Lowe's 2003 Annual Report Download - page 5

Letters to Our Shareholders
Robert L. Tillman, Chairman & Chief Executive Officer
and Robert A. Niblock, President
To our shareholders. Back-to-back success is an achievement recognized in both business and sports as representative of true
excellence. A strong year only raises the hurdle for the next, and Lowe’s has a proven track record of consistently strong performance as we’ve
transformed the company into a leader in the home improvement industry. Rising to the challenge created by record results in 2002, our
success in 2003 is a testament that Lowe’s is providing the products and services that allow Americans to invest in what matters to them.
2003 was a great year for Lowe’s. Under the strong leadership of our experienced management team, we delivered above-plan sales and
earnings despite the weather-affected slow start experienced in the first quarter. After the slow start to spring, we knew we would be facing a
compressed selling season, and our stores would need to be ready. We invested in the business and had the merchandise and staffing in place
to serve our customers as they initiated home improvement projects when weather improved.
That investment was rewarded with strong financial results. Sales from continuing operations for the year totaled $30.8 billion dollars,
up 18.1 percent over fiscal 2002, and comparable store sales increased 6.7 percent. We experienced balanced sales across all of our operating
regions and product categories. In fact, all 18 regions and all 18 product categories delivered positive comparable store sales for the year,
further demonstrating the deep and far-reaching connection we have made with our customers.
Gross margin continues to expand, driven not by higher prices, but rather by our efforts to minimize acquisition and supply chain costs.
Our commitment to everyday low prices remains strong, guaranteeing our customers that they will find the best prices at Lowe’s every day.
Growth in gross margin, combined with effective expense control, led to an industry leading, and Lowe’s record, 10.7 percent operating
margin for the year.
Net earnings grew by 27.6 percent in 2003 and diluted earnings per share increased to $2.34, up 26.5 percent over 2002.
We reached many significant milestones in 2003. Lowe’s crossed $30 billion in sales, shareholders’ equity exceeded $10 billion, and we
took the final step in our transformation to a national, big-box home improvement retailer when we sold the 26 commodity-focused
Contractor Yard locations. This transaction allows us to hone our focus on our retail and targeted commercial customers.
In fiscal 2003, we opened 130 stores, including five relocations, bringing our store count to 952. We entered Chicago with three stores and
added additional locations in strategic markets like Los Angeles, New York, Detroit and Memphis. We also entered many smaller markets
across America, making Lowe’s more and more convenient for home improvement consumers around the country.
A key component of our success in America’s smaller markets is our new 94,000-square-foot prototype store. Designed to efficiently serve
single-store markets across the country, we opened the first prototype in March and ended the year with 32 of our 94,000-square-foot stores.
We designed this prototype to have the same look and feel as our larger stores, and our customer feedback confirms that we met our objective.
We continue to be pleased with the results these stores are delivering, and the communities we’re entering are greeting us with excitement.
Our back-to-back success provides even more confidence in our future. The home improvement industry is strong and growing. In fact,
the Home Improvement Research Institute estimates nearly five percent growth in home improvement spending each year over the next
several years. That growth is buttressed by the strongest housing market on record. In 2003, housing turnover reached record levels, and that
strength is expected to continue into 2004 and beyond. Increases in disposable income, improving equity markets, and low mortgage rates
that fuel a strong refinancing market have propelled home improvement spending and helped make affordable housing available to those
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