Lowes Companies Inc 10-K for FY2023

Lowes Companies Inc (LOW)

10-K 2023-03-27 For: 2023-02-03

Added on April 03, 2026

About this 10-K

Lowes Companies Inc filed this 10-K on March 27, 2023, covering the fiscal year ended February 3, 2023 (FY2023).

Headline figures

Fiscal year ended February 3, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $97.06B; up 0.8% from $96.25B a year earlier
Net income: $6.44B; down 23.8% from net income of $8.44B a year earlier
Diluted EPS: $10.17; down 15.5% from $12.04 a year earlier

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Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.50 per share	LOW	New York Stock Exchange


CLASS						OUTSTANDING AT 3/23/2023
Common Stock, $0.50 par value						596,356,261


Document						Parts Into Which Incorporated
Portions of the Proxy Statement for Lowe’s 2023 Annual Meeting of Shareholders						Part III


			Page No.
Disclosure Regarding Forward-Looking Statements			ii
PART I
	Item 1.	Business	1
	Item 1A.	Risk Factors	8
	Item 1B.	Unresolved Staff Comments	16
	Item 2.	Properties	16
	Item 3.	Legal Proceedings	17
	Item 4.	Mine Safety Disclosures	18
		Information About Our Executive Officers	19

PART II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	20
	Item 6.	Reserved	21
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	32
	Item 8.	Financial Statements and Supplementary Data	33
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	69
	Item 9A.	Controls and Procedures	69
	Item 9B.	Other Information	69
	Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	70

PART III
	Item 10.	Directors, Executive Officers and Corporate Governance	71
	Item 11.	Executive Compensation	71
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	71
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	71
	Item 14.	Principal Accountant Fees and Services	71

PART IV
	Item 15.	Exhibits and Financial Statement Schedules	72
	Item 16.	Form 10-K Summary	83

		Signatures	84


State	Stores	State	Stores
Alabama	38	Montana	5
Alaska	5	Nebraska	5
Arizona	32	Nevada	17
Arkansas	21	New Hampshire	13
California	112	New Jersey	40
Colorado	29	New Mexico	14
Connecticut	17	New York	70
Delaware	10	North Carolina	114
District of Columbia	1	North Dakota	3
Florida	128	Ohio	83
Georgia	64	Oklahoma	29
Hawaii	4	Oregon	14
Idaho	8	Pennsylvania	83
Illinois	37	Rhode Island	5
Indiana	43	South Carolina	50
Iowa	11	South Dakota	3
Kansas	12	Tennessee	60
Kentucky	42	Texas	143
Louisiana	30	Utah	17
Maine	11	Vermont	2
Maryland	29	Virginia	69
Massachusetts	28	Washington	35
Michigan	45	West Virginia	18
Minnesota	10	Wisconsin	8
Mississippi	24	Wyoming	1
Missouri	46	Total	1,738


☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	2/2/2018		2/1/2019		1/31/2020		1/29/2021		1/28/2022		2/3/2023
Lowe’s	$	100.00	$	97.59	$	119.05	$	173.75	$	248.16	$	232.67
S&P 500	100.00		99.35		121.46		142.39		172.28		163.47
S&P Retail Index	$	100.00	$	108.22	$	130.53	$	184.54	$	195.42	$	165.36


	Total Number of Shares Purchased 1	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 2	Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs 2, 3
October 29, 2022 - November 25, 2022 4	5,955,618	$	197.92	5,955,320	$	6,427,480,025
November 26, 2022 - December 30, 2022	585	208.75		—	21,427,480,025
December 31, 2022 - February 3, 2023 4	4,015,907	204.87		4,008,843	20,727,480,160
As of February 3, 2023	9,972,110	$	200.72	9,964,163	$	20,727,480,160


