Lowe's Reports First Quarter Sales and Earnings Results

MOORESVILLE, N.C., May 21 /PRNewswire-FirstCall/ -- Lowe's Companies, Inc. , the world's second-largest home improvement retailer, today reported net earnings of $739 million for the quarter ended May 4, 2007, a 12.1 percent decline versus the same period a year ago. Diluted earnings per share declined 9.4 percent to $0.48 from $0.53 in the first quarter of 2006.

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Sales for the quarter increased 2.1% percent to $12.2 billion, up from $11.9 billion in the first quarter of 2006. Comparable store sales for the first quarter declined 6.3 percent.

"Multiple factors, including a difficult housing market in many areas, tough comparisons to hurricane rebuilding efforts, and significant lumber and plywood price deflation, continued to create a challenging sales environment in the first quarter," commented Robert A. Niblock, Lowe's chairman and CEO. "Those anticipated factors were compounded by mixed weather during the quarter. Mild temperatures and solid sales in March were more than offset by record cold and wet weather across much of the U.S. during the first two weeks of April. While the weather improved in the second half of the month, the drag created by the first two weeks substantially contributed to our sales shortfall to plan.

"We continued to gain market share during the quarter despite the challenging sales environment and credit that success to our commitment to providing great stores and great products as well as our employees' commitment to customer service. Easier comparisons in the back half of the year give us continued confidence that our sales performance will improve as the year progresses."

During the quarter, Lowe's opened 15 new stores. As of May 4, 2007, Lowe's operated 1,400 stores in 49 states representing 158.7 million square feet of retail selling space, an 11.2 percent increase over last year. A conference call to discuss first quarter 2007 operating results is scheduled for today (Monday, May 21) at 9:00 a.m. EDT. 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 First Quarter 2007 Earnings Conference Call Webcast. A replay of the call will be archived on Lowes.com until August 19, 2007.

