Q4 2019 Earnings Call

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Yes.

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Lows started when two guys return from World War two today, we proudly.

Operator: Lowe's started when two GIs returned from World War II. Today, we proudly.

Good morning, everyone and welcome to the most companies fourth quarter 2019 earnings Conference call. This call is being recorded.

Joseph McFarland: Good morning, everyone, and welcome to the Lowe's Companies' Q4 2019 earnings conference call. This call is being recorded. Please note, if you press star one to enter the question queue prior to the start of today's call, your signal did not register. You will need to press star one again to re-enter the queue. Also, supplemental reference materials are available on Lowe's investor relations website within the investor packet. While management will not be speaking directly to the slides, these slides are meant to facilitate your view of the company's results and to be used as a reference document following the call. During this call, management will be using certain non-GAAP financial measures. The supplemental reference materials include information about these measures and a reconciliation to the most directly comparable GAAP financial measures.

Operator: Good morning, everyone, and welcome to the Lowe's Companies' Q4 2019 Earnings Conference Call. This call is being recorded. Please note, if you press star one to enter the question queue prior to the start of today's call, your signal did not register. You will need to press star one again to re-enter the queue. Also, supplemental reference materials are available on Lowe's investor relations website within the investor packet. While management will not be speaking directly to the slides, these slides are meant to facilitate your view of the company's results and to be used as a reference document following the call. During this call, management will be using certain non-GAAP financial measures. The supplemental reference materials include information about these measures and a reconciliation to the most directly comparable GAAP financial measures.

Please note if you press star one to answer the question Q prior to the start of today's call. Your signal did not register.

I'll need to press star, one again to reenter the queue.

Also supplemental reference materials are available on most investor relations website within the Investor packet, while management will not be speaking directly to the slides. These slides are meant to facilitate your view of the company's results and to be used as a reference document following the call.

During this call management, we using certain non-GAAP financial measure the supplemental reference materials include information about these measures and a reconciliation to the most directly comparable GAAP financial measures.

Joseph McFarland: Statements made during this call will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Management's expectations and opinions reflected in those statements are subject to risks, and the company can give no assurance that they will prove to be correct. Those risks are described in the company's earnings release and its filings with the Securities and Exchange Commission. Hosting today's conference will be Mr. Marvin Ellison, President and Chief Executive Officer, Mr. Bill Boltz, Executive Vice President, Merchandising, Mr. Joe McFarland, Executive Vice President, Stores, and Mr. Dave Denton, Chief Financial Officer. I will now turn the program over to Mr. Ellison for opening remarks. Please go ahead, sir.

Statements made during this call will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Management's expectations and opinions reflected in those statements are subject to risks, and the company can give no assurance that they will prove to be correct. Those risks are described in the company's earnings release and its filings with the Securities and Exchange Commission. Hosting today's conference will be Mr. Marvin Ellison, President and Chief Executive Officer, Mr. Bill Boltz, Executive Vice President, Merchandising, Mr. Joe McFarland, Executive Vice President, Stores, and Mr. Dave Denton, Chief Financial Officer. I will now turn the program over to Mr. Ellison for opening remarks. Please go ahead, sir.

Statements made during this call will include forward looking statements as defined in the private Securities Litigation Reform Act of 1995.

Management's expectations and opinions reflected in those statements are subject to risks and the company can give no assurance that they will prove to be correct. Those risks are described in the Companys earnings release and its filings with the Securities and Exchange Commission.

Hosting todays conference will be Mr., Marvin Ellison, President and Chief Executive Officer, Mr., Bill Foley Executive Vice President and merchandising Mr., Joe Mcfarland Executive Vice President stores, and Mr., Dave Denton, Chief Financial Officer, I will now turn the program over to Mr. Allison for opening remarks. Please go ahead Sir.

Good morning, everyone. In 2019, we made significant progress and transforming our company. While we're only one you into a multiyear transformation, we're confident the world right path to capitalize on solid demand and a healthy home improvement market and generate long term profitable growth.

Dave Denton: Good morning, everyone. In 2019, we've made significant progress in transforming our company. While we're only one year into a multi-year transformation, we're confident that we're on the right path to capitalize on solid demand in a healthy home improvement market and generate long-term profitable growth. I'll now take a moment to discuss our fourth quarter results. For the quarter, total company comp sales grew 2.5%. Our US home improvement comps were a positive 2.6%. Our US monthly comps were a negative 0.7% in November, positive 6.2% in December, and a positive 2.1% in January. However, when you normalize for Black Friday holiday shift from 2018, our US monthly comps were relatively balanced with growth of positive 2.8% in November, positive 2.9% in December, and positive 2.1% in January. While our monthly comps were relatively balanced, Q4 sales were softer than our expectations. This stems from three factors.

Marvin Ellison: Good morning, everyone. In 2019, we've made significant progress in transforming our company. While we're only one year into a multi-year transformation, we're confident that we're on the right path to capitalize on solid demand in a healthy home improvement market and generate long-term profitable growth. I'll now take a moment to discuss our fourth quarter results. For the quarter, total company comp sales grew 2.5%. Our US home improvement comps were a positive 2.6%. Our US monthly comps were a negative 0.7% in November, positive 6.2% in December, and a positive 2.1% in January. However, when you normalize for Black Friday holiday shift from 2018, our US monthly comps were relatively balanced with growth of positive 2.8% in November, positive 2.9% in December, and positive 2.1% in January. While our monthly comps were relatively balanced, Q4 sales were softer than our expectations. This stems from three factors.

I will now take a moment to discuss our fourth quarter results.

The quarter total company comp sales grew 2.5% our us home improvement comps were positive 2.6%.

Are you with monthly comps were negative 0.7% in November positive, 6.2% in December and a positive 2.1% in January however, when you normalize for Black Friday holiday shift from 2018, our U.S. monthly costs were relatively balanced growth.

Positive 2.8% in November.

Positive, 2.9% in December and positive 2.1% in January.

While our monthly costs were relatively balanced Q4 sales were softer than I expectations. This stems from three factors first we did not optimize our marketing execution to align with the compressed holiday season.

Dave Denton: First, we did not optimize our marketing execution to align with the compressed holiday season. Our November holiday marketing activity was concentrated closer to Black Friday, and as a result, we didn't fully capitalize on demand for appliances, and other key holiday categories earlier in the month. Second, in Q4, we were lapping the exit of our Project Specialist Interior, or PSI, program in the prior year, which pressured install sales growth more than we anticipated during the quarter. And finally, as we discussed, Lowe's.com is still under construction. As customers increasingly utilize online shopping options for convenience and efficiency in the shorter holiday selling season, Lowe's.com lagged market growth, delivering comp growth of approximately 3% for the quarter.

First, we did not optimize our marketing execution to align with the compressed holiday season. Our November holiday marketing activity was concentrated closer to Black Friday, and as a result, we didn't fully capitalize on demand for appliances, and other key holiday categories earlier in the month. Second, in Q4, we were lapping the exit of our Project Specialist Interior, or PSI, program in the prior year, which pressured install sales growth more than we anticipated during the quarter. And finally, as we discussed, Lowe's.com is still under construction. As customers increasingly utilize online shopping options for convenience and efficiency in the shorter holiday selling season, Lowe's.com lagged market growth, delivering comp growth of approximately 3% for the quarter.

Our November holiday marketing activity was concentrated closer to black Friday and as a result, we didnt fully capitalize on demand for appliances and other key holiday categories earlier in the month.

Second in Q4, we're lapping the exit of our project specialists interior or PSR program in the prior year, which pressured install sales growth more than we anticipated during the quarter and finally as we discuss low sarcom is still under construction.

Customers increasingly utilize online shopping options for convenience and efficiency in the shorter holiday selling season lows dot com lag market growth delivering comp growth of approximately 3% for the quarter.

Dave Denton: Let me remind you, at the beginning of 2019, Lowe's.com was sitting on a decade-old platform, and although we're in the process of re-platforming the entire site to Google Cloud, that work will not be completed until Q2. The good news is, for Lowe's.com, we know exactly what our issues are, and we have temporarily slowed our .com growth to resolve those issues. We recruited a very experienced and talented team, and we have a detailed project roadmap to modernize our website. We expect to see a trajectory change in this business in the second half of 2020, which we are very excited about. While e-commerce business is under repair, I'm very pleased with the strength and productivity of our brick-and-mortar stores. There are very few large retailers in America delivering a 2.6% comp growth almost exclusively from their brick-and-mortar stores.

Let me remind you, at the beginning of 2019, Lowe's.com was sitting on a decade-old platform, and although we're in the process of re-platforming the entire site to Google Cloud, that work will not be completed until Q2. The good news is, for Lowe's.com, we know exactly what our issues are, and we have temporarily slowed our .com growth to resolve those issues. We recruited a very experienced and talented team, and we have a detailed project roadmap to modernize our website. We expect to see a trajectory change in this business in the second half of 2020, which we are very excited about. While e-commerce business is under repair, I'm very pleased with the strength and productivity of our brick-and-mortar stores. There are very few large retailers in America delivering a 2.6% comp growth almost exclusively from their brick-and-mortar stores.

Let me remind you at the beginning of 2019 lows dotcom was sitting on a decade old platform and all that were in the process a replatforming didnt tar site to Google cloud that work will not be completed until Q2.

The good news is the lowest dot com, we know exactly what our issues are and we have temporarily slowed our dot com growth to resolve those issues, we recruited a very experienced and talented team and we have a detail project roadmap to modernize our website.

We expect to see a trajectory change in this business in the second half of 2020, which we're very excited about.

While ecommerce business is under repair Im very pleased with the strength and productivity of our brick and mortar stores. They are very few large retails in America, delivering a 2.6% comp growth almost exclusively from their brick and mortar stores. This underscores the sales productivity improvement of our physical stores and our op.

Dave Denton: This underscores the sales productivity improvement of our physical stores and our opportunity to unlock additional growth when Lowe's.com sales accelerate. One of the key strategic steps to improving Lowe's.com is the transformation of our supply chain. Consequently, we're also investing $1.7 billion in our supply chain over a five-year period. In 2019, we opened three new bulk distribution facilities and four new crawl stock terminals. I look forward to updating you on our ongoing improvements of Lowe's.com and our supply chain on future calls. Let me now take a moment and discuss the drivers of our sales growth in the fourth quarter. Our focus on Pro continues to be a catalyst for our US sales growth, with our Pro comps outpacing DIY in the fourth quarter. Our commitment to implementing retail fundamentals in 2019 has paid dividends in our Pro business.

This underscores the sales productivity improvement of our physical stores and our opportunity to unlock additional growth when Lowe's.com sales accelerate. One of the key strategic steps to improving Lowe's.com is the transformation of our supply chain. Consequently, we're also investing $1.7 billion in our supply chain over a five-year period. In 2019, we opened three new bulk distribution facilities and four new crawl stock terminals. I look forward to updating you on our ongoing improvements of Lowe's.com and our supply chain on future calls. Let me now take a moment and discuss the drivers of our sales growth in the fourth quarter. Our focus on Pro continues to be a catalyst for our US sales growth, with our Pro comps outpacing DIY in the fourth quarter. Our commitment to implementing retail fundamentals in 2019 has paid dividends in our Pro business.