					Basis Point Increase / (Decrease) in Percentage of Net Sales from Prior Year	Percentage Increase / (Decrease) in Dollar Amounts from Prior Year
	2022		2021		2022 vs. 2021	2022 vs. 2021
Net sales	100.00	%	100.00	%	N/A	0.8	%
Gross margin	33.23		33.30		(7)	0.6
Expenses:
Selling, general and administrative	20.94		19.01		193	11.1
Depreciation and amortization	1.82		1.73		9	6.2
Operating income	10.47		12.56		(209)	(16.0)
Interest – net	1.16		0.92		24	26.8

Pre-tax earnings	9.31		11.64		(233)	(19.4)
Income tax provision	2.68		2.87		(19)	(6.0)
Net earnings	6.63	%	8.77	%	(214)	(23.8)	%

					Basis Point Increase / (Decrease) in Percentage of Net Sales from Prior Year	Percentage Increase / (Decrease) in Dollar Amounts from Prior Year
	2021		2020		2021 vs. 2020	2021 vs. 2020
Net sales	100.00	%	100.00	%	N/A	7.4	%
Gross margin	33.30		33.01		29	8.4
Expenses:
Selling, general and administrative	19.01		20.68		(167)	(1.2)
Depreciation and amortization	1.73		1.56		17	18.8
Operating income	12.56		10.77		179	25.4
Interest – net	0.92		0.95		(3)	4.4
Loss on extinguishment of debt	—		1.18		(118)	(100.0)
Pre-tax earnings	11.64		8.64		300	44.8
Income tax provision	2.87		2.13		74	45.3
Net earnings	8.77	%	6.51	%	226	44.7	%


Other Metrics	2022 1			2021			2020
Comparable sales (decrease)/increase 2	(0.9)		%	6.9		%	26.1		%
Total customer transactions (in millions)	937			1,002			1,046
Average ticket 3	$	103.64		$	96.09		$	85.67
At end of year:
Number of stores	1,738			1,971			1,974
Sales floor square feet (in millions)	195			208			208
Average store size selling square feet (in thousands) 4	112			106			105
Return on average assets 5	13.9		%	17.5		%	12.4		%

Net earnings to average debt and shareholders’ (deficit)/equity 6	26.6		%	32.3		%	21.9		%
Return on invested capital 6	30.4		%	35.3		%	27.7		%


	2022
	Pre-Tax Earnings	Tax1	Net Earnings
Diluted earnings per share, as reported			$	10.17
Non-GAAP adjustments – per share impacts
Canadian retail business transaction costs	3.95	(0.31)	3.64

Adjusted diluted earnings per share			$	13.81


(In millions, except percentage data)	2022			2021			2020
Calculation of Return on Invested Capital
Numerator
Net earnings	$	6,437		$	8,442		$	5,835
Plus:
Interest expense – net	1,123			885			848
Operating lease interest	163			160			171
Loss on extinguishment of debt	—			—			1,060
Provision for income taxes	2,599			2,766			1,904
Lease adjusted net operating profit	10,322			12,253			9,818
Less:
Income tax adjustment 1	2,970			3,024			2,416
Lease adjusted net operating profit after tax	$	7,352		$	9,229		$	7,402

Denominator
Average debt and shareholders’ (deficit)/equity 2	$	24,155		$	26,109		$	26,686
Net earnings to average debt and shareholders’ (deficit)/equity	26.6		%	32.3		%	21.9		%
Return on invested capital 3	30.4		%	35.3		%	27.7		%


(In millions)	2022		2021
Interest expense, net of amount capitalized	$	1,137	$	869
Amortization of original issue discount and loan costs	20		16
Interest on tax uncertainties	3		12
Interest income	(37)		(12)
Interest – net	$	1,123	$	885


	2022		2021
Existing store investments ¹	75	%	75	%
Strategic initiatives ²	15	%	15	%
New stores, new corporate facilities and international 3	10	%	10	%
Total capital expenditures	100	%	100	%


