Lowe's Reports Fourth Quarter and Fiscal Year 2007 Earnings

MOORESVILLE, N.C., Feb. 25 /PRNewswire-FirstCall/ -- Lowe's Companies, Inc. , the world's second largest home improvement retailer, today reported net earnings of $408 million for the quarter ended February 1, 2008, a 33.4 percent decline over the same period a year ago. Diluted earnings per share declined 30.0 percent to $0.28 from $0.40 in the fourth quarter of 2006. For the fiscal year ended February 1, 2008, net earnings declined 9.5 percent to $2.81 billion while diluted earnings per share declined 6.5 percent to $1.86.

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Sales for the quarter declined 0.3 percent to just under $10.4 billion. For the fiscal year ended February 1, 2008, sales increased 2.9 percent to $48.3 billion. Comparable store sales declined 7.6 percent for the fourth quarter and 5.1 percent for fiscal 2007.

"Fourth quarter and fiscal year 2007 sales fell short of our plan as we faced an unprecedented decline in housing turnover, falling home prices in many areas and turbulent mortgage markets that impacted both sentiment related to home improvement purchases as well as consumers' access to capital," explained Robert A. Niblock, Lowe's chairman and CEO. "While our results fell short of our expectations, I want to thank our more than 215,000 employees whose customer focus allowed us to capture market share in both the quarter and the year. Those market share gains combined with appropriate expense management in a very challenging environment for the home improvement industry allowed us to deliver respectable annual earnings per share.

"As we look to fiscal 2008, we know the next several quarters will be challenging on many fronts as industry sales are likely to remain soft," Niblock continued. "We remain focused on what we can control: providing great customer service while managing expenses and offering customers the best shopping experience in home improvement. As the year progresses, the recent Federal Reserve interest rate cuts and the approved fiscal stimulus package are expected to lend support to the broader economy and the consumer. As a result, many of the headwinds facing the housing market and the home improvement industry should lessen, and consumers' confidence in investing in and improving their homes should improve."

During the quarter, Lowe's opened 72 new stores including two relocations. As of February 1, 2008, Lowe's operated 1,534 stores in the United States and Canada representing 174.1 million square feet of retail selling space, a 10.9 percent increase over last year.

A conference call to discuss fourth quarter and fiscal 2007 operating results is scheduled for today (Monday, February 25) at 9:00 a.m. EST. Please dial 888-817-4020 (international callers dial 706-679-8762) to participate. A webcast of the call will take place simultaneously and can be accessed by visiting Lowe's website at http://www.lowes.com/investor and clicking on Lowe's Fourth Quarter and Fiscal 2007 Earnings Conference Call Webcast. A replay of the call will be archived on Lowes.com until May 18, 2008.

Lowe's Business Outlook First Quarter 2008 (comparisons to first quarter 2007) * The company expects to open approximately 21 new stores reflecting square footage growth of approximately 11 percent * Total sales are expected to increase approximately 2 percent * The company expects comparable store sales to decline 5 to 7 percent * Earnings before interest and taxes (EBIT) margin is expected to decline approximately 170 basis points driven by payroll, fixed cost, incentive compensation and depreciation de-leverage * Store opening costs are expected to be approximately $17 million * Diluted earnings per share of $0.38 to $0.42 are expected * Lowe's first quarter ends on May 2, 2008 with operating results to be publicly released on Monday, May 19, 2008 Fiscal Year 2008 (comparisons to fiscal year 2007) * The company expects to open approximately 120 stores in 2008 reflecting total square footage growth of approximately 8 percent * Total sales are expected to increase approximately 3 percent * The company expects comparable store sales to decline 5 to 6 percent * Earnings before interest and taxes (EBIT) margin is expected to decline approximately 180 basis points * Store opening costs are expected to be approximately $109 million * Diluted earnings per share of $1.50 to $1.58 are expected for the fiscal year ending January 30, 2009 Disclosure Regarding Forward-Looking Statements