Opportunity to unlock additional growth when low stock comp sales accelerate.

One of the key strategic steps improving lows dot com is the transformation of our supply chain.

Consequently, we're also investing 1.7 billion in our supply chain over a five year period.

And in 2019, we opened three new bulk distribution facilities and four new cross dock terminals I look forward to updating you on ongoing improvements of low stock comp and our supply chain on future calls.

Let me now take a moment and discuss the drivers of ourselves the growth in the fourth quarter.

Our focus on pro continues to be a catalyst for U.S. sales growth, what our pro comps outpacing DIY into fourth quarter, our commitment to implementing retail fundamentals in 2019 has paid dividends in our pro business, we're seeing compounding benefits from our investments and job lot quantities Department Supervisors and our.

Dave Denton: We're seeing compounding benefits from our investments in job lot quantities, department supervisors, and our improved in-store experience. These investments not only drove improved trends in Pro comp sales, they also drove a 400 basis points improvement in Pro customer service scores in the fourth quarter. As Joe will detail, in 2020, we are transitioning to a more strategic investment for our Pro customers, such as designated loyalty and CRM programs to advance the Pro experience and drive future growth with this critical customer. Our success focusing on retail fundamentals is also evident as we again drove strong sales performance in merchandising departments that have historically underperformed. Bill will add additional insight on our merchandising performance shortly. From a geographic perspective, we saw consistent growth across the business with all three US divisions and 14 of 15 US geographic regions generating positive comps.

We're seeing compounding benefits from our investments in job lot quantities, department supervisors, and our improved in-store experience. These investments not only drove improved trends in Pro comp sales, they also drove a 400 basis points improvement in Pro customer service scores in the fourth quarter. As Joe will detail, in 2020, we are transitioning to a more strategic investment for our Pro customers, such as designated loyalty and CRM programs to advance the Pro experience and drive future growth with this critical customer. Our success focusing on retail fundamentals is also evident as we again drove strong sales performance in merchandising departments that have historically underperformed. Bill will add additional insight on our merchandising performance shortly. From a geographic perspective, we saw consistent growth across the business with all three US divisions and 14 of 15 US geographic regions generating positive comps.

Improved in store experience.

These investments not only drove improved trends in pro comp sales. They also drove a 400 basis point improvement in pro customer service scores in the fourth quarter.

As Joe will detail in 2020, we are transitioning to a more strategic investments for pro customers such as designated loyalty and CRM programs to advanced approach experience and drive future growth with this critical customer.

Our success focusing on retail fundamentals is also evident as we again drove strong sales performance in merchandising departments that have historically underperform bill add additional insight on our merchandising performance shortly.

From a geographic perspective, we saw consistent growth across the business would all three of US divisions, and 14 of 15 us geographic regions generating positive comps.

And during the fourth quarter regions that outperformed the total company comps were Atlanta Baltimore Dallas.

Dave Denton: During the fourth quarter, regions that outperformed the total company comps were Atlanta, Baltimore, Dallas, Houston, Nashville, and St. Louis. Once again, the West was our top-performing geographic division. Turning to Canada, in the fourth quarter, we posted comp sales that were slightly negative in local currency. As we outlined on our third quarter earnings call, we're making foundational changes to improve execution and deliver long-term improved profitability in Canada. The initiatives we laid out as part of our strategic reassessment remain on track, including closing 34 underperforming stores, rationalizing SKUs to present a more coordinated assortment to the customer across our banners, reorganizing our corporate support structure across Canada to more efficiently serve our stores, and migrating Canada to a US IT platform to eliminate inefficiencies and unnecessary technology duplication. We've also implemented key leadership changes in Canada.

During the fourth quarter, regions that outperformed the total company comps were Atlanta, Baltimore, Dallas, Houston, Nashville, and St. Louis. Once again, the West was our top-performing geographic division. Turning to Canada, in the fourth quarter, we posted comp sales that were slightly negative in local currency. As we outlined on our third quarter earnings call, we're making foundational changes to improve execution and deliver long-term improved profitability in Canada. The initiatives we laid out as part of our strategic reassessment remain on track, including closing 34 underperforming stores, rationalizing SKUs to present a more coordinated assortment to the customer across our banners, reorganizing our corporate support structure across Canada to more efficiently serve our stores, and migrating Canada to a US IT platform to eliminate inefficiencies and unnecessary technology duplication. We've also implemented key leadership changes in Canada.

Usten Nashville, and Saint Louis.

And once again to west will our top performing geographic division.

Turning to Canada in the fourth quarter, we posted comp sales that were slightly negative in local currency.

As we outlined on our third quarter earnings call, we're making foundational changes to improve execution and deliver long term improve profitability in Canada.

The initiatives, we laid out as part of our strategic reassessment remain on track, including.

Closing 34 underperforming stores rationalizing skus are present, a more coordinated assortment to the customer across our banners.

Organizing our corporate support structure across Canada to more efficiently serve our stores and migrating Canada to us RT platform to eliminate inefficiencies and unnecessary technology duplications. We've also implemented key leadership changes in Canada last month, Tony Hurts was appointed President of lows, Canada, Tony is a strong and accomplish.

Dave Denton: Last month, Tony Hurst was appointed President of Lowe's Canada. Tony is a strong and accomplished leader with more than 25 years of retail and home improvement leadership experience. During the fourth quarter, we also appointed Chris West as our Senior Vice President of Merchandising in Canada. Chris has over 20 years of experience in retail merchandising and is excited to return home to Montreal. We remain confident in the long-term potential of our Canadian business, and I know that Tony and Chris are the right people to lead Lowe's Canada into this exciting new chapter for our customers and associates. Despite pressure from Lowe's and expected comparable sales growth in the fourth quarter, we delivered adjusted diluted earnings per share of $0.94, which exceeded expectations, supported by improved gross margin trends, enhanced process execution, and strong expense management.

Last month, Tony Hurst was appointed President of Lowe's Canada. Tony is a strong and accomplished leader with more than 25 years of retail and home improvement leadership experience. During the fourth quarter, we also appointed Chris West as our Senior Vice President of Merchandising in Canada. Chris has over 20 years of experience in retail merchandising and is excited to return home to Montreal. We remain confident in the long-term potential of our Canadian business, and I know that Tony and Chris are the right people to lead Lowe's Canada into this exciting new chapter for our customers and associates. Despite pressure from Lowe's and expected comparable sales growth in the fourth quarter, we delivered adjusted diluted earnings per share of $0.94, which exceeded expectations, supported by improved gross margin trends, enhanced process execution, and strong expense management.

Leader with more than 25 years of retail and home improvement leadership experience.

And during the fourth quarter, we also pointed Chris Wes as our senior Vice President of merchandising in Canada.

Chris has over 20 years of experience and retail merchandising and as excited to return home to Montreal.

We remain confident in long term potential of our Canadian business, and I noted, Tony and Chris on the right people to lead lows, Canada into this exciting new chapter for our customers and associates.

Despite pressure from lower than expected comparable sales growth in the fourth quarter. We delivered adjusted diluted earnings per share of 94 cents, which exceeded expectations supported by improved gross margin trends enhanced process execution and strong expense management.

Turning to 2020, we're pleased ended the year from position of strength as we look to build upon the strong foundation with stab was in 2018.

Dave Denton: Turning to 2020, we're pleased to enter the year from a position of strength as we look to build upon the strong foundation we established in 2019. We expect to capitalize on a supportive macroeconomic environment by executing on our four strategic areas of focus: driving merchandising excellence, transforming our supply chain, delivering operational efficiency, and intensifying customer engagement by focusing on the Pro. Our improved Lowe's.com platform will allow these four strategic areas of focus to create a true omnichannel ecosystem for Lowe's so we can efficiently serve our customers any way they choose to shop. Our intense focus on retail fundamentals, combined with improving systems and technology, will continue to pay dividends across the business in 2020. In closing, I'd like to take a moment to thank our associates for their hard work and commitment to serving our customers and our communities.

Turning to 2020, we're pleased to enter the year from a position of strength as we look to build upon the strong foundation we established in 2019. We expect to capitalize on a supportive macroeconomic environment by executing on our four strategic areas of focus: driving merchandising excellence, transforming our supply chain, delivering operational efficiency, and intensifying customer engagement by focusing on the Pro. Our improved Lowe's.com platform will allow these four strategic areas of focus to create a true omnichannel ecosystem for Lowe's so we can efficiently serve our customers any way they choose to shop. Our intense focus on retail fundamentals, combined with improving systems and technology, will continue to pay dividends across the business in 2020. In closing, I'd like to take a moment to thank our associates for their hard work and commitment to serving our customers and our communities.

We expect to capitalize on a supportive macro economic environment by executing on our four strategic areas of focus.

Driving merchandising excellence, transforming our supply chain delivering operational efficiency and intensifying customer engagement by focusing on the pro.

Our improved lowest dot com platform will allow these four strategic areas of focus to create a true omni channel ecosystem for lows. So we can efficiently serve our customers anyway, they choose to shop.

And our intense focus on retail fundamentals combined with improving systems and technology will continue to pay dividends across the business in 2020.

And in closing I like that take a moment that thank our associates for their hard work and commitment to serving our customers and our communities.

Dave Denton: I spend quite a bit of my time in stores, and our associates continue to demonstrate that they are the cornerstone of our current and future success. We're looking forward to a great 2020. With that, I'll turn the call over to Bill.

I spend quite a bit of my time in stores, and our associates continue to demonstrate that they are the cornerstone of our current and future success. We're looking forward to a great 2020. With that, I'll turn the call over to Bill.

It's been quite a bit of my time in stores and our associates continue to demonstrate the day are the cornerstone of our current and future success. We're looking forward to a great 2020, and with that I'll turn the call over to Bill.

William Boltz: Thanks, Marvin, and good morning, everyone. As Marvin mentioned, we posted US home improvement comparable sales growth of 2.6% in the fourth quarter. We are especially pleased with these results when you consider that our Q4 comp sales were driven almost exclusively by our brick-and-mortar locations. We continue to see strong customer demand, and our stores executed very well, delivering a strong Black Friday event. However, as Marvin indicated, our November marketing cadence didn't fully capture expected sales early in the compressed holiday period. Turning to our merchandising department performance for the quarter, we delivered above-average comps in appliances, decor, hardware, lawn and garden, lumber and building materials, millwork, paint, and tools. We continue to be pleased with our paint business as it outperformed the company average again this quarter.