	2023
Existing store investments	70	%
Strategic initiatives	25	%
New stores and corporate facilities	5	%


(In millions, except for interest rate data)	2022			2021
Net proceeds from issuance of debt	$	9,667		$	4,972
Repayment of debt	$	(867)		$	(2,118)
Net change in commercial paper	$	499		$	—
Maximum commercial paper outstanding at any period	$	2,470		$	400
Short-term borrowings outstanding at year-end	$	499		$	—
Weighted-average interest rate of short-term borrowings outstanding	4.78		%	—		%


(In millions, except per share data)	2022		2021
Total amount paid for share repurchases	$	14,124	$	13,012
Total number of shares repurchased	71.2		62.8
Average price paid per share	$	198.39	$	207.32


(In millions, except per share data and percentage data)	2022			2021
Total cash dividend payments	$	2,370		$	1,984
Dividends paid per share	$	3.70		$	2.80

Dividend payout ratio	37		%	24		%


Debt Ratings	S&P	Moody’s
Commercial Paper	A-2	P-2
Senior Debt	BBB+	Baa1
Outlook	Stable	Stable


Table of Contents
			Page No.
Management’s Report on Internal Control over Financial Reporting			34
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)			35
Consolidated Statements of Earnings			38
Consolidated Statements of Comprehensive Income			38
Consolidated Balance Sheets			39
Consolidated Statements of Shareholders’ (Deficit)/Equity			40
Consolidated Statements of Cash Flows			41
Notes to Consolidated Financial Statements			42
Note 1: Summary of Significant Accounting Policies			42
Note 2: Revenue			49
Note 3: Fair Value Measurements			50
Note 4: Property and Accumulated Depreciation			53
Note 5: Goodwill and Intangible Assets			52
Note 6: Leases			53
Note 7: D ivestiture of the Canadian Retail Business			55
Note 8: Debt			56

Note 9: Derivative Instruments			59
Note 10: Shareholders’ Deficit			59
Note 11: Share-Based Payments			61
Note 12: Employee Retirement Plans			64
Note 13: Income Taxes			65
Note 14: Earnings Per Share			67
Note 15: Commitments and Contingencies			67
Note 16: Related Parties			68
Note 17: Other Information			68


	Fiscal Years Ended
	February 3, 2023				January 28, 2022				January 29, 2021
Current Earnings	Amount		% Sales		Amount		% Sales		Amount		% Sales
Net sales	$	97,059	100.00	%	$	96,250	100.00	%	$	89,597	100.00	%
Cost of sales	64,802		66.77		64,194		66.70		60,025		66.99
Gross margin	32,257		33.23		32,056		33.30		29,572		33.01
Expenses:
Selling, general and administrative	20,332		20.94		18,301		19.01		18,526		20.68
Depreciation and amortization	1,766		1.82		1,662		1.73		1,399		1.56
Operating income	10,159		10.47		12,093		12.56		9,647		10.77
Interest – net	1,123		1.16		885		0.92		848		0.95
Loss on extinguishment of debt	—		—		—		—		1,060		1.18
Pre-tax earnings	9,036		9.31		11,208		11.64		7,739		8.64
Income tax provision	2,599		2.68		2,766		2.87		1,904		2.13
Net earnings	$	6,437	6.63	%	$	8,442	8.77	%	$	5,835	6.51	%

Basic earnings per common share	$	10.20			$	12.07			$	7.77
Diluted earnings per common share	$	10.17			$	12.04			$	7.75


	February 3, 2023		January 28, 2022

Assets
Current assets:
Cash and cash equivalents	$	1,348	$	1,133
Short-term investments	384		271
Merchandise inventory – net	18,532		17,605
Other current assets	1,178		1,051
Total current assets	21,442		20,060
Property, less accumulated depreciation	17,567		19,071
Operating lease right-of-use assets	3,518		4,108
Long-term investments	121		199
Deferred income taxes – net	250		164
Other assets	810		1,038

