Lowe's Operating Income Rises On Sustained Demand, Sells Canada Operations

Scott Peters
16 Nov, 2022
New York City

Lowe's Companies soared 5.5% to $220.18 after the home improvement retailer lifted its full-year earnings outlook.  

Total sales in the third quarter increased 2.6% to $23.5 billion from $22.9 billion a year ago and total comparable sales increased 2.2% and the U.S. comparable store sales rose 3.0%.

Net income in the quarter dropped to $154 million from $1.78 billion and diluted earnings per share fell to 25 cents from $2.74 a year ago.

Excluding pre-tax non-cash impairment charges of $2.1 billion linked to the Canadian operations, third quarter quarter earnings were  $3.27 a share.

The company is looking to close the sale of its Canadian operation in the first quarter of 2023. 

The company agreed to sell its Canadian network of 450 stores for $400 million to New York-based private equity investment company Sycamore Partners.  

Lowe's Canada operated under several brand names including Reno-Depot, Lowe's Canada, Rona and Dick's Lumber. 

"The sale of our Canadian retail business is an important step toward simplifying the Lowe's business model. 

While this business represents approximately 7% of our full year 2022 sales outlook, it also represents approximately 60 basis points of dilution on our full year 2022 operating margin outlook," said Marvin R. Ellison, Lowe's chairman, president and CEO.

Inventories 

Net merchandise inventories rose to $19.8 billion from $16.7 billion from a year ago. 

 

Cash Flow 

In the third quarter, net cash flow provided by operating activities declined to $8.1 billion from $9.2 billion a year ago. 

Free cash flow dropped to roughly $7.0 billion from $8.0 billion a year ago. 

 

Outlook 

The company revised higher its full-year outlook on stronger-than-expected operating results. 

The company guided full-year 2022 sales outlook between $97 billion and $98 billion and comparable sales are estimated to fall in the range of flat to a decline of 1.0%.

Sales in the 53rd week of 2022 are estimated to fall between $1.0 billion and $1.5 billion. 

 

Dividends and Stock Repurchase 

In the quarter, the company repurchased 20.5 million shares for $4.0 billion and paid $666 million in dividends. 

In the third quarter a year ago, the company repurchased $2.8 billion of its shares and paid dividends of $551 million. 

 

Store Network 

Lowe's operates 1,969 home improvement stores and hardware store in the U.S. and Canada, representing 208 million square feet of retail selling space.