Lowe's Business Outlook Second Quarter 2007 (comparisons to second quarter 2006) -- The company expects to open 26 new stores reflecting square footage growth of approximately 11 percent -- Total sales are expected to increase 6 to 7 percent -- The company expects to report a comparable store sales decline of 1 to 3 percent -- Operating margin (defined as gross margin less SG&A and depreciation) is expected to decline approximately 40 basis points -- Store opening costs are expected to be approximately $35 million -- Diluted earnings per share of $0.62 to $0.64 are expected -- Lowe's second quarter ends on August 3, 2007 with operating results to be publicly released on Monday, August 20, 2007 Fiscal Year 2007 (comparisons to fiscal year 2006) -- The company expects to open 150 to 160 stores in 2007 reflecting total square footage growth of approximately 11 percent -- Total sales are expected to increase approximately 7 percent -- The company expects comparable store sales to decline 1 to 2 percent -- Operating margin (defined as gross margin less SG&A and depreciation) is expected to decline 70 to 80 basis points -- Store opening costs are expected to be $140 to $145 million -- Diluted earnings per share of $1.99 to $2.03 are expected for the fiscal year ending February 1, 2008 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, 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, fuel and other energy costs, slower growth in personal income and other factors which can negatively affect our customers as well as our ability to: (i) respond to decreases in the number of new housing starts 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 develop new sites for store development; (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 matters; and (viii) respond to unanticipated weather conditions. 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 descriptions of any material changes in those "Risk Factors" included in our subsequent 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 2006 sales of $46.9 billion, Lowe's Companies, Inc. is a FORTUNE(R) 50 company that serves approximately 13 million customers a week at more than 1,400 home improvement stores in 49 states. Based in Mooresville, N.C., the 60-year old company 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 May 4, 2007 May 5, 2006 Current Earnings Amount Percent Amount Percent Net sales $12,172 100.00 $11,921 100.00 Cost of sales 7,913 65.01 7,752 65.03 Gross margin 4,259 34.99 4,169 34.97 Expenses: Selling, general and administrative 2,685 22.06 2,467 20.69 Store opening costs 12 0.10 25 0.21 Depreciation 323 2.65 274 2.30 Interest - net 47 0.39 35 0.30 Total expenses 3,067 25.20 2,801 23.50 Pre-tax earnings 1,192 9.79 1,368 11.47 Income tax provision 453 3.72 527 4.41 Net earnings $739 6.07 $841 7.06 Weighted average shares outstanding - basic 1,510 1,557 Basic earnings per share $0.49 $0.54 Weighted average shares outstanding - diluted 1,540 1,590 Diluted earnings per share $0.48 $0.53 Cash dividends per share $0.05 $0.03 Retained Earnings Balance at beginning of period $14,860 $12,191 Cumulative effect adjustment (1) (8) - Net earnings 739 841 Cash dividends (75) (47) Share repurchases (548) - Balance at end of period $14,968 $12,985 (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) (Unaudited) May 4, May 5, February 2, 2007 2006 2007 Assets Current assets: Cash and cash equivalents $629 $1,140 $364 Short-term investments 571 517 432 Merchandise inventory - net 8,501 7,817 7,144 Deferred income taxes - net 201 175 161 Other current assets 155 139 213 Total current assets 10,057 9,788 8,314 Property, less accumulated depreciation 19,187 16,760 18,971 Long-term investments 406 277 165 Other assets 319 203 317 Total assets $29,969 $27,028 $27,767 Liabilities and shareholders' equity Current liabilities: Short-term borrowings $ - $ - $ 23 Current maturities of long-term debt 92 33 88 Accounts payable 5,211 4,553 3,524 Accrued salaries and wages 377 377 425 Self-insurance liabilities 661 613 650 Deferred revenue 851 853 731 Other current liabilities 1,429 1,551 1,098 Total current liabilities 8,621 7,980 6,539 Long-term debt, excluding current maturities 4,306 3,446 4,325 Deferred income taxes - net 657 717 735 Other long-term liabilities 659 304 443 Total liabilities 14,243 12,447 12,042 Shareholders' equity: Preferred stock - $5 par value, none issued - - - Common stock - $.50 par value; Shares issued and outstanding May 4, 2007 1,506 May 5, 2006 1,555 February 2, 2007 1,525 753 778 762 Capital in excess of par value - 816 102 Retained earnings 14,968 12,985 14,860 Accumulated other comprehensive income 5 2 1 Total shareholders' equity 15,726 14,581 15,725 Total liabilities and shareholders' equity $29,969 $27,028 $27,767 Lowe's Companies, Inc. Consolidated Statements of Cash Flows (Unaudited) In Millions Three Months Ended May 4, 2007 May 5, 2006 Cash flows from operating activities: Net earnings $739 $841 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 345 290 Deferred income taxes 37 (38) Loss on disposition/writedown of fixed and other assets 4 8 Share-based payment expense 22 11 Changes in operating assets and liabilities: Merchandise inventory - net (1,357) (1,182) Other operating assets 63 (17) Accounts payable 1,687 1,721 Other operating liabilities 599 476 Net cash provided by operating activities 2,139 2,110 Cash flows from investing activities: Purchases of short-term investments (257) (146) Proceeds from sale/maturity of short- term investments 117 143 Purchases of long-term investments (244) (72) Proceeds from sale/maturity of long- term investments 5 26 Increase in other long-term assets (13) (3) Fixed assets acquired (707) (732) Proceeds from the sale of fixed and other long-term assets 14 9 Net cash used in investing activities (1,085) (775) Cash flows from financing activities: Net decrease in short-term borrowings (23) - Proceeds from issuance of long-term debt 3 - Repayment of long-term debt (16) (7) Proceeds from issuance of common stock from stock options exercised 21 33 Cash dividend payments (75) (47) Repurchase of common stock (700) (600) Excess tax benefits of share-based payments 1 3 Net cash used in financing activities (789) (618) Net increase in cash and cash equivalents 265 717 Cash and cash equivalents, beginning of period 364 423 Cash and cash equivalents, end of period $629 $1,140