Lowe's 2006 Annual Report Download - page 4

culture of customer service. My commitment to you, as a share-
holder, employee, vendor or customer, is that we will continue to
improve our execution in order to capitalize on opportunity.
ank you for your continued support.
Robert A. Niblock
As shareholders and employees, I hope you share my condence
in the team we have at Lowe’s. I’m proud that all of these
promotions were lled with tenured Lowe’s employees which
highlights the deep bench strength I described.
Looking ahead to 2007, many of the headwinds we faced in
2006 are likely to lessen, or in some cases, disappear completely.
We’re certainly all hopeful that we will experience a mild hurri-
cane season similar to last year. But, regardless of this year’s storm
season, from a comparison standpoint our results will not be chal-
lenged by a signicant sales hurdle from rebuilding eorts as they
were in 2006. Lumber and plywood prices have always been tough
to predict, but I’m fairly confident we will not likely be facing
Letter to Shareholders
Sales
In Billions of Dollars
$36.5
$43.2
$26.1
$30.8
02 03 04 05 06
$46.9
The success of our sales initiatives
has driven a five-year compound annual
growth rate of 17%.
Net Earnings
In Millions of Dollars
$2,167
$2,765
$1,485
$1,822
02 03 04 05 06
$3,105
As we drive sales and become more
efficient in our operations, net earnings
have increased at a five-year compound
annual growth rate of 26%.
20–40% deation in the second half of 2007. And nally, as we
enter scal 2007, there are some signs that the worst eects of the
housing slowdown are behind us. While we are not banking on a
rapid recovery, the most recent housing data show encouraging
signs of a stabilization in housing supply and a bottoming in total
housing turnover, which would lead to improving year-over-year
trends. Many of those factors are out of our control, as opposed to
our internal initiatives and programs that are designed to improve
our execution and enhance our customer service.
We are continuing to develop and test new and better ways to
serve customers. For example, in 2006 we tested a new in-home
selling model for installation projects like roong, siding, fencing
and millwork. Other channels of trade have historically sold these
categories with in-home consultation, and our new model puts us
on equal footing, making the shopping experience easier by elimi-
nating the oen multiple trips to our store to complete a sale. Early
results are positive, and we will expand our test in 2007.
We also added new systems, including continuing eorts to
automate our Special Order process to make it quicker and easier.
In 2006, 82% of our Special Order transactions were processed
electronically. Also, we installed new tools like our online kitchen
design center that allows a customer to make many of the basic
choices involved in a kitchen remodel online before coming into
the store. Since we rolled it out in February 2006, over 12,000
customers have used the tool to begin the
design of their dream kitchen.
And, we remain committed to providing
the best customer service in the business.
Our training programs ensure our employees
have the product knowledge they need to
help customers, which drives lower turnover
and better retention rates of our experienced
employees, and, ultimately, better service.
ese eorts to improve the shopping
experience at Lowe’s will ensure we continue
to gain market share, regardless of the exter-
nal environment. Based on the indications
that the worst of the housing slowdown is
behind us and the initiatives we have in place
to drive sales, I believe our sales results will
gradually improve throughout scal 2007,
and we have the opportunity to deliver
another solid year.
Sixty years of experience brings perspec-
tive. A lot has changed in the history of Lowe’s,
but what has remained is our core values and