Bill Boltz: Thanks, Marvin, and good morning, everyone. As Marvin mentioned, we posted US home improvement comparable sales growth of 2.6% in the fourth quarter. We are especially pleased with these results when you consider that our Q4 comp sales were driven almost exclusively by our brick-and-mortar locations. We continue to see strong customer demand, and our stores executed very well, delivering a strong Black Friday event. However, as Marvin indicated, our November marketing cadence didn't fully capture expected sales early in the compressed holiday period. Turning to our merchandising department performance for the quarter, we delivered above-average comps in appliances, decor, hardware, lawn and garden, lumber and building materials, millwork, paint, and tools. We continue to be pleased with our paint business as it outperformed the company average again this quarter.

Thanks, Marvin and good morning, everyone.

As Martin mentioned, we posted us home improvement comparable sales growth of 2.6% in the fourth quarter.

We're especially pleased with these results when you consider that our Q4 comp sales were driven almost exclusively by our brick and mortar locations.

We continued to see strong customer demand and our stores executed very well delivering a strong black Friday event.

However, as Marvin indicated our November marketing cadence Didnt fully capture expected sales early in the compressed holiday period.

Turning to our merchandising department performance for the quarter, we delivered above average comps in appliances, the core hardware lawn and garden lumber and building materials millwork paint and tools.

We continue to be pleased with our paint business as it outperformed the company average again this quarter.

William Boltz: As we continue to grow our paint business, we will continue to work closely with our suppliers to introduce an improved pro paint offering to better serve the repair remodelers who need paint to complete a larger project, such as a kitchen or bathroom remodel. After previously performing below the company average for years, in Q4, decor performed above the company average for the third consecutive quarter, with double-digit comp growth, supported by strength in home decor, blinds and shades, and home organization. In Q4, our millwork business remained strong and outperformed the company average, driven by our strength in doors and windows, along with our garage door opener program, where we are the only retailer to carry the top three brands of garage door openers in Chamberlain, Genie, and Craftsman.

As we continue to grow our paint business, we will continue to work closely with our suppliers to introduce an improved pro paint offering to better serve the repair remodelers who need paint to complete a larger project, such as a kitchen or bathroom remodel. After previously performing below the company average for years, in Q4, decor performed above the company average for the third consecutive quarter, with double-digit comp growth, supported by strength in home decor, blinds and shades, and home organization. In Q4, our millwork business remained strong and outperformed the company average, driven by our strength in doors and windows, along with our garage door opener program, where we are the only retailer to carry the top three brands of garage door openers in Chamberlain, Genie, and Craftsman.

As we continue to grow our paint business, we will continue to work closely with our suppliers to introduce an improved propane offering to better serve the repair remodel leaders, who need paint to complete a larger project such as a kitchen or bathroom remodel.

After previously performing below the company average for years in Q4, the core performed above the company average for the third consecutive quarter with double digit comp growth supported by strength in home decor blinds and shades in home organization.

In Q4, or millwork business remains strong and outperformed the company average driven by our strength in doors and windows, along with our garage door opener program, where we are the only retailer to carry the top three brands a garage door openers in Chamberlain Genie and Craftsman.

The traction that we built in these departments is a clear indication at the end implementation of our retail fundamentals has been effective and we look forward to taking this momentum into 2020.

William Boltz: The traction that we've built in these departments is a clear indication that the implementation of our retail fundamentals has been effective, and we look forward to taking this momentum into 2020. In tools, we are still seeing a strong customer response to our Craftsman offering. We continue to leverage this iconic brand and our home center channel exclusivity to drive market share gains within key tool categories. We also continue to gain traction within our key pro brands with our exclusive DEWALT 12-volt compact line of power tools, which delivers more power in a smaller and lightweight tool. We are also proud to announce an extension to our DEWALT power tool program with the launch of the new 20V MAX XR power tools with the PowerDetect system in Q1, another home center channel exclusive.

The traction that we've built in these departments is a clear indication that the implementation of our retail fundamentals has been effective, and we look forward to taking this momentum into 2020. In tools, we are still seeing a strong customer response to our Craftsman offering. We continue to leverage this iconic brand and our home center channel exclusivity to drive market share gains within key tool categories. We also continue to gain traction within our key pro brands with our exclusive DEWALT 12-volt compact line of power tools, which delivers more power in a smaller and lightweight tool. We are also proud to announce an extension to our DEWALT power tool program with the launch of the new 20V MAX XR power tools with the PowerDetect system in Q1, another home center channel exclusive.

In tools, we're still seeing a strong customer response to our craftsman offerings. We continue to leverage this iconic brand in our home center channel exclusivity to drive market share gains within key tool categories. We also continue to gain traction within our key programs with our exclusive dwelt 12 volt compact line of power.

Tools, which delivers more power in a smaller in lightweight tool.

We're also proud to announce an extension to our dwelt power tool program with the launch of the New 20 volt Max XR power tools with the power to tech system in the first quarter Another home Center channel exclusive.

William Boltz: These tools are optimized to deliver more power than their predecessors, giving pros better performance to complete their jobs. In addition, we'll also continue to leverage new and innovative products from Bosch, Lufkin, Spyder, Metabo HPT, and Kobalt to provide customers with an outstanding lineup of tool options. As Marvin mentioned, in appliances, despite performance below our expectations in November, we drove comps above the company average in the quarter, leveraging our position as the leading appliance retailer in the US, with our best-in-class appliance offerings along with great values and special buys. We also delivered comps above the company average in lawn and garden, with double-digit comps in live goods, fertilizer, and landscape products, benefiting from an improved in-stock position and warmer-than-average temperatures. And lastly, we posted comps above the company average in lumber and building materials, supported by strong pro comps and warmer weather.

These tools are optimized to deliver more power than their predecessors, giving pros better performance to complete their jobs. In addition, we'll also continue to leverage new and innovative products from Bosch, Lufkin, Spyder, Metabo HPT, and Kobalt to provide customers with an outstanding lineup of tool options. As Marvin mentioned, in appliances, despite performance below our expectations in November, we drove comps above the company average in the quarter, leveraging our position as the leading appliance retailer in the US, with our best-in-class appliance offerings along with great values and special buys. We also delivered comps above the company average in lawn and garden, with double-digit comps in live goods, fertilizer, and landscape products, benefiting from an improved in-stock position and warmer-than-average temperatures. And lastly, we posted comps above the company average in lumber and building materials, supported by strong pro comps and warmer weather.

These tools are optimized to deliver more power than their predecessors, giving pros better performance to complete their jobs. In addition, we'll also continue to leverage new and innovative products from Bosh Lufkin Spider the title HBT and cobalt to provide customers with an outstanding lineup of tool options.

As Martin mentioned in appliances, despite performance below our expectations in November we drove comps above the company average in the quarter leveraging our position as the leading appliance retailers in the us with our best in class appliance offerings, along with great values and special buys.

We also delivered comps above the company average in lawn and garden with double digit comps in live goods fertilizer and landscape products benefiting from an improved in stock position and warmer than average temperatures.

And lastly, we posted comps above the company average in lumber and building materials supported by strong pro comps and warmer weather.

William Boltz: Looking ahead, we are very excited about our plans and enter the year with a strong foundation in our stores. Our merchandising service teams, or MSTs, have improved our merchandising reset execution and day-to-day bay and end cap maintenance at the store level, delivering a better shopping experience for our customer and taking time-consuming tasks off the shoulders of our Red Vest associates. We plan to build on this strength by adding approximately 7,000 additional vendor-funded MSTs to our stores in the first half of 2020. We'll also leverage our field merchandising team to drive customized assortments at the store level and improve our space productivity. In Q4, we made improvements to our store environment, optimizing our layout on a critically important seasonal pad at the front of our stores.

Looking ahead, we are very excited about our plans and enter the year with a strong foundation in our stores. Our merchandising service teams, or MSTs, have improved our merchandising reset execution and day-to-day bay and end cap maintenance at the store level, delivering a better shopping experience for our customer and taking time-consuming tasks off the shoulders of our Red Vest associates. We plan to build on this strength by adding approximately 7,000 additional vendor-funded MSTs to our stores in the first half of 2020. We'll also leverage our field merchandising team to drive customized assortments at the store level and improve our space productivity. In Q4, we made improvements to our store environment, optimizing our layout on a critically important seasonal pad at the front of our stores.

Looking ahead, we're very excited about our plans and enter the year with a strong foundation in our stores.

Our merchandising service teams or amnesties have improved our merchandising reset execution in day to day Bay and in Kent maintenance at the store level, delivering a better shopping experience for our customer and taking time consuming tas off the shoulders of our Red Best Associates, we plan to build on this strength by adding approximately 7000.

No vendor funded amnesties to our stores in the first half of 2020.

We'll also leverage our field merchandising team to drive customize assortments at the store level and improve our space productivity.

In Q4, we made improvements to our store environment optimizing our lay it on a critically important seasonal pad at the front of our stores. This reset activity opens up additional square footage of selling space, which will use for additional seasonal selling areas inflect space in this strategic location to improve our sales velocity.

William Boltz: This reset activity opens up additional square footage of selling space, which we'll use for additional seasonal selling areas in flex bays in this strategic location to improve our sales velocity. Our upcoming spring sets will ensure that products typically used together to complete a project are now located in the same aisle to make it easier for the customer to efficiently shop their whole project. Also, in the first half of the year, we'll complete the rollout of our new signage and wayfinding package. This will provide all of our stores with an updated signage and wayfinding for the first time in over 15 years. In our pilot stores, customer surveys showed that this new package improved the customer experience, making it easier and faster for customers to locate products. We have a number of exciting brand introductions in 2020.

This reset activity opens up additional square footage of selling space, which we'll use for additional seasonal selling areas in flex bays in this strategic location to improve our sales velocity. Our upcoming spring sets will ensure that products typically used together to complete a project are now located in the same aisle to make it easier for the customer to efficiently shop their whole project. Also, in the first half of the year, we'll complete the rollout of our new signage and wayfinding package. This will provide all of our stores with an updated signage and wayfinding for the first time in over 15 years. In our pilot stores, customer surveys showed that this new package improved the customer experience, making it easier and faster for customers to locate products. We have a number of exciting brand introductions in 2020.

Our upcoming spring sets will ensure that products typically used together to complete a project are now located in the same mile to make it easier for the customer to efficiently shop their whole project.

Also in the first half of the year, we'll complete the rollout of our new signage in way finding package. This will provide all of our stores with an updated signage in way finding for the first time and over 15 years in our pilot stores customer survey showed that this new package improve the customer experience make it easier and faster for customers to local.

Products.

We have a number of exciting brand introductions in 2020, we're one of the first retailers to introduced the new Weber smoke fire pellet group.

William Boltz: We are one of the first retailers to introduce the new Weber SmokeFire Pellet Grill. Weber's Pellet Grill is their initial entry into this fast-growing category and is built to let grill users discover what's possible with pellet grilling. And we are proud to partner with Weber to introduce this exciting new product. Within our seasonal and outdoor living business, we are excited to build on our strength in outdoor power equipment with the introduction of Honda Outdoor Power products. After many years, we are extremely excited to be able to offer this brand as part of the Lowe's Outdoor Power Equipment assortment. The categories will be available both in store and on lowes.com and will include walk-behind lawnmowers, generators, snowblowers, tillers, pumps, and trimmers for both residential and commercial projects.

