Self-inflicted wounds lead to holiday sales below internal expectations

Management called out the West region as the strongest performing region in the quarter and noted specific strength in the Atlanta, Baltimore, Dallas, Houston and Nashville markets.

Average tickets increased 3% year-over-year, with total transactions moving 0.5% lower. Transactions under $50 declined 0.3% due to warmer winter weather, which resulted in lower sales of ice melt and pellet fuel. Large ticket transactions, greater than $500, increased the most at 3.8%.

Lowe’s incurred $185 million in pre-tax operating costs and charges associated with the closure of 28 of the planned 34 Canadian store closures and the exit of its Mexican business.

Net inventories closed the 2019 fiscal year 4.9% higher year-over-year at $13.2 billion.

Lowe’s fiscal 2020 guidance calls for total sales growth of 2.5% to 3% with comparable sales increasing 3% to 3.5%. Adjusted operating income is expected to increase approximately 8% to 12% with adjusted EPS of $6.45 to $6.65, lower than the current consensus estimate of $6.67.

Management expects its year-over-year growth to be “slightly” back-half loaded in fiscal 2020 as it continues to advance a variety of initiatives including its ecommerce platform, a new labor management system and the rightsizing of its geographic footprint.

In 2019, Lowe’s made progress on its $1.7 billion supply chain investment initiative by adding three new bulk distribution facilities and four cross-dock terminals.

Lowe’s ended the 2019 fiscal year with 1,977 home improvement stores with 208.2 million square feet of retail space.

Shares of LOW are 4% lower on the day.