exactly where we expected it to be with some adjustments within the quarter on how we got there.”

Market has been pretty rational

“I don’t think so. I think where those are having challenges, the challenges are probably something other than just straight price. I think there are folks having challenges around their format and I’m not sure they’re going to promote their way out of those kind of challenges. And so I would describe the market as very rational. When we go after what we target for share gains, we do it in a way that’s rational. I think the majority of us do exactly that. So I don’t see it becoming more promotional.”

Robert F. Hull – Chief Financial Officer

Above average wage inflation in the marketplace

“As you’ve heard from others, there is wage pressure in the marketplace. Our outlook for 2016 assumes roughly 7 basis points or $0.03 per share of pressure associated with above-average wage inflation”