Total assets	$	43,708	$	44,640

Liabilities and shareholders’ deficit
Current liabilities:
Short-term borrowings	$	499	$	—
Current maturities of long-term debt	585		868
Current operating lease liabilities	522		636
Accounts payable	10,524		11,354
Accrued compensation and employee benefits	1,109		1,561
Deferred revenue	1,603		1,914
Income taxes payable	1,181		128
Other current liabilities	3,488		3,207
Total current liabilities	19,511		19,668
Long-term debt, excluding current maturities	32,876		23,859
Noncurrent operating lease liabilities	3,512		4,021
Deferred revenue – Lowe’s protection plans	1,201		1,127
Other liabilities	862		781
Total liabilities	57,962		49,456

Commitments and contingencies

Shareholders’ deficit:
Preferred stock – $5 par value: Authorized – 5.0 million shares; Issued and outstanding – none	—		—
Common stock – $0.50 par value: Authorized – 5.6 billion shares; Issued and outstanding – 601 million and 670 million, respectively	301		335

Accumulated deficit	(14,862)		(5,115)
Accumulated other comprehensive income/(loss)	307		(36)
Total shareholders’ deficit	(14,254)		(4,816)
Total liabilities and shareholders’ deficit	$	43,708	$	44,640


	Common Stock			Capital in Excess of Par Value		Retained Earnings/(Accumulated Deficit)		Accumulated Other Comprehensive Income/(Loss)		Total
	Shares	Amount
Balance January 31, 2020	763	$	381	$	—	$	1,727	$	(136)	$	1,972

Net earnings	—	—		—		5,835		—		5,835

Cash dividends declared, $2.30 per share	—	—		—		(1,724)		—		(1,724)
Share-based payment expense	—	—		155		—		—		155
Repurchases of common stock	(34)	(16)		(214)		(4,721)		—		(4,951)
Issuance of common stock under share-based payment plans	2	1		149		—		—		150
Balance January 29, 2021	731	$	366	$	90	$	1,117	$	(136)	$	1,437

Net earnings	—	—		—		8,442		—		8,442
Other comprehensive income	—	—		—		—		100		100
Cash dividends declared, $3.00 per share	—	—		—		(2,081)		—		(2,081)
Share-based payment expense	—	—		228		—		—		228
Repurchases of common stock	(63)	(32)		(449)		(12,593)		—		(13,074)
Issuance of common stock under share-based payment plans	2	1		131		—		—		132
Balance January 28, 2022	670	$	335	$	—	$	(5,115)	$	(36)	$	(4,816)

Net earnings	—	—		—		6,437		—		6,437
Other comprehensive income	—	—		—		—		343		343
Cash dividends declared, $3.95 per share	—	—		—		(2,466)		—		(2,466)
Share-based payment expense	—	—		225		—		—		225
Repurchases of common stock	(71)	(35)		(375)		(13,718)		—		(14,128)
Issuance of common stock under share-based payment plans	2	1		150		—		—		151
Balance February 3, 2023	601	$	301	$	—	$	(14,862)	$	307	$	(14,254)


	Years Ended
(In millions)	February 3, 2023		January 28, 2022		January 29, 2021
Goodwill, balance at beginning of year	$	311	$	311	$	303
Acquisitions	—		—		8


Goodwill, balance at end of year	$	311	$	311	$	311


Cost of Sales						Selling, General and Administrative
n Total cost of products sold, including: - Purchase costs, net of vendor funds; - Freight expenses associated with moving merchandise inventories from vendors to selling locations; - Costs associated with operating the Company’s distribution network, including payroll and benefit costs and occupancy costs; - Depreciation of assets associated with the Company’s distribution network; n Costs of installation services provided; n Costs associated with shipping and handling to customers, as well as directly from vendors to customers by third parties; n Depreciation of assets used in delivering product to customers; n Costs associated with inventory shrinkage and obsolescence; n Costs of services performed under the extended protection plan.						n Payroll and benefit costs for retail and corporate employees; n Occupancy costs of retail and corporate facilities; n Advertising; n Store environment costs; n Tender costs, including bank charges, costs associated with credit card interchange fees; n Costs associated with self-insured plans, and premium costs for stop-loss coverage and fully insured plans; n Long-lived asset impairment losses, gains/losses on disposal of assets, and exit costs; n Other administrative costs, such as supplies, and travel and entertainment.