We are one of the first retailers to introduce the new Weber SmokeFire Pellet Grill. Weber's Pellet Grill is their initial entry into this fast-growing category and is built to let grill users discover what's possible with pellet grilling. And we are proud to partner with Weber to introduce this exciting new product. Within our seasonal and outdoor living business, we are excited to build on our strength in outdoor power equipment with the introduction of Honda Outdoor Power products. After many years, we are extremely excited to be able to offer this brand as part of the Lowe's Outdoor Power Equipment assortment. The categories will be available both in store and on lowes.com and will include walk-behind lawnmowers, generators, snowblowers, tillers, pumps, and trimmers for both residential and commercial projects.

Webber's pellet drill as their initial entry into this fast growing category and is built to let grill users discover what's possible with pellet drilling.

And we are proud to partner with Weber to introduce this exciting new product.

Within our seasonal and outdoor living business, we're excited to build on our strength in outdoor power equipment with the ended introduction of Honda outdoor power products. After many years, we're extremely excited to be able to offer. This brand is part of the lows outdoor power equipment assortment.

The categories will be available both in store and on lows Dot Com and will include walk behind lawnmowers generators, Snowblowers tillers pumps and trimmers for both residential and commercial projects.

In addition to adding Honda, we will also be adding the aarons brand of zero turn mowers to our outdoor power lineup, which currently includes John Deere Husqvarna and Craftsman.

William Boltz: In addition to adding Honda, we will also be adding the Ariens brand of zero-turn mowers to our outdoor power lineup, which currently includes John Deere, Husqvarna, and Craftsman. These two new brands further strengthen Lowe's position as the number one destination for outdoor power equipment in the US. We are also excited to continue our national home center rollout of Yeti, a leader in coolers, equipment, and drinkware. Our expanded product offering highlights our commitment to providing our customers with relevant, innovative, best-in-class products. I look forward to sharing additional brand introduction news with you throughout the year. In closing, we are very pleased with the progress we've made against our strategic objective of delivering merchandising excellence. We enter 2020 in a position superior to last year and are excited to take our positive momentum into the all-important spring season.

In addition to adding Honda, we will also be adding the Ariens brand of zero-turn mowers to our outdoor power lineup, which currently includes John Deere, Husqvarna, and Craftsman. These two new brands further strengthen Lowe's position as the number one destination for outdoor power equipment in the US. We are also excited to continue our national home center rollout of Yeti, a leader in coolers, equipment, and drinkware. Our expanded product offering highlights our commitment to providing our customers with relevant, innovative, best-in-class products. I look forward to sharing additional brand introduction news with you throughout the year. In closing, we are very pleased with the progress we've made against our strategic objective of delivering merchandising excellence. We enter 2020 in a position superior to last year and are excited to take our positive momentum into the all-important spring season.

These two new brands further strengthened lows position as the number one destination for outdoor power equipment in the U.S.

We're also excited to continue our National home center rollout of Yeti, a leader in coolers equipment and Drinkware.

Our expanded product offering highlights our commitment to providing our customers with relevant innovative best in class products I look forward to sharing additional brand introduction news with you throughout the year.

And in closing, we're very pleased with the progress we've made against our strategic objective of delivering merchandising excellence. We enter 2020 in a position superior last year and we're excited to take our positive momentum into the all important spring season.

Thank you and I'll now turn the call over to Joe.

William Boltz: Thank you, and I'll now turn the call over to Joe.

Thank you, and I'll now turn the call over to Joe.

Thanks, Bill and good morning, everyone.

Joseph McFarland: Thanks, Bill, and good morning, everyone. In 2019, we focused on improving our customer service, investing in our in-stock position, driving efficiency in our store operations, and advancing our pro service model. Our strategic initiatives not only drove top-line growth but also positioned us for success in 2020 and beyond. We are pleased that this quarter marked our fourth straight quarter of improved customer service scores, combined with payroll leverage. This is evidence of our strong commitment to operational efficiency and focus on the customer. We continue to be pleased with our associate engagement as we undertake changes to better serve customers. For example, our annual employee engagement survey showed strength versus retail benchmarks in multiple key engagement measures. As a result of the improved internal and external brand reputation of the company, we have also been very pleased with our ability to recruit seasonal employees for spring.

Joe McFarland: Thanks, Bill, and good morning, everyone. In 2019, we focused on improving our customer service, investing in our in-stock position, driving efficiency in our store operations, and advancing our pro service model. Our strategic initiatives not only drove top-line growth but also positioned us for success in 2020 and beyond. We are pleased that this quarter marked our fourth straight quarter of improved customer service scores, combined with payroll leverage. This is evidence of our strong commitment to operational efficiency and focus on the customer. We continue to be pleased with our associate engagement as we undertake changes to better serve customers. For example, our annual employee engagement survey showed strength versus retail benchmarks in multiple key engagement measures. As a result of the improved internal and external brand reputation of the company, we have also been very pleased with our ability to recruit seasonal employees for spring.

In 2019, we focused on improving our customer service investing in our in stock position driving efficiency in our store operations and advancing our pro service model, our strategic initiatives not only drove topline growth, but also positioned us for success in 2020 and beyond.

We're pleased that this quarter marked our fourth straight quarter of improved customer service scores combined with payroll leverage. This is evidence of our strong commitment to operational efficiency and focus on the customer.

We continue to be pleased with our associate engagement as we undertake changes to better serve customers. For example, our annual employee engagement survey showed strength versus retail benchmarks in multiple key engagement measures as a result of the improved internal and external brand reputation of the company. We have also been very pleased with our bills.

The to recruit seasonal employees for spring.

We are ahead of our target and recruiting efforts, which is a testament to our position as a preferred employer.

Joseph McFarland: We are ahead of our target in recruiting efforts, which is a testament to our position as a preferred employer. In Q3 2019, we completed the national rollout of our new customer-centric scheduling system. Our new labor scheduling system allows us to provide better department coverage and customer service while ensuring that we're using our payroll efficiently. We have also layered on scheduling effectiveness tools that measure schedule efficiency all the way down to the store department level. These advancements allow us to align our payroll hours with peak customer traffic and customize that allocation at the store and department level. For example, under previous system, a DIY-heavy store in Dayton, Ohio, had the same payroll scheduling framework as a Pro-heavy store in Brooklyn.

We are ahead of our target in recruiting efforts, which is a testament to our position as a preferred employer. In Q3 2019, we completed the national rollout of our new customer-centric scheduling system. Our new labor scheduling system allows us to provide better department coverage and customer service while ensuring that we're using our payroll efficiently. We have also layered on scheduling effectiveness tools that measure schedule efficiency all the way down to the store department level. These advancements allow us to align our payroll hours with peak customer traffic and customize that allocation at the store and department level. For example, under previous system, a DIY-heavy store in Dayton, Ohio, had the same payroll scheduling framework as a Pro-heavy store in Brooklyn.

In the third quarter of 2019, we completed the national rollout of our new customer centric scheduling system.

Our new labor scheduling system allows us to provide better department coverage and customer service, while ensuring that we're using our payroll efficiently.

We have also layered on scheduling effectiveness tools that measure schedule efficiency, all the way down to the store department level. These advancements allow us to align our payroll hours of peak customer traffic and customize that allocation that store and department level.

For example, under previous system, a DIY heavy store in Dayton, Ohio had the same payroll scheduling framework as a pro heavy store in Brooklyn, our customer centric scheduling system now allocates more associate hours to the weekend in the Dayton, Ohio store, all allocating more hours to pro centric departments on weekdays in Brooklyn allow.

Joseph McFarland: Our customer-centric scheduling system now allocates more associate hours to the weekend in the Dayton, Ohio store, while allocating more hours to pro-centric departments on weekdays in Brooklyn, allowing us to provide better customer service while driving payroll efficiency. As a reminder, in early 2019, we deployed new mobile devices to our store associates called smartphones. Throughout the year, we added applications to the devices, such as standardized performance scorecards, store walk applications, and most recently, a new pricing application. This functionality made our associates more efficient and ultimately allowed them to spend more time interacting with customers. Our investments in store process and technology paid off in 2019, driving strong payroll leverage for Q4 and the fiscal year, all while improving our customer service scores by 500 basis points year to date.

Our customer-centric scheduling system now allocates more associate hours to the weekend in the Dayton, Ohio store, while allocating more hours to pro-centric departments on weekdays in Brooklyn, allowing us to provide better customer service while driving payroll efficiency. As a reminder, in early 2019, we deployed new mobile devices to our store associates called smartphones. Throughout the year, we added applications to the devices, such as standardized performance scorecards, store walk applications, and most recently, a new pricing application. This functionality made our associates more efficient and ultimately allowed them to spend more time interacting with customers. Our investments in store process and technology paid off in 2019, driving strong payroll leverage for Q4 and the fiscal year, all while improving our customer service scores by 500 basis points year to date.

Joining us to provide better customer service, while driving payroll efficiency.

As a reminder, in early 2019, we deployed new mobile devices to our store associates called smartphones throughout the year, we added applications to the devices such as standardized performance scorecards Star walk applications, and most recently and new pricing application.

This functionality made our associates more efficient and ultimately allow them to spend more time interacting with customers.

Our investments in store process and technology paid off in 2019, driving strong payroll leverage for the fourth quarter and the fiscal year all on proving our customer service scores by 500 basis points year to date. This payroll leveraged combined with improved customer service scores demonstrates our ability to reengineer our labor model.

Joseph McFarland: This payroll leverage, combined with improved customer service scores, demonstrates our ability to re-engineer our labor model while advancing the customer experience. We began 2019 with 60% of our payroll hours spent on tasking and 40% spent on service. We ended the year with 48% of payroll hours spent on tasking and 52% serving the customer. This represents a significant step forward in putting associate time back in front of the customers. These advancements will continue to deliver benefits in 2020, and we plan to build on these accomplishments to deliver additional improvements in customer service and drive more efficiency in our stores. In H1 2020, we will deploy a centralized return-to-vendor process, which will further reduce tasking, limit product damage, and free up additional space in our stores. We will also roll out our new point-of-sale system in H1 2020.

This payroll leverage, combined with improved customer service scores, demonstrates our ability to re-engineer our labor model while advancing the customer experience. We began 2019 with 60% of our payroll hours spent on tasking and 40% spent on service. We ended the year with 48% of payroll hours spent on tasking and 52% serving the customer. This represents a significant step forward in putting associate time back in front of the customers. These advancements will continue to deliver benefits in 2020, and we plan to build on these accomplishments to deliver additional improvements in customer service and drive more efficiency in our stores. In H1 2020, we will deploy a centralized return-to-vendor process, which will further reduce tasking, limit product damage, and free up additional space in our stores. We will also roll out our new point-of-sale system in H1 2020.

