Lowe's 2005 Annual Report Download - page 4

Letter to
Our Shareholders
Our success in consistently grow-
ing comp sales and average sales
per store is a validation that we are
meeting the needs of customers
and our business initiatives are
well-executed.
By any measure, 2005 was another great year for Lowe’s. Our strong fi nancial results for the year,
including 19 percent sales growth, 6 percent comparable store sales growth and 27 percent net
earnings growth, provide evidence that customer-focused programs throughout our organization
are driving repeat business and attracting new customers to our stores.
During 2005, our stores completed nearly 640 million transactions, which is equal to 1,200 trans-
actions per minute. As CEO of Lowe’s, I have the privilege every day to work with a great team that
is focused on customers and delivering great service with every transaction. This is one of the key
drivers that has made Lowe’s successful for the past 60 years.
The continued enthusiasm and commitment of our more than 185,000 employees to delivering
excellent customer service is helping us realize our vision of making Lowe’s the fi rst choice for
home improvement in each and every market we serve.
Driving our top-line growth in 2005 was our continued expansion as we opened 150 stores, includ-
ing our fi rst stores in New Hampshire. We ended the fi scal year with 1,234 stores in 49 states, with
approximately 55 percent in the top 100 markets. We will continue to add stores in these markets,
which represent a signifi cant opportunity for further market share gains. Our store expansion plan
for 2006 includes opening 155 new stores in great locations around the country. Fueling our growth
pipeline are the approximately 400 future sites currently approved through our real estate commit-
tee, and of those, more than 65 percent are in the nation’s top 100 markets. In addition, during
2005 we announced plans to expand our retail store presence outside of the United States, with
the opening of six to 10 stores in Toronto, Canada, in 2007.
Opening new stores in new markets is just one aspect of our growth strategy. Equally important is
driving sales in our existing stores by improving the shopping experience and adding compelling
and innovative products to our shelves. Our merchandising teams continue to work closely with our
vendor partners to add new products that inspire customers to improve their homes. Recent addi-
tions to our merchandising assortment include the introduction of Samsung high-effi ciency digital
kitchen appliances to our strong appliance offering and the addition of John Deere mowers to our
already successful outdoor power equipment lineup for the 2006 spring season. We’re experiencing
great results from these brands as well as many others we’ve added throughout the year.
A strong driver of our performance is also continued investment in our existing stores, so we are
diligent about making our older stores appear as fresh and inviting as our newest locations. In 2005,
we invested $650 million in our existing store base, and in 2006 we plan to invest $800 million in
maintenance, signage, displays and other upgrades we believe are essential for maintaining a
superior shopping environment.
Customer-focused employees and great stores with inspiring products drove compa-
rable store sales growth of 6.1 percent in 2005. We achieved this comp on top of
a 6.6 percent increase in 2004, 6.7 percent in 2003 and 5.8 percent in 2002,
resulting in a four-year average comparable store sales increase of 6.3 per-
cent. Our comp store sales growth, combined with great new store locations,
has led to an increase in average sales per store from $20 million in 1994
to over $37 million in 2005. Our success in consistently growing comp
sales and average sales per store is a validation that we are meeting the
needs of customers and our business initiatives are well-executed.
Robert A. Niblock
Chairman of the Board, President
and Chief Executive Offi cer