Lowe's 2003 Annual Report Download - page 7

2003 ANNUAL REPORT 05
To our shareholders. As I reflect on my first year as president of Lowe’s, I’m proud of the results we delivered in 2003. Our
employees were passionate about taking care of our customers, focused on executing the fundamentals of retailing, and delivered exceptional
results that wouldn’t have been possible without the entire team working as one.
We’ve described for years the value we see in developing the appropriate infrastructure to manage our growing store base. The value of
our structure was highlighted in 2003 as comparable store sales ramped from flat in the first quarter to over 12 percent in the third quarter.
Our state-of-the-art logistics and distribution infrastructure allowed us to keep our stores in stock with the right products to satisfy the strong
demand we experienced in the second half of the year, while leveraging inventory growth. Our disciplined operating structure allowed us to
match payroll hours to sales across the entire chain, with a controlled model that leverages sales and ensures customer service levels remain
high. The results we delivered in 2003, including strong sales, great customer service and high in-stock levels, are a testament to the value of
that structure and could not have been achieved without the entire Lowe’s team working together.
For fiscal 2004, we added two new divisions and three regions to our store operations structure to ensure an effective management system
is in place to deliver our customers a consistent Lowe’s experience no matter where they shop.
While execution of the basics is fundamental to our success, Installed Sales, Special Order Sales (SOS) and our Commercial Business
Customer (CBC) initiatives continue to evolve to better serve our customers. This year, we began rolling out an enhanced installed sales
model designed to better communicate and manage our customers’ expectations. At the end of 2003, the new model was in place in 380
stores. We continue to be extremely pleased with the results of this model. Customers, installers and employees tell us the model works, and
we are seeing the success in improving customer satisfaction scores. Over 90 percent of the customers experiencing the model say they would
use Lowe’s again for a future installed project. We expect to have the new model in all stores by the end of fiscal 2004, allowing us to better
serve the growing “do-it-for-me” customer base.
Enhancements to our SOS process continue to make selecting, ordering and tracking these sales more convenient and worry-free. In the
second half of 2003, we completed the rollout of our SOS Express program for fashion plumbing. The new automated system improves
inventory visibility and, utilizing a dedicated distribution facility, provides accurate and timely fulfillment of orders. Additionally, the new
system informs the customer about related products needed to complete or complement the project. As with our installed sales model, the best
way to measure the success of this new model is with customer satisfaction. We’ve seen sales return rates cut in half
— evidence of the efficient
new technology. One of the most exciting aspects of SOS Express is that the model can be leveraged into many other categories. We will explore
these opportunities in 2004 and beyond, as we provide our customers a more efficient process to fulfill their desire to differentiate their homes.
And finally, our CBC business continues to drive strong results, delivering comparable store sales higher than the company average in 2003.
Our commitment to commercial customers remains strong, and we’re excited about the growth prospects going forward. Providing great inventory
depth and knowledgeable staff is paramount to our success with commercial customers. We’re utilizing our direct marketing capabilities to remind
commercial customers we have the products and brands they need, in the quantities they demand, all at everyday low prices.
Our merchandising organization continues to partner with well-known national vendors to develop and provide great products for our
customers. An excellent example unveiled in 2003 is American Tradition®Signature Colors.
®An enhancement of our existing American Tradition
line of paint, Signature Colors adds a premium assortment of thousands of designer colors to our interior paint offering. Shades inspired by Eddie
Bauer,
®Nickelodeon, ™Waverly®and other well-known brands give our customers unmatched selection to add their unique style to any room.
This is just one of the numerous examples of how our merchants are constantly working with our vendors to differentiate Lowe’s product
offering, keep our stores fresh and ensure we’re providing our customers exciting new products that make home improvement easier and
more enjoyable.
Our 2003 marketing programs were successful in solidifying Lowe’s position as a preeminent national retailer where do-it-yourself and
commercial customers alike can find the products and services to turn a house into a home. Our “Improving Home Improvement®”
campaign continues to evolve and is hitting home with customers across America. Our marketing message is representative of the consistently
inviting and inspirational shopping environment found in each of our stores across the country.
Our theme for this year’s National Sales Meeting was Defining Opportunity, and that’s just what we intend to do in 2004. We see oppor-
tunities in everything we do, as we strive to better serve our customers and to fulfill Lowe’s vision to be the first choice for home improvement
in each and every market we serve. From the initial welcome as a customer walks through our doors, to an enthusiastic salesperson who helps
a dream become a reality, we will continually look for opportunities to enhance customer service and make our customers’ lives easier.
I am honored by the support and confidence of Bob Tillman, which led to the Board of Directors’ decision to name me chairman and
CEO-elect. I am also very fortunate to have in place a seasoned executive team who, in their collective experience, represent the gold standard
in the home improvement industry. Together, we look forward to continuing to drive value for our shareholders, customers, employees,
suppliers, and the communities we serve. Building on Bob Tillman’s vision, which launched Lowe’s into a new era more than a decade ago, I
look forward to the challenges and opportunities ahead of us. I accept this responsibility knowing our company has a clear vision, a sound
strategy, high quality leadership and an enabling culture that provides the foundation I’m confident will lead to continued success.
robert a. niblock
president
April 16, 2004 Mooresville, NC