Lowe's reinforces role of logistics; drives 2Q earnings up

By Staff -- Home Textiles Today, 8/19/2002 3:10:00 PM

Wilkesboro, NC — As Lowe's continues to break into new markets nationwide, company executives detailed how its centralized integrated logistics system helps keep costs down and enables the company to remain the "lowest-cost customer" to its vendors, said Tom Whiddon, evp logistics and technology at the company's second quarter conference call this morning.

The home improvement retailer today reported net earnings of $467.1 million for the quarter ended Aug. 2, 2002, a 41.9 percent increase over the same period a year ago. Diluted earnings per share increased 40.5 percent to $0.59 from $0.42 in the second quarter of 2001. For the six months ended Aug. 2, 2002, net earnings climbed 46.6 percent to $812.9 million while diluted earnings per share increased 43.7 percent to $1.02.

Sales for the quarter increased 22.2 percent to $7.49 billion, up from $6.13 billion in the second quarter of 2001. Comp-store sales for the second quarter increased 6.8 percent. For the six months ended Aug. 2002, sales increased 22.4 percent to $13.96 billion. Comp-store sales increased 7.1 percent in the first half of 2002.

During the conference call the company called particular attention to its flexibility. "We look at every product of every vendor to determine the most efficient way to get product on the shelves," he said.

It also wants to minimize the fully loaded cost of product, he said, which results in four methods of distribution: flowing merchandise through its regional distribution centers; shipping by consolidation or transit facilities; using commodity-focused flat bed reloading DCs; and having vendors ship directly to the stores.

Its network of regional DCs is its "backbone" and about 50 percent of the company's inventory is moved through this method. Lowe's operates seven regional DCs and has two more averaging over 1 million sq. ft. currently under construction.