While advancing the customer experience.

We began 2019 with 60% of our payroll hours spent on tasking and 40% spent on service. We ended the year with 48% of payroll hours spent on tasking and 52% serving the customer. This represents a significant step forward and putting assess your time back in front of the customers.

These advancements will continue to deliver benefits in 2020, and we plan to build on these accomplishments to deliver additional improvements in customer service and drive more efficiency in our stores.

In the first half of 2020, we will deploy a centralized returned to vendor process, which will further reduce tasking limit product damage and free up additional space in our stores.

We will also rollout our new point of sale system in the first half of the year. Our previous point of sale systems were extremely outdated within old Green screen that was very difficult to navigate. Additionally, our associates had to toggle between multiple systems to sell product.

Joseph McFarland: Our previous point-of-sale systems were extremely outdated, with an old green screen that was very difficult to navigate. Additionally, our associates had to toggle between multiple systems to sell product. For example, if an associate sold an appliance with home delivery and an extended protection plan, they previously had to interact with as many as six systems to complete that transaction. Our new point-of-sale system has a user-friendly touchscreen interface that will bring multiple systems together in one screen. This will greatly simplify the work of our cashiers, driving payroll efficiency by reducing training time and allowing for a much-improved customer experience at checkout. In 2020, we plan to reinvest some of those savings from our process and technology efficiency in nearly 2,000 additional leadership roles in our stores. This includes 650 additional pro supervisors to drive incremental improvements in customer experience.

Our previous point-of-sale systems were extremely outdated, with an old green screen that was very difficult to navigate. Additionally, our associates had to toggle between multiple systems to sell product. For example, if an associate sold an appliance with home delivery and an extended protection plan, they previously had to interact with as many as six systems to complete that transaction. Our new point-of-sale system has a user-friendly touchscreen interface that will bring multiple systems together in one screen. This will greatly simplify the work of our cashiers, driving payroll efficiency by reducing training time and allowing for a much-improved customer experience at checkout. In 2020, we plan to reinvest some of those savings from our process and technology efficiency in nearly 2,000 additional leadership roles in our stores. This includes 650 additional pro supervisors to drive incremental improvements in customer experience.

For example, if an associate sold and appliance with home delivery and an extended protection plan. They previously had interact with as many as six systems to complete that transaction, our new point of sale system has user friendly touch screen interface that will bring multiple systems together in one screen.

This will greatly simplify the work of our cashiers driving payroll efficiency by reducing training time, and allowing for a much improved customer experience at checkout.

In 2020, we plan to reinvest some of those savings from our process on technology efficiency and nearly 2000 additional leadership roles in our stores. This includes 650 additional pro supervisors to drive incremental improvements in customers experience.

Moving to our pro business as Marvin indicated we were very pleased with our performance in Q4 as the pro continues to demonstrate their willingness to shop with Lowe's when we provide them with the right products and great service.

Joseph McFarland: Moving to our pro business, as Marvin indicated, we were very pleased with our pro performance in Q4, as the pro continues to demonstrate their willingness to shop with Lowe's when we provide them with the right products and great service. In 2019, our pro strategy was primarily focused on improving retail fundamentals such as job lot quantities, improved service levels, dedicated loaders, pro department supervisors, and consistent volume pricing. In Q4, we continued this progress with the addition of dedicated point-of-sale terminals at our pro desk to allow for more convenient, fast service. Our commitment to retail basics drove strong pro comps and significant improvement in customer service scores in Q4. Although we're pleased with our pro performance in 2019, we are now transitioning from retail basics to more strategic initiatives for the pro.

Moving to our pro business, as Marvin indicated, we were very pleased with our pro performance in Q4, as the pro continues to demonstrate their willingness to shop with Lowe's when we provide them with the right products and great service. In 2019, our pro strategy was primarily focused on improving retail fundamentals such as job lot quantities, improved service levels, dedicated loaders, pro department supervisors, and consistent volume pricing. In Q4, we continued this progress with the addition of dedicated point-of-sale terminals at our pro desk to allow for more convenient, fast service. Our commitment to retail basics drove strong pro comps and significant improvement in customer service scores in Q4. Although we're pleased with our pro performance in 2019, we are now transitioning from retail basics to more strategic initiatives for the pro.

In 2019 are part of strategy was primarily focused on improving retail fundamentals such as job like quantities improve service levels dedicated loaders Pro Department Supervisors and consistent volume pricing.

In Q4, we continue this progress with the addition of dedicated point of sale terminals at our progress to allow for more convenient fast servers.

Our commitment to retail basics drove strong pro comps and significant improvement in customer service scores in Q4.

Although as we're pleased with our pro performance in 2019, we're now transitioning from retail basics two more strategic initiatives for the pro.

In the first half of 2020, we will launch our pro loyalty program nationally integrated with the CRM program, which will allow us to deploy more surgical strategic marketing to the pro and expand our share of wallet through suggestive selling and approved account management, we're confident that our partnership with Salesforce Dot com will allow us to build up.

Joseph McFarland: In H1 2020, we will launch our pro loyalty program nationally, integrated with a CRM program, which will allow us to deploy more surgical, strategic marketing to the pro and expand our share of wallet through suggestive selling and improved account management. We are confident that our partnership with Salesforce.com will allow us to build a best-in-class platform to better serve our pros. All of these pro-centric initiatives reinforce the importance of the pro customer to Lowe's. We are encouraged by our 2019 successes and once again applaud our associates' commitment to our mission. We are excited about our future and focused on the work ahead to capture the opportunity in front of us. Thank you, and I'll now turn the call over to Dave.

In H1 2020, we will launch our pro loyalty program nationally, integrated with a CRM program, which will allow us to deploy more surgical, strategic marketing to the pro and expand our share of wallet through suggestive selling and improved account management. We are confident that our partnership with Salesforce.com will allow us to build a best-in-class platform to better serve our pros. All of these pro-centric initiatives reinforce the importance of the pro customer to Lowe's. We are encouraged by our 2019 successes and once again applaud our associates' commitment to our mission. We are excited about our future and focused on the work ahead to capture the opportunity in front of us. Thank you, and I'll now turn the call over to Dave.

Best in class platform to better serve our pros.

All of these pro centric initiatives reinforce the importance of the pro customer to lows.

We are encouraged our 2019 successes and once again applaud our associates commitment to our mission. We're excited about our future and focused on the work ahead to capture the opportunity in front of US. Thank you ill now turn the call over to Dave Thanks, Joe and good morning, everyone before reviewing the underlying operating performance of the business I'd like to take a moment to discuss.

Dave Denton: Thanks, Joe, and good morning, everyone. Before reviewing the underlying operating performance of the business, I'd like to take a moment to discuss the previously announced restructuring of our Canadian operations and the associated fourth quarter financial impacts. During the quarter, we completed 28 store closures, with the remaining six planned closures completed earlier this month. Additionally, we completed the inventory rationalization activities in our remaining Canadian locations in support of our banner simplification strategies. As a result of the Canadian restructuring activities and the final closure of our remaining business in Mexico, we incurred pre-tax operating costs and charges of $185 million in the fourth quarter. I'll now turn to review of our operating performance, beginning with our strong capital allocation program. In fiscal 2019, we returned over $5.9 billion to our shareholders through a combination of both dividends, and share repurchases.

Dave Denton: Thanks, Joe, and good morning, everyone. Before reviewing the underlying operating performance of the business, I'd like to take a moment to discuss the previously announced restructuring of our Canadian operations and the associated fourth quarter financial impacts. During the quarter, we completed 28 store closures, with the remaining six planned closures completed earlier this month. Additionally, we completed the inventory rationalization activities in our remaining Canadian locations in support of our banner simplification strategies. As a result of the Canadian restructuring activities and the final closure of our remaining business in Mexico, we incurred pre-tax operating costs and charges of $185 million in the fourth quarter. I'll now turn to review of our operating performance, beginning with our strong capital allocation program. In fiscal 2019, we returned over $5.9 billion to our shareholders through a combination of both dividends, and share repurchases.

The previously announced restructuring of our Canadian operations and the associated fourth quarter financial impacts.

During the quarter, we completed 28 store closures with the remaining six planned closures completed earlier this month.

Additionally, we completed the inventory rationalization activities in our remaining Canadian locations in support of our banner simplification strategies.

As a result of the Canadian restructuring activities and the final closure of our remaining business in Mexico, we incurred pre tax operating cost in charges of $185 million in the fourth quarter.

I'll now turn to review of our operating performance beginning with our strong capital allocation program.

In fiscal 2019, we returned over $5.9 billion to our shareholders through a combination of both dividends and share repurchases.

In the fourth quarter alone, we paid $423 million in dividends and our dividend payout ratio currently stands at 36% over the trailing four quarters.

Dave Denton: In the fourth quarter alone, we paid $423 million in dividends, and our dividend payout ratio currently stands at 36% over the trailing four quarters. We also repurchased approximately 5.7 million shares for $670 million through the open market, which brings us to nearly $4.3 billion in share repurchases for the year. We have approximately $9.7 billion remaining on our share repurchase authorization. Importantly, we continue to invest in our core business, with capital expenditures of approximately $557 million in the fourth quarter and almost $1.5 billion for the full year. In 2019, we generated over $2.8 billion in free cash flow. Now, turning to the income statement, in Q4, we generated GAAP-diluted earnings per share of $0.66. Now, my comments from this point forward will include certain non-GAAP comparisons where applicable.

In the fourth quarter alone, we paid $423 million in dividends, and our dividend payout ratio currently stands at 36% over the trailing four quarters. We also repurchased approximately 5.7 million shares for $670 million through the open market, which brings us to nearly $4.3 billion in share repurchases for the year. We have approximately $9.7 billion remaining on our share repurchase authorization. Importantly, we continue to invest in our core business, with capital expenditures of approximately $557 million in the fourth quarter and almost $1.5 billion for the full year. In 2019, we generated over $2.8 billion in free cash flow. Now, turning to the income statement, in Q4, we generated GAAP-diluted earnings per share of $0.66. Now, my comments from this point forward will include certain non-GAAP comparisons where applicable.

We also repurchased approximately 5.7 million shares for $670 million through the open market, which brings us to nearly $4.3 billion in share repurchases for the year.

We have approximately $9.7 billion remaining on our share repurchase authorization.

And importantly, we continue to invest in our core business with capital expenditures of approximately $557 million in the fourth quarter and almost 1.5 billion for the full year.

In 2019, we generated over $2.8 billion and free cash flow.

Now turning to the income statement in Q4, we generated GAAP diluted earnings per share of 66 cents.

Now my comments from this point forward will include certain non-GAAP comparisons where applicable in Q4, we delivered adjusted diluted earnings per share of 94 cents, an increase of 17.5% compared to adjusted diluted earnings per share of last year.

