AGM 2015

May 29, 2015

Slides

Before we begin, please note that the use of cameras or sound recording devices, except those used by Lowe's to provide a record of the proceedings, is prohibited. In addition, throughout this presentation, you will hear forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Management's expectations and opinions reflected in those statements are subject to risks, and the company can give no assurance that they will prove to be correct. Those risks are described in the company's annual meeting press release and in its filings with the Securities and Exchange Commission. Also, during this presentation, management will be using certain non-GAAP financial measures. You can find a reconciliation to the most directly comparable GAAP financial measures and other information about them posted on Lowe's investor relations website under investor packet. Now please welcome Lowe's, Robert Niblock. Thank you. Good morning and welcome to Lowe's 2015 annual shareholders meeting. We're glad that you could join us. On behalf of Lowe's, thank you for your continued support and commitment. To begin this meeting, I'm pleased to announce that your board of directors approved a 22% increase in Lowe's quarterly dividend from $0.23 per share to $0.28 per share, and that dividend is scheduled to be paid on August 5th of this year. This increase is a result of the dedication and hard work of employees across the organization, led by our executive management team, who is here today in the front row. Thank you. I'd like to introduce your board of directors and nominees who are standing for election at today's meeting. Please hold your applause until all have been recognized. In the front row, Mr. Raul Alvarez, Mr. Dave Bernauer, Ms. Angela Braly, Ms. Laurie Douglas, Mr. Rick Dreiling, Mr. Bob Johnson, Mr. Marshall Larsen, Mr. Dick Lochridge, Mr. Jim Morgan, and Mr. Eric Wiseman. Thank you. In addition, I would like to recognize Dr. Len Berry, who is retiring from Lowe's board today, and thank him for his 17 years of loyal and devoted service. Len, we will miss your passion, advice, and counsel. Thank you for your many years of dedicated service, Len. Also, I would like to recognize Ms. Dawn Hudson, who has the responsibility as the Chief Marketing Officer of the National Football League. Dawn, thank you for your 14 years of counsel, advice, and dedicated service. We wish you much success with the NFL, and we'll certainly miss your inspiration and your marketing and consumer insights. Thank you, Dawn. I'd like to introduce Mr. Bill Sullivan. Bill is here today from the accounting firm, Deloitte & Touche, and he'll be available after the meeting to answer any of your questions. Sid Rodrigue, Senior Director at Broadridge, has been appointed Inspector of Election for this meeting. Broadridge will assist with the tabulation of proxies and ballots. As your proxy cards indicated, Mr. McCanless and Mr. Hull have been duly appointed as proxies for this meeting. At this time, I officially call the meeting to order. Mr. McCanless, please report on the mailing of the notice for this meeting, the presence of a quorum, and other business we will consider today. Bill? Okay. Thank you, Robert. Notice of the annual meeting of shareholders of Lowe's Companies, Inc. has been provided to shareholders of record as of March 27, 2015. The notice and accompanying proxy statement were mailed to shareholders beginning on April 13, 2015. As of today, there were 951,704,640 shares of common stock outstanding. Of which 845,216,382 shares are represented today, either in person or by proxy. Therefore, we have a quorum. As provided in the notice of annual meeting of shareholders, the purpose of this meeting is to address four items of business. First, elect 11 directors to a term of one year. Second, approve on an advisory basis the compensation paid to the company's executive officers in fiscal 2014. Third, ratify the appointment of Deloitte & Touche as the company's independent registered public accounting firm for fiscal 2015. Fourth, transact such other businesses may properly come before the annual meeting or any adjournment or postponement thereof. Thank you, Robert. Thank you, Bill. I now declare the polls open for voting. The proxies have already delivered their ballots to the Inspector of Election. If you have already delivered a proxy, it is not necessary to vote in person unless you wish to change your vote. Anyone who desires to vote in person should raise their hand at this time so we can provide you with a ballot. Okay, since I don't see any hands raised, all votes have now been cast, and I declare the polls to be closed. Sid, have you got the final tally? Okay. Thank you, Sid. I've received the voting report from the voting inspector, and based upon the vote of shareholders, let me note that all nominees to the board of directors are elected. The company's executive compensation plan has been approved, and Deloitte & Touche is ratified as the company's independent public accountant. Please note that the final voting results will be filed with the SEC within four business days. I will now provide insights into our progress and strong performance in 2014. Our sales topped a company record $56 billion, a 5.3% increase over 2013. We delivered comparable sales growth of 4.3%. We leveraged our sales growth to increase net earnings by 18% and diluted earnings per share by 27% to a company record $2.71. Our stock price finished the fiscal year at $67.76, a 46% increase over the final day of fiscal 2013. The company paid out $822 million in dividends for the year. We also became America's number one retailer in appliances, a goal we've been pursuing for many years. We were named one of the 10 happiest retailers to work for by CareerBliss. Advertising Age magazine put us on their A list of the country's most creative and successful companies. While north of the border, Lowe's Canada delivered double-digit comps in local currency all four quarters in 2014, resulting in seven consecutive quarters of double-digit comp performance. The strategic decisions and investments we made at the start of the decade continue to pay off, enabling shareholders to enjoy benefits like today's dividend increase and significant growth in our stock price over the past year. Solid financial performance also enables us to maintain a rapid pace of change as we create the omni-channel environment consumers expect today and deliver the customer experiences that set us apart from the competition. The value improvement line review process has become part of our everyday business. In 2014, we were able to drive additional inventory productivity as a natural part of that process. With elements of product differentiation now executed in all stores, we continue to see excitement from customers around our better product display techniques, especially the end caps that allow us to showcase innovative products, significant values in private and national brands. By refining our investment in incremental store labor, we're better