Lowe’s Companies, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended February 2, 2024 (fiscal 2023, 52 weeks). Although the request metadata says “2022 Q4,” this filing is an annual report for fiscal 2023, not a quarterly filing. Amounts are in U.S. dollars.
Business context
Lowe’s is a U.S.-focused home improvement retailer operating 1,746 stores and outlets, with approximately 195 million square feet of selling space. It sold its Canadian retail business on February 3, 2023 and reports one operating segment. Its Total Home strategy emphasizes Pro customers, online retail, installation services, localized assortments, and supply-chain capabilities.
Financial performance and liquidity
| Metric | Fiscal 2023 | Fiscal 2022 |
|---|---|---|
| Net sales | $86.377 billion | $97.059 billion |
| Comparable sales | (4.7%) | (0.9%) |
| Gross margin | 33.39% | 33.23% |
| Operating income | $11.557 billion | $10.159 billion |
| Net earnings | $7.726 billion | $6.437 billion |
| Diluted EPS | $13.20 | $10.17 |
| Adjusted diluted EPS (non-GAAP) | $13.09 | $13.81 |
| Cash from operations | $8.140 billion | $8.589 billion |
| Capital expenditures | $1.964 billion | $1.829 billion |
Gross margin improved 16 basis points, while operating margin rose to 13.38% from 10.47%. Net earnings and reported EPS increased largely because fiscal 2022 included $2.5 billion of pre-tax costs tied to the Canadian divestiture; adjusted EPS, which excludes the transaction’s specified effects, declined 5.2%.
Fiscal 2023 sales fell 11.0%. The comparison includes approximately $5.0 billion of Canadian retail sales and $1.4 billion from an extra 53rd week in fiscal 2022, as well as weaker comparable sales. Comparable transactions declined 4.6% and comparable average ticket declined 0.1%. Management cited pressure on DIY demand, especially bigger-ticket purchases, and lumber deflation. Pro comparable sales were positive for the year.
Operating cash flow decreased to $8.1 billion, reflecting tax-payment timing and lower earnings adjusted for non-cash items, partly offset by working-capital movements. Inventory changes increased operating cash flow by approximately $1.6 billion in fiscal 2023, compared with a $2.6 billion use in fiscal 2022. Investing cash outflow was $1.9 billion and financing cash outflow was $6.7 billion.
At year-end, cash and cash equivalents were $921 million, with $307 million of short-term investments. Total debt was approximately $35.9 billion, including current maturities and finance lease obligations; shareholders’ deficit was $15.1 billion. The company had $4.0 billion of undrawn revolving credit capacity and no outstanding commercial paper or revolving-credit borrowings. Management said cash flows and capital-market access were adequate for operations, investments, shareholder returns, and debt maturities over the next 12 months.
Lowe’s repurchased $6.3 billion of common stock and paid $2.5 billion in dividends during the year. The quarterly dividend was increased 5% to $1.10 per share in the third quarter. The company ended the year with $14.6 billion remaining under its authorized repurchase program.
Outlook, commentary, risks, and unusual items
- Management’s stated fiscal 2024 capital-expenditure guidance was approximately $2.0 billion. The supplied filing text does not provide clear fiscal 2024 sales or EPS guidance.
- Management described DIY demand as uncertain amid persistent macroeconomic pressure and emphasized value, convenience, cost discipline, and continued investment in the Total Home strategy. Productivity initiatives and lower transportation costs supported gross-margin improvement; supply-chain expansion costs partly offset that benefit.
- The Canadian business sale simplified Lowe’s focus on the U.S. market. Fiscal 2023 included a $79 million gain related to contingent consideration and final sale-price adjustments; fiscal 2022 included $2.5 billion of impairment, sale, and closing costs.
- Principal risks include consumer spending, housing and home-improvement activity, inflation and interest rates, competition, labor costs and retention, shrink, commodity-price volatility, tariffs and supply-chain disruption, and execution of technology and supply-chain investments. Cybersecurity and privacy risks, extreme weather and climate-related risks, and regulatory changes are also highlighted.
- The company disclosed an ongoing government investigation concerning lead-safe practices and recordkeeping in its third-party installation program. Management did not expect it to have a material adverse effect, but stated that outcomes could not be predicted. Other ordinary-course legal proceedings were not considered material.
- Management and Deloitte reported effective internal control over financial reporting as of February 2, 2024; the financial-statement audit opinion was unqualified. Deloitte identified vendor funds as a critical audit matter because of the volume and complexity of vendor agreements and related accruals.
Important facts for investors to verify
- Whether comparable-sales trends, particularly transactions and bigger-ticket DIY demand, stabilize or worsen.
- How reported results compare on a like-for-like basis after accounting for the Canadian divestiture and fiscal 2022’s extra week and unusual charges.
- Whether adjusted EPS and margins are supported by ongoing operations, given the gap between reported and adjusted comparisons and the role of productivity initiatives.
- Debt maturities, interest costs, and the sustainability of repurchases and dividends relative to operating cash flow and capital needs.
- Progress and costs of the supply-chain and technology transformations, and developments in the lead-safe installation investigation.