Dear Shareholders,
As I reflect on 2022, I feel privileged to work for a team that continues to drive such tremendous progress across the business, despite macroeconomic uncertainty. As a company, we are seeing clear momentum with our Total Home strategy as we position Lowe’s as the one-stop shop for do-it-yourself (DIY) and Pro customers to get everything they need for their home improvement projects.
We continue to enhance our omnichannel capabilities, increase our Pro penetration and deliver everyday value for our DIY customers. As a result of this focus, we grew adjusted operating margin1 to 13% in 2022 —which is more than a 440-basis point improvement from 2018—reflecting our persistent focus on driving productivity across every aspect of our business.
Through our disciplined capital allocation strategy, we remain committed to generating long-term sustainable value for our shareholders. In 2022, we returned $16.5 billion to our shareholders through a combination of share repurchases and dividends. This includes a 31% increase in our quarterly cash dividend, on top of a 33% increase in 2021.
We continue to focus on taking market share by executing the five pillars of our growth-oriented Total Home strategy:
- Improve Pro penetration
- Accelerate our online business
- Expand installation services
- Drive localization
- Elevate our product assortment
Specific to our Pro focus, our investments to better serve this important customer segment are paying dividends. By the fourth quarter of 2022, we delivered 11 consecutive quarters of double-digit Pro comparable sales growth in the U.S. We are capitalizing on this momentum by growing our MVPs Pro Rewards loyalty program, building relationships with Pros through our CRM platform and continuing to expand our product assortment to meet Pro needs.
As an essential part of our journey, we continue to invest in our supply chain transformation. As part of the continued rollout of our market-based delivery model, to date, we have converted 11 geographic regions supporting over 1,000 stores. This model allows us to flow big and bulky products directly to customer homes—unlocking significant capacity and enabling us to further consolidate our leadership position in appliances and set the company up for profitable growth in other big and bulky categories, like grills, riding lawn mowers and vanities.
As a demonstration to our commitment to sustainability, we announced a 2050 science-based net-zero target across our full value chain, along with targets for renewable energy and product sustainability. We also announced a five-year, $100 million investment in the communities we serve, with a new community impact program called Lowe’s Hometowns that will complete nearly 1,800 community impact projects each year.
None of the progress we made in 2022 would have been possible without the hard work and dedication of our 300,000 associates. To attract and retain top talent, we’re focused on becoming the employer of choice in retail, where associates choose to stay and build their careers. That is why we have invested over $3 billion in incremental wage and share-based compensation for our front-line associates since 2018, including increasing associate wage rates by over 20%. We also recently opened the Lowe’s Tech Hub, a leading-edge collaborative workplace that’s helping us attract top technology talent.
This year we also completed the sale of our Canadian retail business, enabling us to invest more capital into higher-return opportunities in the U.S. to drive long-term, sustainable growth. Despite a macroeconomic environment with many crosscurrents, the home improvement market remains resilient. Disposable personal income is still strong, homeowners have record levels of equity and we have the oldest U.S. housing stock since World War II. More millennials are buying homes, baby boomers are choosing to age in place and remote work is more widespread. While we expect residential investment to remain under pressure in 2023, this unique confluence of demand drivers gives us confidence in the medium- to long-term industry outlook.
Through our Total Home strategy and our culture of continuous improvement, we are confident that we will continue to capture market share, improve our operating margin and deliver long-term, sustainable value to our shareholders. Our associates share my passion for serving our customers and striving to win each day, and that’s exactly what we’ll do to continue to deliver winning results. I believe if we give our associates a great place to work, offer our customers a seamless shopping experience in-store and online and make our communities better, Lowe’s will continue to create shareholder value. This is why Lowe’s is well positioned for 2023 and beyond as we continue our journey to become a world-class, customer-centric, omnichannel retailer.
God bless,
Marvin R. Ellison
Chairman, President and Chief Executive Officer
Read the original letter here.
