Lowe's 2004 Annual Report Download - page 5

Lowe’s 2004 Annual Report Page 3
2004 was another great year for Lowe’s. Excellent customer service and store-level execution led to $36.5 billion
in sales and $2.2 billion in net earnings. Those sales were driven by the addition of 140 new Lowe’s stores in
great markets around the U.S. as well as strong 6.6 percent comparable store sales growth. Our comparable
store sales results in 2004, on top of comp growth of 6.7 percent in 2003 and 5.8 percent in 2002, are a clear
indication that our operational, merchandising, marketing and distribution initiatives are working to drive sales.
We experienced widespread strength in 2004, with all 18 product categories and all 21 regions delivering
positive comparable store sales growth during the year. Our goal in 2005 is to ensure we build on that
momentum and deliver another year of broad-based sales strength.
We could not have delivered such great results without the hard work, commitment and focus of our over
160,000 employees. Thanks to them, Lowe’s reached many milestones in 2004. We opened our 1,000th store
and we replaced our last small store
— a 33,000-square-foot store in Kentucky — with a new 116,000-square-foot store. We opened our first
stores in Minnesota, Wisconsin and Maine, and ended the year with stores in 48 states. We opened our tenth Regional Distribution Center in
Poinciana, Florida, in the third quarter, and we opened our eleventh in Plainfield, Connecticut, in early 2005.
We continued to experience great success with our Big 3 sales initiatives: Installed Sales, Special Order Sales, and our focus on Commercial
Business Customers.
First, our Installed Sales business continues its rapid growth. Although we have installed products like kitchen cabinets, flooring, doors and
windows for years, we completed the rollout of our new installed sales model in the fourth quarter. That model, some two years in development
and an additional year in implementation, separates the sales function from the administrative process required to complete an installation. With
the new model in place, we now have an improved process and a better infrastructure that we can leverage as we grow. Customers who have
experienced the new model seem to agree that we have improved our installed sales process, with over 90 percent saying they would use Lowe’s
for a future installation. We will continue to introduce additional installation options in our stores, as we’re currently testing deck installations,
water filtration systems, landscape lighting and more. In 2005, we’ll advertise and prominently feature our installation services nationally for the
first time. With our new model fully rolled out, we can confidently market the program nationwide and know that customers will receive a better
experience with our installation process than ever before. We expect this business to continue to grow at a faster rate than our overall sales, as our
ability to provide customers an easy and convenient installation option only grows stronger.
In Special Order Sales (SOS), technological advancements and distribution enhancements were the key drivers of improvements in our
offering in 2004. A major advancement in 2004 was the rollout of SOS Express for our Fashion Plumbing department. We used our proven
m2o software as the backbone of a new system that integrates a warehouse and distribution component into our special order offering. We’ve
given our sales associates visibility into inventory levels in our special order distribution center, allowing them to give customers firm expectations
for delivery. Additionally, the warehousing and distribution components of SOS Express have significantly reduced lead times, allowing delivery
in as little as 24 hours. Based on the success of this platform, we are evaluating other categories for a similar program in the future.
Another successful SOS project in 2004 was the implementation of an automated notification system in two regions to inform customers
their SOS order is available for pickup. We estimate that this system will save each store approximately 40 hours per week versus the old manual
system. Those hours will be redeployed into customer-facing and sales activities to ensure we continue to provide exceptional service. In 2005,
we’ll implement this process in our remaining regions.
Technology is the future for SOS. We’ll continue to make enhancements that increase selection, simplify the ordering process, drive efficiency
and speed delivery to our customers.
Letter to Our Shareholders
Robert A. Niblock
Chairman of the Board, President
and Chief Executive Officer