(In millions)	Classification	February 3, 2023		January 28, 2022
Anticipated sales returns	Other current liabilities	$	234	$	245
Right of return assets	Other current assets	139		151


			Fair Value Measurements at
(In millions)	Classification	Measurement Level	February 3, 2023		January 28, 2022


Available-for-sale debt securities:
U.S. Treasury securities	Short-term investments	Level 1	$	157	$	75
Corporate debt securities	Short-term investments	Level 2	78		8
Commercial Paper	Short-term investments	Level 2	52		30
Money market funds	Short-term investments	Level 1	43		120
Certificates of deposit	Short-term investments	Level 1	40		14
Foreign government debt securities	Short-term investments	Level 2	14		14
Municipal obligations	Short-term investments	Level 2	—		10








U.S. Treasury securities	Long-term investments	Level 1	86		132
Corporate debt securities	Long-term investments	Level 2	12		50

Municipal obligations	Long-term investments	Level 2	2		3
Foreign government debt securities	Long-term investments	Level 2	—		14



Derivative instruments:
Forward interest rate swaps	Other current assets	Level 2	$	251	$	66
Forward interest rate swaps	Other assets	Level 2	—		48









Fixed-to-floating interest rate swaps	Other liabilities	Level 2	88		21
Other financial instruments:
Contingent consideration	Long-term investments	Level 3	$	21	$	—


	Year Ended
(In millions)	February 3, 2023
Beginning balance	$	—
Recognition of contingent consideration at initial fair value	21


Ending balance	$	21




(In millions)	February 3, 2023

Canada asset group:
Property, less accumulated depreciation	$	1,258
Operating lease right-of-use assets	621
Other assets	182
Other	36
Total	$	2,097


(In millions)	Estimated Depreciable Lives, In Years	February 3, 2023		January 28, 2022
Cost:
Land	N/A	$	6,793	$	7,278
Buildings and building improvements	5-40	17,784		18,433
Equipment	2-15	9,541		10,533

Construction in progress	N/A	793		715
Total cost		34,911		36,959
Accumulated depreciation		(17,344)		(17,888)
Property, less accumulated depreciation		$	17,567	$	19,071


(In millions)	Amortization Expense
Fiscal 2023	$	15
Fiscal 2024	13
Fiscal 2025	13
Fiscal 2026	12
Fiscal 2027	11
Thereafter	105
Total	$	169


Leases (In millions)	Classification	February 3, 2023		January 28, 2022
Assets
Operating lease assets	Operating lease right-of-use assets	$	3,518	$	4,108
Finance lease assets	Property, less accumulated depreciation 1	462		548
Total lease assets		3,980		4,656

Liabilities
Current
Operating	Current operating lease liabilities	522		636
Finance	Current maturities of long-term debt	86		103
Noncurrent
Operating	Noncurrent operating lease liabilities	3,512		4,021
Finance	Long-term debt, excluding current maturities	477		563
Total lease liabilities		$	4,597	$	5,323


Lease Cost (In millions)	Years Ended
	February 3, 2023		January 28, 2022		January 29, 2021
Finance lease cost
Amortization of leased assets	$	90	$	89	$	82
Interest on lease liabilities	29		30		32
Operating lease cost 1	734		699		659
Variable lease cost	329		268		244
Total lease cost	$	1,182	$	1,086	$	1,017


Maturity of lease liabilities (In millions)	Operating Leases 1		Finance Leases 2		Total
2023	$	665	$	113	$	778
2024	606		99		705
2025	635		95		730
2026	565		80		645
2027	488		49		537
After 2027	2,050		257		2,307
Total lease payments	5,009		693		5,702
Less: Interest 3	(975)		(130)		(1,105)
Present value of lease liabilities	$	4,034	$	563	$	4,597