This news release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Statements of the company's expectations for sales growth, comparable store sales, earnings and performance, capital expenditures, store openings, the housing market, the home improvement industry, demand for services, and any statement of an assumption underlying any of the foregoing, constitute "forward-looking statements" under the Act. Although the company believes that the expectations, opinions, projections, and comments reflected in its forward-looking statements are reasonable, it can give no assurance that such statements will prove to be correct. A wide-variety of potential risks, uncertainties, and other factors could materially affect our ability to achieve the results expressed or implied by our forward-looking statements including, but not limited to, changes in general economic conditions, such as interest rate and currency fluctuations, higher fuel and other energy costs, slower growth in personal income, declining housing turnover, the availability of mortgage financing, inflation or deflation of commodity prices and other factors which can negatively affect our customers, as well as our ability to: (i) respond to adverse trends in the housing industry and the level of repairs, remodeling, and additions to existing homes, as well as general reduction in commercial building activity; (ii) secure, develop, and otherwise implement new technologies and processes designed to enhance our efficiency and competitiveness; (iii) attract, train, and retain highly-qualified associates; (iv) locate, secure, and successfully develop new sites for store development particularly in major metropolitan markets; (v) respond to fluctuations in the prices and availability of services, supplies, and products; (vi) respond to the growth and impact of competition; (vii) address legal and regulatory developments; and (viii) respond to unanticipated weather conditions that could adversely affect sales. For more information about these and other risks and uncertainties that we are exposed to, you should read the "Risk Factors" included in our Annual Report on Form 10-K to the United States Securities and Exchange Commission and the description of material changes, if any, in those "Risk Factors" included in our Quarterly Reports on Form 10-Q.

The forward-looking statements contained in this news release speak only as of the date of this release and the company does not assume any obligation to update any such statements.

With fiscal year 2007 sales of $48.3 billion, Lowe's Companies, Inc. is a FORTUNE(R) 50 company that serves approximately 14 million customers a week at more than 1,525 home improvement stores in the United States and Canada.

Founded in 1946 and based in Mooresville, N.C., Lowe's is the second-largest home improvement retailer in the world. For more information, visit Lowes.com.

