Welcome Lowe's Chairman, Rick Dreiling.
Good morning. That was a nice recap of the company's progress over the last year. I am honored to be joining you as the Chairman of the Board of Lowe's. On behalf of all of the independent directors of the board, welcome to the Lowe's 2019 shareholders meeting. I would also like to welcome those who are listening to the live webcast. We're glad you could join us. On behalf of Lowe's, thank you for your continued support and commitment. Now I'd like to introduce your board of directors, in addition to myself, who are standing for election at today's meeting. Please hold your applause until all have been recognized. In front of me, we have David Batchelder, Mrs. Angela Braly, Ms. Sandy Cochran, Ms. Lori Douglas, Mr. Marvin Ellison, Mr. Jim Morgan, Mr. Brian Rogers, Mr. Bert Scott, Ms. Lisa Wardell, and Mr. Eric Wiseman.
Mr. Raul Alvarez could not be with us this morning. If we could give them a round of applause. At this time, I would also like to recognize Mr. Marshall Larsen. Marshall is retiring from the Lowe's board today, and I would like to thank him for his 15 years of dedicated service. The board will miss Marshall's advice and counsel, and we wish him all the best in retirement. Next, I'd like to ask the executive officers of the company who are in attendance today to please stand, and we'd like to say thank you and give you a round of applause, too. I'd like to introduce Brad Vineyard from the independent accounting firm of Deloitte & Touche. He is available to answer your questions after the meeting.
Sid Rodri, Senior Director at Broadridge Financial Solutions, has been appointed Inspector of the Election for this meeting, and Broadridge Financial Solutions will assist with the tabulation of proxies and ballots. As your proxy cards indicated, Bill McCanless, Executive Vice President, General Counsel, and Corporate Secretary, and Mr. David Denton, Chief Financial Officer, have been duly appointed as proxies for this meeting. At this time, I officially call the meeting to order. Bill, please report on the mailing of the notice for this meeting, and presence of a quorum, and other business we will consider today.
Okay. Thanks, Rick. Notice of the annual meeting of shareholders of Lowe's has been provided to shareholders of record as of March 22, 2019. The notice and proxy statement were mailed to shareholders beginning on April 18, 2019. As of the record date, there were 796,325,174 shares of common stock outstanding, of which 723,815,286 are represented here today, either in person or by proxy. Therefore, we have a quorum. As provided in the notice of the annual meeting of shareholders, the purpose of this meeting is to address four items of business. First, elect 12 directors. Second, approve on an advisory basis the compensation paid to the company's named executive officers. Third, ratify the appointment of Deloitte & Touche.
Fourth, transact such other businesses may properly come before the meeting. With that, Rick, that completes our proposals.
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've already delivered a proxy, it's not necessary to vote in person unless you wish to change your vote. Anyone who desires to vote in person should raise your hand, and we will provide you a ballot. I do not see any hands raised. Since all votes have been cast, I declare the polls closed. With that said, thank you.
Thank you very much.
I have received the report from the voting inspector. Based upon the votes of the shareholders, let me note that all nominees to the board of directors are elected. The compensation paid to the company's named executive officers has been approved. Deloitte & Touche is ratified as the company's independent public accountant for fiscal 2019. Please note that the final voting results will be filed with the SEC within four business days. That concludes the business portion of the meeting. I would now like to ask Marvin Ellison, President and Chief Executive Officer, to provide insight into our progress and performance over the past year. Marvin?
Thank you. Thank you, Mr. Chairman. Good morning, everyone. It's an honor to be here today for my first annual meeting as the President and CEO of Lowe's. This is a terrific company with an outstanding brand and a powerful balance sheet. We also have great people, approximately 300,000 associates throughout the company who are resilient and committed to serving customers in their community. Without question, our associates are our greatest asset. So let me begin today by announcing that your board of directors has approved a 15% increase in Lowe's quarterly dividend, increasing the dividend from $0.48 per share to $0.55 per share, scheduled to be paid on August the 7th of this year. This increase is a result of the outstanding efforts of the associates across this organization. In 2018, we delivered solid results.