positioned to serve customers in our stores. All of these wins made 2014 a successful year for Lowe's and a source of momentum for 2015 and beyond. In 2015, economic forecasts suggest moderately stronger growth in the home improvement industry, with job and income growth steadily strengthening and credit usage continuing to rise. We expect household financial conditions to continue to improve, setting the stage for higher discretionary spending among consumers. We're prepared to capitalize on this opportunity and to continue to grow in 2015. This positive outlook allows us to focus on two points of emphasis in 2015. First, we'll pursue sales growth by delivering better customer experiences and improving our offering for the pro customer while continuing to develop our omni-channel capabilities to ensure we're meeting the needs of customers whenever and wherever they choose to engage with us. Second, we'll continue improving our productivity and profitability with a dedicated focus in the areas of store payroll, marketing, and indirect spend. With a focus on these initiatives in 2015, we're confident that we will increase our sales and operating margin, resulting in earnings per share of approximately $3.29, an increase of 21% over 2014. Enduring growth beyond the here and now is a function of having a purpose that goes beyond just making money. Having a purpose helps companies drive better performance because it communicates that a company stands for something more than just the bottom line, something that fulfills a greater need in society. Having a purpose helps companies deliver better results because it empowers employees to focus on the one thing that matters most. Having a purpose helps companies strengthen employee engagement because it helps employees find meaning in their work and fulfills their desire to be part of something bigger. Not only do companies with a clear purpose consistently outperform everyone else, they create enduring growth because the reason they exist goes beyond just profit. Enduring growth comes from uncovering, sharing, and aligning every facet of a business around a shared noble purpose. It's a process that we've undertaken as well. What we uncovered and what we're working to align around is that our purpose is to help people love where they live. Being a purpose-driven company means leading with our heart instead of our wallet. Like the employees at our store in Long Island, N.Y., who stayed after work to help a disabled veteran whose wheelchair had fallen apart while shopping in the store. Being a purpose-driven company means doing the right thing first for customers and communities. Like our partnership with Habitat for Humanity, where for more than a decade we've been working to bring affordable housing solutions and hope to families across the country. Being a purpose-driven company means that day-to-day, our focus needs to be on the customer first. Like helping a family with 10 children remodel their entire kitchen and laundry room without overly disrupting the functionality of those critical areas. If we continue to keep our purpose as our priority and put the customer and community first, sales, profits, and return on investment will reach levels that we could never achieve otherwise. Becoming a purpose-driven company ensures that all the hard work that we've put into transformational change will last well into the future. Being purpose-driven allows us to build deep, lasting relationships with customers. If we're true to our purpose, then those deep, lasting relationships will deliver results today, tomorrow, and for years to come. That concludes the business update portion of our meeting today. I will now open the meeting to shareholders with questions. If anyone has a question, if you'll please step to the microphone in the center of the room, state your name and organization for which you are a proxy if you're here on their behalf. I'd like to ask that you limit your question to no more than two minutes and hold follow-up questions in order that others can have an opportunity to share their questions and be heard. The floor is now open for questions. Hi, how are you? Doing well. Chuck Johnson. I just wanted to know, in the future. Right What type of growth are we going to have? We're going to open up stores about 1% a year. Right. Comps are going to be about 3% for the next several years. Okay. After that, if we don't open new stores, where would the growth come from? Great question, Chuck. As you have outlined in the presentation, what we're seeing from customers today is really the expectation that we've got to be there on an omni-channel basis whenever and wherever they choose to engage with us. We've got over 1,800 stores, obviously, throughout North America today. Our focal point over the next few years is continuing to fill in in those key areas where we have gaps in store coverage, because the store is still a very focal and integral part of our strategy. To layer on that, the rest of the omni-channel capabilities that'll continue to meet the needs of our customers and be able to better leverage the investment that we've made so far. That's continued investment in dotcom, continued investment in what we're calling in-home selling through our PSI, our Project Specialist Interiors, Project Specialist Exteriors specialists that are out there, and also through our contact centers. By doing that's what's going to fuel a lot of our growth. Actually, I think for the next few years, our comp will probably be a little higher than 3%. As we're doing that, you're also going to see us reinvesting in existing stores to drive additional growth through there with new sets, new ways to go to market. We'll also be looking at continuing to store out in Canada and in Mexico, where we've got nice businesses started there. We'll continue to determine how fast we can grow from a new store square footage standpoint. The overwhelming majority of our growth is going to be moving to that omni-channel over the next three to five years and really leveraging those assets that we've put in place over the next few years, which will drive, I think, great return for shareholders. Instead of new stores, the internet's going to be a big driver. The internet. It's the omni-channel. It's the way it's connected. Today, the store is still, as I said, a very integral part because over 60% of what we sell today is picked up in our stores. Right. It's just a convenient way for the customer to interact with our stores in many cases today, and that's what customers are telling us that they want us to go to in the future. All right. Thank you. Great. Thank you, Chuck. Great question. Other questions? Well, certainly, thank you for your questions and comments. I would like to express my appreciation for your continued support and commitment and also for attending this year's meeting. I want to also thank our shareholders who submitted their proxies but were unable to make it to the meeting today. Hope you join us next year, and this meeting is now adjourned. Thank you.