Dave Denton: In Q4, we delivered adjusted diluted earnings per share of $0.94, an increase of 17.5% compared to adjusted diluted earnings per share of last year. The strong performance exceeded expectations due in large part to improving gross margin trends and solid expense management. Sales for the fourth quarter increased 2.4% on a GAAP basis to over $16 billion. Consolidated comp sales were 2.5%, driven by an average ticket increase of 3%, partially offset by a transaction decrease of 0.5%. The decline in comp transactions was isolated to smaller ticket purchases as warmer weather exerted pressure on small ticket seasonal items such as ice melt and pellet fuel. The comparison to our accelerated holiday clearance activity in the prior year also pressured transactions. When normalizing for these items, comp transactions were flat for the fourth quarter. US comp sales growth was 2.6% for Q4.

In Q4, we delivered adjusted diluted earnings per share of $0.94, an increase of 17.5% compared to adjusted diluted earnings per share of last year. The strong performance exceeded expectations due in large part to improving gross margin trends and solid expense management. Sales for the fourth quarter increased 2.4% on a GAAP basis to over $16 billion. Consolidated comp sales were 2.5%, driven by an average ticket increase of 3%, partially offset by a transaction decrease of 0.5%. The decline in comp transactions was isolated to smaller ticket purchases as warmer weather exerted pressure on small ticket seasonal items such as ice melt and pellet fuel. The comparison to our accelerated holiday clearance activity in the prior year also pressured transactions. When normalizing for these items, comp transactions were flat for the fourth quarter. US comp sales growth was 2.6% for Q4.

This strong performance exceeded expectations due in large part to improving gross margin trends and solid expense management.

Sales for the fourth quarter increased 2.4% on a GAAP basis to over $16 billion.

Consolidated comp sales were 2.5% driven by an average ticket increase of 3%, partially offset by a transaction decrease a 0.5%.

The decline in comp transactions was isolated to smaller ticket purchases as warmer weather exerted pressure on small ticket seasonal items, such as I smell and pellet fuel.

The comparison to our accelerated holiday clearance activity in the prior year also pressured transactions.

When normalizing for these items comp transactions were flat for the fourth quarter us comp sales growth was 2.6% for Q4 during the quarter. The net effect of cycling previous Hurricanes was a drag of approximately 80 basis points on comp sales while weather in the quarter provided a modest 20 basis points.

Dave Denton: During the quarter, the net effect of cycling previous hurricanes was a drag of approximately 80 basis points on comp sales, while weather in the quarter provided a modest 20 basis points of benefit. We saw less impact from commodity deflation this quarter, with a negative impact of approximately 15 basis points on comp sales. Adjusted gross margin for the fourth quarter was 31.9% of sales, an increase of 40 basis points from Q4 of last year. We are very pleased with the compounding benefits from the actions we've taken to improve our gross margin performance, including the implementation of a more dynamic and strategic pricing program, a pivot to more strategic and targeted promotions, greater vendor partnership for key promotional activities, and continued aggressive product cost management. This quarter, we experienced approximately 55 basis points of total rate improvement, offset by 15 basis points of pressure from product mix.

During the quarter, the net effect of cycling previous hurricanes was a drag of approximately 80 basis points on comp sales, while weather in the quarter provided a modest 20 basis points of benefit. We saw less impact from commodity deflation this quarter, with a negative impact of approximately 15 basis points on comp sales. Adjusted gross margin for the fourth quarter was 31.9% of sales, an increase of 40 basis points from Q4 of last year. We are very pleased with the compounding benefits from the actions we've taken to improve our gross margin performance, including the implementation of a more dynamic and strategic pricing program, a pivot to more strategic and targeted promotions, greater vendor partnership for key promotional activities, and continued aggressive product cost management. This quarter, we experienced approximately 55 basis points of total rate improvement, offset by 15 basis points of pressure from product mix.

Benefit.

We saw less impact from commodity deflation this quarter with a negative impact of approximately 15 basis points on comp sales.

Adjusted gross margin for the fourth quarter was 31.9% of sales an increase of 40 basis points from Q4 of last year.

We're very pleased with the compounding benefits from the actions we've taken to improve our gross margin performance.

Including the implementation of a more dynamic and strategic pricing program.

A pivot to more strategic and targeted promotions.

Greater vendor partnerships for key promotional activities and continued aggressive product cost management.

This quarter, we experienced approximately 55 basis points of total rate improvement.

Offset by 15 basis points, a pressure from product mix.

Our rate improvement was driven by actions to improve gross margin, which drove approximately 105 basis points, a benefit which was partially offset by 25 basis points, a pressure from supply chain cost and 25 basis points of pressure from inventory shrink.

Dave Denton: Our rate improvement was driven by actions to improve gross margin, which drove approximately 105 basis points of benefit, which was partially offset by 25 basis points of pressure from supply chain costs and 25 basis points of pressure from inventory shrink. Adjusted SG&A for Q4 was 22.7% of sales, which levered 27 basis points, driven primarily by payroll leverage, which was partially offset by strategic investments in the business. Adjusted operating income increased 70 basis points to 7.2% of sales. The adjusted effective tax rate was 24.7% compared to 24.3% last year. At $13.2 billion, inventory increased $618 million, or 4.9% versus the fourth quarter of LY, but decreased more than $1.8 billion versus Q1. The year-over-year increase was driven by strategic investments in the first half of the year to drive sales, such as Craftsman resets, increased presentation minimums, and investments in job lot quantities for the Pro.

Our rate improvement was driven by actions to improve gross margin, which drove approximately 105 basis points of benefit, which was partially offset by 25 basis points of pressure from supply chain costs and 25 basis points of pressure from inventory shrink. Adjusted SG&A for Q4 was 22.7% of sales, which levered 27 basis points, driven primarily by payroll leverage, which was partially offset by strategic investments in the business. Adjusted operating income increased 70 basis points to 7.2% of sales. The adjusted effective tax rate was 24.7% compared to 24.3% last year. At $13.2 billion, inventory increased $618 million, or 4.9% versus the fourth quarter of LY, but decreased more than $1.8 billion versus Q1. The year-over-year increase was driven by strategic investments in the first half of the year to drive sales, such as Craftsman resets, increased presentation minimums, and investments in job lot quantities for the Pro.

Adjusted SGN, a for Q4 was 22.7% of sales, which Levered 27 basis points, driven primarily by payroll leverage which was partially offset by strategic investments in the business.

Adjusted operating income increased 70 basis points to 7.2% of sales the adjusted effective tax rate was 24.7% compared to 24.3% last year.

At $13.2 billion inventory increased $618 million or 4.9% versus the fourth quarter of ally.

But decreased more than $1.8 billion versus Q1.

Year over year increase was driven by strategic investments in the first half the year to drive sales such as Craftsman resets increased presentation minimums and investments in job lot quantities for the pro.

And the second half the year, we invested in inventory to support in earlier spring load in for the southern markets and capture early seasonal demand for 2020.

Dave Denton: In the second half of the year, we invested in inventory to support an earlier spring load-in for the southern markets and capture early seasonal demand for 2020. Looking ahead, I'd like to discuss our 2020 guidance and our business outlook. I'm providing the outlook today on an adjusted basis versus 2019. We expect that we will incur minor pre-tax operating costs and charges related to our Canadian restructuring into 2020. These charges are excluded from our adjusted 2020 business outlook. We expect that a constructive macroeconomic environment in the US will continue to support our healthy growth in 2020. A strong consumer, low interest rates, a healthy housing sector, and aging housing stock provide support for continued growth in home improvement spending. Turning to our financial guidance in 2020, we expect to drive strong sales through our brick-and-mortar locations.

In the second half of the year, we invested in inventory to support an earlier spring load-in for the southern markets and capture early seasonal demand for 2020. Looking ahead, I'd like to discuss our 2020 guidance and our business outlook. I'm providing the outlook today on an adjusted basis versus 2019. We expect that we will incur minor pre-tax operating costs and charges related to our Canadian restructuring into 2020. These charges are excluded from our adjusted 2020 business outlook. We expect that a constructive macroeconomic environment in the US will continue to support our healthy growth in 2020. A strong consumer, low interest rates, a healthy housing sector, and aging housing stock provide support for continued growth in home improvement spending. Turning to our financial guidance in 2020, we expect to drive strong sales through our brick-and-mortar locations.

Looking ahead to light to discuss our 2020 guidance and our business outlook.

On providing the outlook today on an adjusted basis versus 2019.

We expect that we will incur minor pre tax operating cost and charges related to our Canadian restructuring into 2020. These charges are excluded from our adjusted 2020 business outlook.

Expect that a constructive macroeconomic environment in the US we'll continue to support our healthy growth in 2020.

A strong consumer low interest rates, a healthy housing sector and aging housing stock provide support for continued growth in home improvement spending.

Turning to our financial guidance in 2020, we expect to drive strong sales through our brick and mortar locations.

As we complete the foundational work to improve our ecommerce platform. We're planning for lows dotcom sales to steadily improve in the second half of the year, reaching high single digit growth, which will provide modest contribution to sales growth.

Dave Denton: As we complete the foundational work to improve our e-commerce platform, we are planning for Lowe's.com sales to steadily improve in the second half of the year, reaching high single-digit growth, which will provide modest contribution to sales growth. For 2020, we expect a total sales increase of approximately 2.5% to 3%, driven by a comp sales increase of 3% to 3.5%. When considering the cadence of the year, we expect comp sales for the first half of the year to be slightly lower than the second half, based on the anticipated timing of benefits from our strategic initiatives. Consolidated adjusted operating income is expected to increase approximately 8% to 12% in 2020 versus LY, with adjusted operating margins increasing approximately 50 to 70 basis points.

As we complete the foundational work to improve our e-commerce platform, we are planning for Lowe's.com sales to steadily improve in the second half of the year, reaching high single-digit growth, which will provide modest contribution to sales growth. For 2020, we expect a total sales increase of approximately 2.5% to 3%, driven by a comp sales increase of 3% to 3.5%. When considering the cadence of the year, we expect comp sales for the first half of the year to be slightly lower than the second half, based on the anticipated timing of benefits from our strategic initiatives. Consolidated adjusted operating income is expected to increase approximately 8% to 12% in 2020 versus LY, with adjusted operating margins increasing approximately 50 to 70 basis points.

For 2020, we expect a total sales increase of approximately 2.5% to 3%.

I've been by a comp sales increase of 3% to 3.5%.

When considering the cadence for the year week, we expect comp sales for the first half the year to be slightly lower than the second half based on the anticipated timing benefits from our strategic initiatives.

Consolidated adjusted operating income is expected to increase approximately 8% to 12% in 2020 versus ly.

With adjusted operating margins, increasing approximately 50 to 70 basis points.

For the year adjusted depreciation and amortization is expected to de leverage approximately 10 basis points, driven primarily by increased investments in our store facilities and technology.