Our sales exceeded $71 billion, a 3.9% increase over 2017. We delivered comparable sales growth of 2.4%. Diluted earnings per share were $2.84, while adjusted diluted earnings per share grew 16% to $5.11. The company also paid $1.5 billion in dividends for the year, while also repurchasing $3 billion in stock under our repurchase program. This reflects the company's commitment to return excess cash to shareholders in the form of dividends and share repurchases. In addition to delivering solid financial results, we continue to deepen our commitment to the communities we serve. In 2019, our primary community relations focus will be safe, affordable housing and skilled trades education. In fact, Lowe's is leading 60 other companies in an effort to address the anticipated deficit of three million jobs in skilled trades with training, education, and career opportunities.
We're also proud to be a leader in supporting our military veterans through employment opportunities and skilled training for trades. Lowe's has a long and a very proud history of being there for our customers and our communities when they need us most. That tradition will remain strong. Looking forward, we believe we can deliver stronger results by simplifying the business and getting back to the basics. During 2018, we created a strategic reassessment of our business. We also assembled an experienced leadership team. We worked with that team to develop action plans and initiatives that will modernize our company to improve our future performance. Let me take a moment and walk you through some of the specific actions we took in 2018. Let's begin with our organizational structure. We recruited seasoned executives with extensive retail and technical experience.
This new team has deep retail experience and is committed to delivering value for the shareholders. We're also getting back to the basics by sharpening our focus on driving sales and improving the customer experience, both in store and online. Now let me transition to how we will take advantage of the opportunities in front of us. First, we're going to stay true to our mission statement, together, delivering the right home improvement products with the best service and value in every channel and community we serve. This mission is not fancy, it's not overly ambitious, but it defines what we stand for each and every day as a company. We believe that over a reasonable planning horizon, we can deliver an operating margin of 12% and a return on invested capital of 35%. In other words, we think the future at Lowe's is very bright.
We have an opportunity to capitalize on a healthy home improvement sector. We have a strong consumer brand, and we are renewed in our focus executing the fundamental elements of retail. Before I close, I want to thank all of our associates for their great work. My most enjoyable days as CEO are my weekly visits to the stores. In doing these visits, I can clearly see our associates' commitment and their dedication to serving both our customers and the communities in which they live and work. I'm confident that we have the right plan, the right path to make Lowe's a best-in-class omni-channel retailer, and one that delivers consistent and better returns for our shareholders. This concludes the business update portion of our meeting. I'll now open the meeting to shareholders with questions.
If anyone has a question, please step to the microphone, state your name and the organization for which you are a proxy, if you're here on their behalf. Please limit your questions to no more than two minutes. We have a clock here up front to help you with that. Please hold any follow-up questions so that we can give time to other shareholders who may have questions. The floor is now open for questions.
Thank you, Mr. Ellison. Thank you for the presentation. Hello, everyone. I'm Dr. Laura Shields, and I'm here on behalf of PETA, People for the Ethical Treatment of Animals. I have a question about Lowe's sale of glue traps, which are among the cruelest devices on the market. Just to give you a little background, glue traps are rodent control devices that use an extremely strong adhesive to trap animals. Animals wander across them, and they become stuck. They panic, and they struggle, and they often tear their flesh and break their bones as they try to free themselves. Some chew off their own limbs. The glue basically just holds the animals, these live animals, in place until they die, which is often days later from blood loss, suffocation, exhaustion. Glue traps are also dangerous to human health.
The Centers for Disease Control and Prevention warns against their use because trapped animals lose control of their bodily functions. Selling them to your consumers puts your customers at risk of disease. Lowe's has taken steps to reduce consumer demand for them, but the fact that they remain on shelves for consumers to buy is unacceptable. Lowe's cannot claim to source products responsibly while continuing to sell devices that are designed to cause prolonged agony simply because some customers still buy them. Today's consumers are increasingly focused on socially conscious issues, and they're looking to companies like Lowe's to stand up and do the right thing. My question is this: given that Lowe's is well aware that the glue traps cause egregious suffering, when will the company live up to its mission to make the world better and stop selling them?
Dr. Shields, thank you for your question.
Thank you.
We as a company, oftentimes desire to offer a broad assortment of products for our consumers. Our consumers have different choices on rodent control, and some still choose to use glue traps. As you know, we worked with your organization as recent as last year to change the packaging and update the language. As a matter of fact, the language was updated specifically based on recommendations from PETA. We're hoping with the language recommendation that we've made, customers will continue to understand exactly what they're purchasing and understand that there are more humane ways in which to dispose of rodents. We'll continue to work with you and your organization on ways that we can minimize this issue.
Our commitment to our customers is offer choices, educate them with facts, and allow them to make the decision that they think is in their best interest, and we'll continue to engage you and your organization.