Lowe's Companies, Inc. Consolidated Statements of Current and Retained Earnings (Unaudited) In Millions, Except Per Share Data Three Months Ended February 1, 2008 February 2, 2007 Current Earnings Amount Percent Amount Percent Net sales $10,379 100.00 $10,406 100.00 Cost of sales 6,759 65.12 6,719 64.56 Gross margin 3,620 34.88 3,687 35.44 Expenses: Selling, general and administrative 2,489 23.97 2,335 22.44 Store opening costs 61 0.59 49 0.47 Depreciation 370 3.57 308 2.97 Interest - net 47 0.45 43 0.42 Total expenses 2,967 28.58 2,735 26.30 Pre-tax earnings 653 6.30 952 9.14 Income tax provision 245 2.37 339 3.25 Net earnings $408 3.93 $613 5.89 Weighted average shares outstanding - basic 1,456 1,519 Basic earnings per share $0.28 $0.40 Weighted average shares outstanding - diluted 1,482 1,549 Diluted earnings per share $0.28 $0.40 Cash dividends per share $0.08 $0.05 Retained Earnings Balance at beginning of period $15,281 $14,323 Cumulative effect adjustment 1 - - Net earnings 408 613 Cash dividends (117) (76) Share repurchases (227) - Balance at end of period $15,345 $14,860 Years Ended February 1, 2008 February 2, 2007 Current Earnings Amount Percent Amount Percent Net sales $48,283 100.00 $46,927 100.00 Cost of sales 31,556 65.36 30,729 65.48 Gross margin 16,727 34.64 16,198 34.52 Expenses: Selling, general and administrative 10,515 21.78 9,738 20.75 Store opening costs 141 0.29 146 0.31 Depreciation 1,366 2.83 1,162 2.48 Interest - net 194 0.40 154 0.33 Total expenses 12,216 25.30 11,200 23.87 Pre-tax earnings 4,511 9.34 4,998 10.65 Income tax provision 1,702 3.52 1,893 4.03 Net earnings $2,809 5.82 $3,105 6.62 Weighted average shares outstanding - basic 1,481 1,535 Basic earnings per share $1.90 $2.02 Weighted average shares outstanding - diluted 1,510 1,566 Diluted earnings per share $1.86 $1.99 Cash dividends per share $0.29 $0.18 Retained Earnings Balance at beginning of period $14,860 $12,191 Cumulative effect adjustment 1 (8) - Net earnings 2,809 3,105 Cash dividends (428) (276) Share repurchases (1,888) (160) Balance at end of period $15,345 $14,860 (1) The Company adopted FIN 48, Accounting for Uncertainty in Income Taxes, effective February 3, 2007. Lowe's Companies, Inc. Consolidated Balance Sheets In Millions, Except Par Value Data (Unaudited) February 1, February 2, 2008 2007 Assets Current assets: Cash and cash equivalents $281 $364 Short-term investments 249 432 Merchandise inventory - net 7,611 7,144 Deferred income taxes - net 302 161 Other current assets 279 213 Total current assets 8,722 8,314 Property, less accumulated depreciation 21,376 18,971 Long-term investments 509 165 Other assets 313 317 Total assets $30,920 $27,767 Liabilities and shareholders' equity Current liabilities: Short-term borrowings $1,064 $23 Current maturities of long-term debt 40 88 Accounts payable 3,713 3,524 Accrued salaries and wages 424 425 Self-insurance liabilities 671 650 Deferred revenue 717 731 Other current liabilities 1,137 1,098 Total current liabilities 7,766 6,539 Long-term debt, excluding current maturities 5,576 4,325 Deferred income taxes - net 712 735 Other liabilities 768 443 Total liabilities 14,822 12,042 Shareholders' equity: Preferred stock - $5 par value, none issued - - Common stock - $.50 par value; Shares issued and outstanding February 1, 2008 1,458 February 2, 2007 1,525 729 762 Capital in excess of par value 16 102 Retained earnings 15,345 14,860 Accumulated other comprehensive income 8 1 Total shareholders' equity 16,098 15,725 Total liabilities and shareholders' equity $30,920 $27,767 Lowe's Companies, Inc. Consolidated Statements of Cash Flows In Millions Years Ended (Unaudited) February 1, February 2, 2008 2007 Cash flows from operating activities: Net earnings Adjustments to reconcile net earnings to net cash provided by $2,809 $3,105 operating activities: Depreciation and amortization 1,464 1,237 Deferred income taxes (11) (6) Loss on disposition/writedown of fixed and other assets 51 23 Share-based payment expense 99 62 Changes in operating assets and liabilities: Merchandise inventory - net (464) (509) Other operating assets (45) (135) Accounts payable 185 692 Other operating liabilities 259 33 Net cash provided by operating activities 4,347 4,502 Cash flows from investing activities: Purchases of short-term investments (920) (284) Proceeds from sale/maturity of short- term investments 1,183 572 Purchases of long-term investments (1,588) (558) Proceeds from sale/maturity of long- term investments 1,162 415 Increase in other long-term assets (7) (16) Fixed assets acquired (4,010) (3,916) Proceeds from the sale of fixed and other long-term assets 57 72 Net cash used in investing activities (4,123) (3,715) Cash flows from financing activities: Net increase in short-term borrowings 1,041 23 Proceeds from issuance of long-term debt 1,296 989 Repayment of long-term debt (96) (33) Proceeds from issuance of common stock under employee stock purchase plan 80 76 Proceeds from issuance of common stock from stock options exercised 69 100 Cash dividend payments (428) (276) Repurchase of common stock (2,275) (1,737) Excess tax benefits of share-based payments 6 12 Net cash used in financing activities (307) (846) Net decrease in cash and cash equivalents (83) (59) Cash and cash equivalents, beginning of period 364 423 Cash and cash equivalents, end of period $281 $364