Dave Denton: For the year, adjusted depreciation and amortization is expected to deleverage approximately 10 basis points, driven primarily by increased investments in our store facilities and technology. We expect that gross margin and SG&A will provide equal contributions to adjusted operating margin expansion for the year. However, in Q1, we expect gross margin improvement versus the prior year to be elevated as we cycle the first cost pressure we experienced in Q1 of 2019. We also expect that adjusted SG&A margin will be essentially flat in Q1 as we cycle over benefits from lease assignments and terminations in the prior year. We anticipate similar levels of adjusted operating margin expansion for the first and second halves of the year. Furthermore, we expect that the Lowe's US operations will drive solid operating income performance, while the Canadian business will continue to mute overall operating profit performance throughout 2020.

For the year, adjusted depreciation and amortization is expected to deleverage approximately 10 basis points, driven primarily by increased investments in our store facilities and technology. We expect that gross margin and SG&A will provide equal contributions to adjusted operating margin expansion for the year. However, in Q1, we expect gross margin improvement versus the prior year to be elevated as we cycle the first cost pressure we experienced in Q1 of 2019. We also expect that adjusted SG&A margin will be essentially flat in Q1 as we cycle over benefits from lease assignments and terminations in the prior year. We anticipate similar levels of adjusted operating margin expansion for the first and second halves of the year. Furthermore, we expect that the Lowe's US operations will drive solid operating income performance, while the Canadian business will continue to mute overall operating profit performance throughout 2020.

We expect that gross margin in the SDMA will provide equal contributions to adjusted operating margin expansion for the year.

However in Q1, we expect gross margin improvement versus the prior year to be elevated as we cycle. The first cost pressure, we experienced in Q1 of 19.

We also expect that adjusted SGN, a margin will be essentially flat in Q1, as we cycle over benefits from lease assignments and terminations in the prior year, we anticipate similar levels of adjusted operating margin expansion for the first and second half of the year.

Furthermore, we expect that allows us operations will drive solid operating income performance, while the Canadian business will continue to mute overall operating profit performance throughout 2020.

The effective tax rate and adjusted effective tax rate are expected to be approximately 24.5%.

Dave Denton: The effective tax rate and adjusted effective tax rate are expected to be approximately 24.5%. Additionally, our guidance assumes approximately $5 billion in share repurchases throughout 2020 and a targeted leverage ratio of 2.75x. Now, with solid growth of approximately 8% to 12% in adjusted operating income, coupled with our $5 billion share repurchase program, we expect adjusted diluted earnings per share will grow approximately 12% to 16% to $6.45 to $6.65 per share. Strong sales and expanding margins are expected to generate $6.5 billion of cash flow from operations. We expect modest working capital benefits of approximately $300 million. Our plan in 2020 assumes our inventory level will remain elevated as we implement enhanced tools to drive long-term inventory productivity. In the short term, we are focused on ensuring we have appropriate in-stock levels to support our Pro and DIY customers.

The effective tax rate and adjusted effective tax rate are expected to be approximately 24.5%. Additionally, our guidance assumes approximately $5 billion in share repurchases throughout 2020 and a targeted leverage ratio of 2.75x. Now, with solid growth of approximately 8% to 12% in adjusted operating income, coupled with our $5 billion share repurchase program, we expect adjusted diluted earnings per share will grow approximately 12% to 16% to $6.45 to $6.65 per share. Strong sales and expanding margins are expected to generate $6.5 billion of cash flow from operations. We expect modest working capital benefits of approximately $300 million. Our plan in 2020 assumes our inventory level will remain elevated as we implement enhanced tools to drive long-term inventory productivity. In the short term, we are focused on ensuring we have appropriate in-stock levels to support our Pro and DIY customers.

Additionally, our guidance assumes approximately $5 billion in share repurchases throughout 2020, and a targeted leverage ratio of 2.75 times.

Now with solid growth of approximately 8% to 12% in adjusted operating income coupled with our $5 billion share repurchase program. We expect adjusted diluted earnings per share will grow approximately 12% to 16% to $6.45 to $6.65.

For share.

Strong sales and expanding margins are expected to generate six and a half billion dollars a cash flow from operations.

We expect modest working capital benefits of approximately $300 million.

Our plan in 2020 assumes our inventory level remain elevated as we implemented enhance tools to drive long term inventory productivity.

And the short term we are focused on ensuring we have appropriate in stock levels to support our pro and DIY customers.

We are planning for capital expenditures of approximately $1.6 billion in 2020, and we will continue to look for investment areas to enhance the business over the long term.

Dave Denton: We are planning for capital expenditures of approximately $1.6 billion in 2020, and we will continue to look for investment areas to enhance the business over the long term. We estimate that free cash flow will be approximately $4.9 billion. In closing, we remain excited about the future of our business and its ability to deliver significant shareholder value over the long term. With that, we're now ready for questions.

We are planning for capital expenditures of approximately $1.6 billion in 2020, and we will continue to look for investment areas to enhance the business over the long term. We estimate that free cash flow will be approximately $4.9 billion. In closing, we remain excited about the future of our business and its ability to deliver significant shareholder value over the long term. With that, we're now ready for questions.

We estimate that free cash flow will be approximately $4.9 billion.

In closing I remain excited about the future of our business and its ability to deliver significant shareholder value over the long term with that we're now ready for questions.

Thank you we are now ready to take your questions. If he would like to ask a question. Please press star one on your telephone keypad to withdraw your question. Please press Star then to in order to allow questions from as many individuals as possible. Please limit yourself to one question and one follow up our first question comes from the line of Greg.

Operator: Thank you. We are now ready to take your questions. If you would like to ask a question, please press Star 1 on your telephone keypad. To withdraw your question, please press Star, then 2. In order to allow questions from as many individuals as possible, please limit yourself to one question and one follow-up. Our first question comes from the line of Greg Melich with Evercore ISI. Please proceed with your question.

Operator: Thank you. We are now ready to take your questions. If you would like to ask a question, please press Star 1 on your telephone keypad. To withdraw your question, please press Star, then 2. In order to allow questions from as many individuals as possible, please limit yourself to one question and one follow-up. Our first question comes from the line of Greg Melich with Evercore ISI. Please proceed with your question.

With Evercore ISI. Please proceed with your question.

Great. Thanks, a lot.

Joseph McFarland: Great. Thanks a lot. I guess two areas I'd love to learn some more about. One, Dave, if you think about the margin outlook for this year, I want to make sure I got that right. Canada will continue to hurt OI all through 2020. Is that on a year-over-year basis, or is that on an absolute dollar basis that it's still pressuring profitability?

Greg Melich: Great. Thanks a lot. I guess two areas I'd love to learn some more about. One, Dave, if you think about the margin outlook for this year, I want to make sure I got that right. Canada will continue to hurt OI all through 2020. Is that on a year-over-year basis, or is that on an absolute dollar basis that it's still pressuring profitability?

I guess two areas that I'd love to learn some more about one Dave if you think about the margin outlook for this year.

I want to make sure I got that right, Canada will continue to mute ally all through 2020 is that on a year over year basis or is that on an absolute dollar basis that it's still a pressuring.

Profitability.

On an absolute basis.

Dave Denton: On an absolute basis.

Dave Denton: On an absolute basis.

On absolute basis, so year over year, though could still help the restructuring actions could could make it better than last year. Yes. It is our expectation that Canada will get a little better next year in 2020 for the whole company got it and then maybe a little bit more on on the dot com rollout and sort of the timing and the expected lift from that.

Joseph McFarland: On an absolute basis. So year-over-year, though, it could still help. The restructuring actions could make it better than last year?

Greg Melich: On an absolute basis. So year-over-year, though, it could still help. The restructuring actions could make it better than last year?

Dave Denton: Yes. It is our expectation that Canada will get a little better next year in 2020.

Dave Denton: Yes. It is our expectation that Canada will get a little better next year in 2020.

Joseph McFarland: For the whole company. Got it. And then maybe a little bit more on the dot-com rollout and sort of the timing and the expected lift from that. Could you give us a little more detail on what you really expect to get from a customer standpoint once we're up to Google Cloud in terms of the number of SKUs it'll be on offer or how it'll help you run the integrated business with BOPUS? Just a little bit more about what'll change once it's up and running in the second quarter to help us understand that acceleration you expect.

Greg Melich: For the whole company. Got it. And then maybe a little bit more on the dot-com rollout and sort of the timing and the expected lift from that. Could you give us a little more detail on what you really expect to get from a customer standpoint once we're up to Google Cloud in terms of the number of SKUs it'll be on offer or how it'll help you run the integrated business with BOPUS? Just a little bit more about what'll change once it's up and running in the second quarter to help us understand that acceleration you expect.

Could you give us a little more detail on what you really expect to get from a customer.

Standpoint, once we're up to Google cloud in terms of the number skews it will be on offer or how it will help you run it and the integrated business. So BOPUS just a little bit more about what will change once it's up and running in the second quarter to help us understand that acceleration you expect.

As Marvin.

Marvin Ellison: Hey, Greg. This is Marvin. So we're excited about the work on Lowe's.com, but as we noted in the prepared comments, a 3% growth underperforms any large brick-and-mortar retailer trying to create an omnichannel environment. So as we replatform the entire site to Google Cloud, that will happen in the Q2 time period. We'll have additional phases and additional initiatives being added throughout the year. So there's no one big grand unveil. There will be phases of improvements throughout the year, but we're estimating in Q3 we'll start to see benefits, and the customers will begin to become aware of the improved functionality. But let me give you a perspective of what we're doing over the course of this time frame. We're going to decouple freight from product costs. Today, we still have a competitive disadvantage that our retails look artificially inflated because many of them have freight included.

Marvin Ellison: Hey, Greg. This is Marvin. So we're excited about the work on Lowe's.com, but as we noted in the prepared comments, a 3% growth underperforms any large brick-and-mortar retailer trying to create an omnichannel environment. So as we replatform the entire site to Google Cloud, that will happen in the Q2 time period. We'll have additional phases and additional initiatives being added throughout the year. So there's no one big grand unveil. There will be phases of improvements throughout the year, but we're estimating in Q3 we'll start to see benefits, and the customers will begin to become aware of the improved functionality. But let me give you a perspective of what we're doing over the course of this time frame. We're going to decouple freight from product costs. Today, we still have a competitive disadvantage that our retails look artificially inflated because many of them have freight included.

So we are excited about that were on load I comment as we noted in the prepared comments, 3% growth underperformed in the large brick and mortar retailer trying to create an omni channel environment. So as we re platform the entire fight to Google cloud that will happen and Nick.

Due to time period, we'll have additional phases in additional initiatives being added throughout the year. So there's no one big brand unveil therapy phases of improvement throughout the year, but we're estimating in Q3 will start to see benefit.

And the customers will begin become aware of the improved March now let me give your perspective.

What were doing over the course this timeframe, we're going to decouple freight and product calls today, we still have competitive disadvantage that are retails live artificially inflated because many of them have freight included.

Changing that.

