Lowe’s 4Q16 Earnings Call Notes

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Robert Niblock

Consumers are excited

“We expect housing in 2017 to remain a bright spot. Rising home prices should continue to encourage homeowners to engage in more discretionary projects in addition to ongoing maintenance and repair spending. The improving incomes and household financial conditions should continue to be a catalyst for household formation, which will help sustain home buying and related spending. Expected growth in the home improvement market is further support of the results of our fourth quarter consumer sentiment survey, which revealed that post election, homeowners have an increasingly favorable view of the national economy and their personal financial situations and we believe this trend will continue, as almost half of the homeowners we surveyed indicate that they are very likely to begin a home improvement project in the next six months, and more than half of homeowners believe that home values are rising and will continue to increase.”

We’ve needed to reorganize because this isn’t the design you would have from scratch if you were omni-channel

“But we look at the continued shift that you see taking place in the customer and the way that they want to interact with us. Realize that we need to continue to evolve. So you think about it, you sitting back with an organizational structure today that is evolved over time, not the one that we would have design from scratch. If you were starting out as a omni-channel company. So as we continue to see that evolution, we said we really needed to step back and say, okay, back and say, okay, where do resources need be, allocated the cooperate office. We took out some spans and layers to make us more agile nimble organization from a corporate office standpoint, so that hopefully we can better response opportunities, better respond to the stores in our other channels after the taken care of the customer on daily basis.”

Really strong increase in homeowners’ intention to invest in their home

“As we look at 2017, we look – if you look at whether it’s the underlying macro fundamentals that are out there, still seeing, a very healthy housing market was from a turnover standpoint was from an appreciation standpoint on housing, incomes continuing to rise, as we spoke about, employment continuing to improve, all of those things I think set up home improvement to continue to gain shares as a percent of share of wallet in 2017. We’ve seen that trend for the past few years, and I think it sets us up well for this year. And then on top of that, we’ve actually, behind, or post election, we’ve actually seen, from our consumer sentiment survey, a really strong increase in homeowners’ intention to invest in their home and start a project with the next six months, as we talked about. So as we look at just the underlying factors, some of the momentum that we saw coming out of our quarterly consumer sentiment survey sets us up that we think that sets us up well that 3.5% comp should be achievable as we look out 2017.”