Horizontal Analysis of Lowes's Income Statement

(In Millions) 1-Feb-17 1-Feb-16 1-Feb-15 Dollar Change Percent Change

NET SALES $87,335 $83,176 $78,812 4,364 5.54%
Cost of Sales $56,933 54,222 51,422 2,800 5.45%
GROSS PROFIT $30,402 28,954 27,390 1,564 5.71%

Operating Expenses:
Selling, General, and Administrative $17,676 16,834 16,597 237 1.43%
Depreciation and Amortization $1,734 1,651 1,627 24 1.48%
Total Operating Expenses $19,409 18,485 18,224 261 1.43%
OPERATING INCOME $10,992 10,469 9,166 1,303 14.22%

Interest and other (Income) Expense:

Interest and investment Income ($354) ($337) ($12) ($325) 2708.33%
Interest Expense $872 830 711 16.74%
Other
Interest and Other, net $518 493 699 -206 -29.47%

EARNINGS BEFORE PROVISIONS FOR INCOME TAXES $10,475 9,976 8,467 1,509 17.82%
Provisions for Income Taxes $3,813 3,631 3,082 549 17.81%
NET EARNINGS $6,662 $6,345 $5,385 $960 17.83%

Weighted Average Common Shares $1,405 1,338 1,425 -87 -6.11%

BASIC EARNINGS PER SHARE $4.98 $4.74 $3.78 0.96 25.40%

Diluted Weighted Average Common Shares $1,413 1,346 1,434 -88 -6.14%
DILUTED EARNINGS PER SHARE $4.95 $4.71 $3.76 0.95 25.27%

Horizontal Analysis of Lowe's Income Statement

Fiscal years ended on 30-Jan-17 30-Jan-16 31-Jan-15 Dollar change Percent change
Net sales $59,034 $56,223 $53,417 $2,806 5.25%
Cost of sales $38,498 36,665 34,941 1,724 4.93%
Gross margin $20,536 19,558 18,476 1,082 5.86%
Expenses:
Selling, general and administrative $13,945 13,281 12,865 416 3.23%
Depreciation $1,559 1,485 1,462 23 1.57%
Interest - net $542 516 476 40 8.40%
Total expenses $16,046 15,282 14,803 479 3.24%
Pre-tax earnings $4,490 4,276 3,673 603 16.42%
Income tax provision $1,657 1,578 1,387 191 13.77%
Net earnings $2,833 $2,698 2,286 412 18.02%
Basic earnings per common share $2.85 $2.71 $2.14 $0.57 26.64%
Diluted earnings per common share $2.85 $2.71 $2.14 $0.57 26.64%
Cash dividends per share $0.91 $0.87 $0.70 $0.17 24.29%

Observations over Lowe's Horizontal Analysis

1. Lowe's sales have increased significantly. This may have to do with the “cost of sales.” Lowe's clearly invests more for the benefit of the business.

2. Being that Lowe’s does not have a significant expense amount, does not invest as much, this indicates how much less Lowe's has to spend to reach its peak. Not to
mention, its liabilities are not outstanding in the balance sheet.
Financical Statement Ratios for Lowes and Lowe's

Current Ratio:

Lowe's
10,080/9348 = 1.08 to 1
Lowe's has $1.08 of current assets to every $1 of current debt.

Acid- test ratio:

Lowe's
466+125+0/9348 = .06 to 1
Lowe's has $0.06 of cash like assets to $1 of debt.

Debt to equity ratio:

Lowe's
21,859/9,968 = 219.29%
For every $1 in debt Lowe's renders $2.19 or 219.29% equity

Basic earnings per share:

Lowe's
2,698/988 = 2.73
For every $1 of income Lowe's distributes to its shareholders, each share receives $2.73

Inventory Turnover:

Lowe's
36,665/(8,911+9,127)/2 = 4.07 times
Lowe's overturns it inventory 4.07 times a year.

Days' Sale in Inventory:

Lowe's
(8,911/36,665) x 365 = 88.71 days
When Lowe's purchases inventory on average it take 88.71 days to reach sale

Profit Margin Ratio:

Lowe's
2,698/56,223 = 4.80%
For every $1 in sale Lowe's makes 4.80 cent per sale.

Total Asset Turnover:

Lowe's
56,223/(31,827+32,732)/2 = 1.74 times
Every $1 invented into assets generates 1.74 times in sale.

Return on Total Assets:

Lowe's
2,698/(31,827+32,732)/2 = 8.36%
Every $1 invested into assets generates 8.36% of return on assets for net income.

Return on common stockholder's Equity:

Lowe's
2,698-0/(9,968+11,853)/2 = 24.73%
Lowe's generates 24.73% return on net income for every $1 of equity.

In comparing the two companies, it seems that Lowe's has the advantage. Lowe's has more a better asset-to-debt ratio (both current and acid). They also get rid of their
inventory quickly and generate more sales per investment. Lowe's also nearly doubles their return on common stockholder's equity. These ratios to an investor show that
Lowe's is a great investment.