Thank you for your question.
Mr. Chairman, thank you and everyone for having me here today. My name is Jeremy Hogue, and I worked at NFI California Cartage warehouse on Port of L.A. property for the past 13 years, getting products ready for distribution for Lowe's stores and other popular retailers and manufacturers. NFI Cal Cartage is on the way out, and I'm here today to ask, will Lowe's make a commitment to the people who have toiled for years under NFI's terrible conditions, making Lowe's the success that it is, and keep its business at the Port of L.A. warehouse now that a high road employer is moving in? I ask this question, because many years at the warehouse, I'm still just a temp and not a permanent employee. I wait in line sometimes for a couple of hours to get picked for a job assignment.
If I don't get paid for that time and if I don't get picked, I get sent home without pay. NFI chose to walk away from its prime location at this country's most important port rather than follow the law, treat workers fairly by respecting our rights, and stopping exploitation through misclassification. Now, my coworkers and I finally see a chance for fair employment. Toll Group will take over operations this summer, and they have done the right thing by making a commitment to the city and us workers that they'll not only abide by the law, but treat us fairly and with dignity. Just when we finally have a shot at a fair workplace, we are deeply concerned that Lowe's will continue to do business with low road employers. This time, Damco at another warehouse.
A temp agency has been recruiting workers with a message that people who want to continue doing work at the Lowe's work should apply. Lowe's shouldn't be rewarding lawbreakers. Workers like me do a lot to make Lowe's the successful company that it is, Lowe's has a responsibility to us to please end the cycle of poverty and abuse and put low road companies out of business. Thank you.
Mr. Hogue, thank you for your question. We will take your specific concerns back to NFI. We also have a firm commitment that we will do business with no company that violates the law or violates any regulations. We're also going to make our community affairs leader, Dan Frahm, available after this meeting to get specific information of your concerns. You have my commitment that we will address any issues we become aware of. We'll communicate these issues to the various leadership teams of these companies to ensure that there is nothing that they're doing that's violating any laws or regulations that we hold dear. If you will hang back after the meeting, we'll make sure we engage you to get more information.
Thank you very much.
Thank you for the question.
Thank you.
Good morning, Mr. Chairman. My name's Ricardo Hidalgo with the International Brotherhood of Teamsters. I'm representing the Teamsters Local 710 pension fund today. I don't want to be redundant about the questions.
Sure
Slightly different, actually, this one is going to be posed directly to Ms. Angela Braly, the Director of Sustainability Committee. The question is, dovetailing on Mr. Hogue's comments here. We firmly believe NFI fails to meet the standards of Lowe's vendor code of conduct for compliance laws, Lowe's policies around compensation, freedom of association, health and safety, et cetera. The question is: has the Sustainability Committee done an independent investigation into the oversight of Lowe's vendor code of conduct as it relates to one of its major transportation providers, NFI Industries, for goods going through the ports of Los Angeles and Long Beach, or looked into how it has opened up the company up to very reputable, legal, and ultimate operational and financial risk?
Thank you for the question. I'll answer the question for Mrs. Braly. The sustainability committee was just established. You have my commitment, as in the previous statement to the questioner, that we're going to take your concerns seriously. We'll look into them. We'll ensure that any company we're doing business with, NFI included, is appropriately executing all regulations and laws. If we find they are not, we will not do business with them. If you have any information specific that you think we need to know, if you could wait after the meeting, we'll collect that information. We'll follow up with NFI. We'll ensure that our regulations and expectations don't vary based on any provider that we do business with.
Thank you.
Okay.
Thank you so much.
Thank you.
Mr. Chairman, for your time.
Thank you.
We just want to make sure that if Lowe's is being subjected to any financial liability, that they're aware of it. Thank you, Mr. Chairman.
To the group, I'm the CEO.
I'm sorry
you're trying to promote me to chairman. I appreciate the promotion.
I'm sorry. I am sorry.
No, it's okay. I take it as a compliment.
Okay.
The Chairman is sitting to my right.
Correct.
President, CEO.
Have a good day, sir.
Yes, sir. Thank you for the question.
Well, I'm going to make sure I get it right then.
Yes, sir.
