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Lowe’s Reports Higher Q1 Net Earnings, Sales

5/22/2006 09:53:00 AM Eastern

Mooresville, N.C. –— Lowe's reported net earnings of $841 million for the quarter, ended May 5, a 43.5 percent increase over the same period a year ago.

Sales for the quarter increased 20.3 percent to $11.92 billion, up from $9.91 billion in the first quarter of 2005. Total sales results were positively impacted by a calendar shift and change in accounting practices, the company said. Comp-store sales for the first quarter increased 5.7 percent.

“Industry-leading market-share gains in appliances and outdoor power equipment are evidence of our compelling product offering and our success in meeting customers' needs,” said Robert A. Niblock, chairman and president/CEO.

“Recent data suggest continued favorable trends in employment levels and income growth which will offset some of the monetary pressures consumers are facing, such as rising fuel prices and interest rates,” Niblock added.

During the first quarter of 2006, management reviewed the company’s method of accounting for early payment discounts on merchandise purchases and determined, effective for 2006, it should recognize these discounts initially as a reduction of inventory cost and then as a reduction to cost of sales when the related inventory is sold. The company previously recognized early payment discounts as a financing component of merchandise purchases by reducing cost of sales when the related product was purchased. Prior year financial statements have been restated to reflect this change. This resulted in a reduction in net earnings of $6 million and $9 million for fiscal years 2005 and 2004, respectively, including a reduction in net earnings for the first quarter of 2005 of $4 million, and a reduction in beginning retained earnings in fiscal 2004 of $28 million. The impact of this restatement on diluted earnings per share did not exceed $0.01 for any interim or annual period.

During the quarter, Lowe's opened 24 new stores. As of May 5, Lowe's operated 1,258 stores in 49 states, representing 142.8 million square feet of retail selling space, a 12.9 percent increase over last year.

During the second quarter it expects to open another 24 new stores, reflecting square footage growth of approximately 12 percent. And for the fiscal year the chain plans to open 155 stores in 2006, reflecting total square footage growth of about 12 percent.

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