I won't call you Mr. Chairman. Mr. CEO. My name is Vernon Gammon. I'm Secretary Treasurer of Teamsters Local 391 out of Greensboro, North Carolina. I'm here to represent the SEIU National Industry Pension Fund, Master Trust service. I don't want to repeat the same thing the gentleman said before, I am greatly concerned about what's going on in this situation that we support Lowe's. Teamsters families support Lowe's. My wife support Lowe's more than anybody support Lowe's, I can assure you that.
Thanks.
We feel like you're taking the low road when it come to transportation provider. It's unacceptable that a company such as your own, that claim corporate social responsibility, take the low road and look away from the drivers and warehouse workers. That's a key part of getting the product to your stores and into our hands as customers so we make sure our spouses is happy. I would ask you, how can this be possible? We want to make sure that you're not partnered with companies that's misclassified drivers, that have awful working conditions in their distribution centers around the country. I'm requesting that the board of directors take an independent investigation into the employee's practice of the port transportation and logistic providers, and give that finding back to your stockholders and to your customers, because I think your customers deserve it more than anyone else.
Thank you for your time today.
Thank you for your question. Thank you for the work that you and your organization performs on a daily basis to support Lowe's. Thank you for your consumer patronage as well. You have my commitment, as I said previously, we'll look into all of your concerns, and if we find that violations exist, you have my commitment that we'll deal with them.
Thank you very much.
Yes, sir. Thank you for your question.
Marvin Ellison.
Good morning.
Good morning. My name is Louis Malizia, and I'm with the International Brotherhood of Teamsters General Fund. I'm encouraged by what I've heard today in answer to my colleague's questions. I just wanted to reiterate the fact that shareholders are becoming more and more concerned in human capital management issues, particularly in supply chain. We've written along with a coalition of other pension funds and large institutional investors to several large retailers and manufacturers, including your largest competitor. We're trying to gain more dialogue on the issue of how boards are assessing this risk, especially with new laws that are being enacted every day to strengthen the protections for workers in the transportation sector that's kind of been forgotten at America's ports. I just want to encourage you that this is a big issue for investors.
It's being talked about more and more at places like the Council of Institutional Investors, and I encourage the board to become involved. Thank you.
Thank you for your question. You have my commitment that we will look into your concerns. Okay. Seeing there are no more. One more question. Yes, sir. Please.
Thank you, Marvin Ellison.
Yeah. Good morning.
Good morning. My name's Alan Lovejoy. I don't represent anything but a shareholder.
Yes, sir.
As a shareholder, I want to thank you for the hard work you put in. I'm sure your wife's not happy about all the nights that you've spent at the shop on Saturdays and Sundays or whenever it might be, missing family things to make sure this company turns around, which is a lot of work. Thank you, Richard Dreiling, for making sure he's doing a good job. For getting him on to do it because he's got the experience and it looks like he's doing the right things. What I'm looking at is margins. Let's blue sky. Let's not look at what you have to do, but in a perfect world, 2025 rolls around, your goal is a 12% margin. Last quarter you were at 8.1% or something like that. Your target is hopefully that kind of number.
We all want it because you'll get paid more, we'll get paid more, and the drivers will too, I'm sure. Do you think we've hit the inflection point as far as doing the turnaround that you've done for the last year to start seeing the margins improve, or is there another quarter or two going on?
No, thank you for the question. We have not hit the inflection point. Q1 was a little bit of a setback due to some cost pricing issues and the need to improve systems and processes, which we're in the process of doing. We think our best days are ahead. Our operating margin improvement is going to be driven by some of the key things that I talked about in the business section, improving our supply chain, making it more efficient and less costly to move product. Improving our IT infrastructure, being able to allow systems to allow us to make better decisions so we can take our payroll and spend it more on serving customers and selling. Ensuring that we make better advantage of all of our retail space.
We have too much space in our stores and we're not driving what we call productivity, meaning we're not selling enough with that space. Making sure our e-commerce platform is such that you have no reason to shop anywhere else but lowes.com to find home improvement goods. Ensuring that we continue to serve all of our customers, specifically that professional customer. These initiatives are underway, and we are very confident that as we continue to execute on this transformation we're on, that we're going to hit that 12% operating margin and that return on invested capital number that we laid out. We think that we're kind of on a trajectory to get there. Hopefully, we'll see that start to happen at the latter point of this year and on into the future.
Okay. Thank you so much for your time.
Yes, sir. Thank you for your question.
Appreciate it.
Okay. Thanks everyone for your questions and your comments. The meeting is now adjourned. Thank you for your interest in Lowe's.