Marvin Ellison: We're changing that. We're going to be able to expand our online assortment. Today, it takes, in some cases, weeks and months to add dropship SKUs on our site because it's very manual. And so we're creating a more digital process to do that. We'll have that ready in the second half of the year. Today, we don't have the ability to shop by collection. As an example, if you're purchasing patio furniture, it's a very cumbersome process where a customer will have to shop on one screen for their table. They have to toggle to another screen for their umbrella, another screen for their chair. It is not very customer-friendly. We'll be able to get that done in this first part of the second half of the year.

We're changing that. We're going to be able to expand our online assortment. Today, it takes, in some cases, weeks and months to add dropship SKUs on our site because it's very manual. And so we're creating a more digital process to do that. We'll have that ready in the second half of the year. Today, we don't have the ability to shop by collection. As an example, if you're purchasing patio furniture, it's a very cumbersome process where a customer will have to shop on one screen for their table. They have to toggle to another screen for their umbrella, another screen for their chair. It is not very customer-friendly. We'll be able to get that done in this first part of the second half of the year.

We're going to be able to expand our online assortment today intake in some cases weeks and months.

Drop ship skewed on our site because it's very manageable. So we're creating a more digital process do that we'll have that ready in the second half of the year.

Today, we don't have the ability to shop by collection as an example, if you purchasing patio furniture, it's a very cumbersome process or customer will have to shop on watch great quarter table at the time with another screen for umbrella. Another scream literature. It is not very customer friendly relating to get that the on industry.

First part of the second half of the year and believe the not what our market leading position in appliances is still difficult to schedule a delivery date with a precision because these are accustomed to and so we'll have that up and going by the second half. So those are just fundamental thing in addition to.

Marvin Ellison: Believe it or not, with our market-leading position in appliances, it's still difficult to schedule a delivery date with the precision that most customers are accustomed to. We'll have that up and going by the second half. Those are just fundamental things in addition to one-click checkout, in addition to dynamic homepage, in addition to navigation and search functionality that's more modernized. The reason why we're optimistic that this platform is going to be accretive starting in the second half is because we can look at the project timeline and see all these things coming online over the course of the year.

Believe it or not, with our market-leading position in appliances, it's still difficult to schedule a delivery date with the precision that most customers are accustomed to. We'll have that up and going by the second half. Those are just fundamental things in addition to one-click checkout, in addition to dynamic homepage, in addition to navigation and search functionality that's more modernized. The reason why we're optimistic that this platform is going to be accretive starting in the second half is because we can look at the project timeline and see all these things coming online over the course of the year.

One click checkout. In addition to dynamic home page. In addition in addition to navigation in search functionality as well not in and so the reason why we're optimistic that this platform is going to be accretive starting in the second that is because we can look at the project timeline.

To see all these things coming online over the course of the year.

Got it that's super helpful. Thanks, and good luck.

Joseph McFarland: Got it. That's super helpful. Thanks and good luck.

Greg Melich: Got it. That's super helpful. Thanks and good luck.

Thank you.

Marvin Ellison: Thank you.

Marvin Ellison: Thank you.

Thank you. Our next question comes from the line of Seth Sigman with Credit Suisse. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Seth Sigman with Credit Suisse. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Seth Sigman with Credit Suisse. Please proceed with your question.

Guys. Good morning, Thanks for taking the question I guess, just given the most difficult comparison of the year coming up here in the first quarter. How are you thinking about Q1 in the context of that three 3.5% full year guidance and if you could just help us with some of the drivers that you think will help navigate these difficult compares here in the spring, obviously lapping a lot of inventory growth.

Joseph McFarland: Hey, guys. Good morning. Thanks for taking the question. I guess just given the most difficult comparison of the year coming up here in the first quarter, how are you thinking about Q1 in the context of that 3% to 3.5% full-year guidance? And if you could just help us with some of the drivers that you think will help navigate these difficult comparison here in the spring, obviously lapping a lot of inventory growth, much better in-stock last year versus the prior year, just help us think about first quarter. Thanks.

Seth Sigman: Hey, guys. Good morning. Thanks for taking the question. I guess just given the most difficult comparison of the year coming up here in the first quarter, how are you thinking about Q1 in the context of that 3% to 3.5% full-year guidance? And if you could just help us with some of the drivers that you think will help navigate these difficult comparison here in the spring, obviously lapping a lot of inventory growth, much better in-stock last year versus the prior year, just help us think about first quarter. Thanks.

Much better in stock last year versus the prior year, just help us think about a first quarter. Thanks.

Yes. This is Dave so maybe I'll kick it off net borrowing will pick up here just as you know we don't really guide specifically to the quarter, just particularly the first half the year given that when the weather breaks from spring perspective, I will say if you look at first half versus second half I Wouldnt expect at the first half from a cost perspective to be slightly.

Dave Denton: Yeah. So this is Dave. So maybe I'll kick it off, and then Marvin will pick up here. Just as you know, we don't really guide specifically to the quarter, just particularly in the first half of the year given when the weather breaks from a spring perspective. I will say if you look at first half versus second half, I would expect that the first half from a cost perspective to be slightly lower than the second half of the year as our strategic initiatives begin to take hold through the balance of the year and really start to pay off in the second half of 2020.

Dave Denton: Yeah. So this is Dave. So maybe I'll kick it off, and then Marvin will pick up here. Just as you know, we don't really guide specifically to the quarter, just particularly in the first half of the year given when the weather breaks from a spring perspective. I will say if you look at first half versus second half, I would expect that the first half from a cost perspective to be slightly lower than the second half of the year as our strategic initiatives begin to take hold through the balance of the year and really start to pay off in the second half of 2020.

Lower than the second half of the year as our strategic initiatives begin to take hold through the balance of the year and really start to pay off in the second half of 2020.

Seth.

Marvin Ellison: So, Seth, relative to what will be our sales drivers, we have a very robust list of merchandising and pro initiatives that will be incremental. We have initiatives that we will get full-year benefit for things like the merchandise service teams and field merchants. So I'm going to hand it over to Bill to highlight some of the key merchandising initiatives that we believe will drive incremental sales in Q1. I'll let Joe touch on some of the additional initiatives in pro. So Bill.

Marvin Ellison: So, Seth, relative to what will be our sales drivers, we have a very robust list of merchandising and pro initiatives that will be incremental. We have initiatives that we will get full-year benefit for things like the merchandise service teams and field merchants. So I'm going to hand it over to Bill to highlight some of the key merchandising initiatives that we believe will drive incremental sales in Q1. I'll let Joe touch on some of the additional initiatives in pro. So Bill.

Relative to what will be our sales drivers.

We have a very robust lists of merchandising and pro initiative.

We'll be incremental and we have initiatives that we will get full year benefit for things like the merchandise service teams in field margins I'm going ahead over the bill how like someone to achieve merchandising initiatives that we believe will drive incremental sales in Q1 and I'll, let Joe touch on some of the additional initiatives.

So bill yes.

William Boltz: Yeah. I think in addition to the MST team and the field merchant team, we also have the first full year of our merchants being in seat, which is a big deal for us. And then, as I said in my prepared remarks, we're very excited about introducing Honda Outdoor Power, bringing in the Ariens line of Zero Turn. We've got the first full year of Craftsman. If you think about that, we didn't finish the Craftsman rollout till mid-year of 2019. We've got a bunch of new products that we're introducing in our private brands, Kobalt and Allen + Roth. I touched on the new pro stuff coming out of DEWALT, the new products from Weber, Yeti. We've got new fastener brands with FastenMaster and GRK. We've got Miracle-Gro live goods product that we're introducing in our live goods program.

Bill Boltz: Yeah. I think in addition to the MST team and the field merchant team, we also have the first full year of our merchants being in seat, which is a big deal for us. And then, as I said in my prepared remarks, we're very excited about introducing Honda Outdoor Power, bringing in the Ariens line of Zero Turn. We've got the first full year of Craftsman. If you think about that, we didn't finish the Craftsman rollout till mid-year of 2019. We've got a bunch of new products that we're introducing in our private brands, Kobalt and Allen + Roth. I touched on the new pro stuff coming out of DEWALT, the new products from Weber, Yeti. We've got new fastener brands with FastenMaster and GRK. We've got Miracle-Gro live goods product that we're introducing in our live goods program.

Amis team in the field merchant team. We also have the first full year of our merchant speed in seat, which is a big deals for us.

Then as I said in my prepared remarks, we're very excited about introducing Honda outdoor power, bringing indeed aarons line of zero turn we've got first full year of Craftsman.

How about that we didn't finish to crash and roll out until mid year 2019, we've got a bunch of new products that we're introducing in our private brands and cobalt and Alan and Ron.

Touched on the new pro stuff coming out into Walt.

Products from wherever Yeti, we've got new fastener brands with fashion Master in G.R.K., We've got Miracle Gro.

Live goods product that we're introducing and our language program and then you'd think about all the changes that we've made in store in 2019 that leads you to have in place for full year on our end cap strategy completely changing 29 gain as did our off shelf strategy implemented a cross merchandising program that rolled out in the fourth.

William Boltz: Then you think about all the changes that we've made in store in 2019 that we get to have in place for a full year. Our end cap strategy completely changed in 2019, as did our off-shelf strategy. We implemented a cross-merchandising program that rolled out in the fourth quarter of last year. We finished phase one of our refresh work, and we've just tackled some really valuable retail space up in the front of the store that we'll be able to execute and use for the spring season. As Marvin touched on with Lowe's.com, albeit early and a lot of things going on, we now have the ability to ship battery-powered products. We have the ability to ship oversized products. We have easier checkout and navigation experience. We've got a more enhanced homepage.

Then you think about all the changes that we've made in store in 2019 that we get to have in place for a full year. Our end cap strategy completely changed in 2019, as did our off-shelf strategy. We implemented a cross-merchandising program that rolled out in the fourth quarter of last year. We finished phase one of our refresh work, and we've just tackled some really valuable retail space up in the front of the store that we'll be able to execute and use for the spring season. As Marvin touched on with Lowe's.com, albeit early and a lot of things going on, we now have the ability to ship battery-powered products. We have the ability to ship oversized products. We have easier checkout and navigation experience. We've got a more enhanced homepage.

Quarter of last year, we finished phase one of our refreshed work and we've just tackled some really.

Valuable real retail space up in front of the store that we'll be able to executing use for the spring season, and as Marvin touched on but lowest dot com, albeit early in a lot of things going on we now have built the ability to ship battery powered products, we have the ability to ship oversized products, we have easier checkout navigation experience, we got it.

More enhanced on age so there's a ton of things that are in front of us that we've got that lay out what's going to happen in 2020, Hey look we're also really excited about 2020 in our pro business. If you think about Martin mentioned in the prepared remarks as well as I did.

William Boltz: There's a ton of things that are in front of us that we've got that lay out what's going to happen in 2020.

There's a ton of things that are in front of us that we've got that lay out what's going to happen in 2020.

Marvin Ellison: Hey, look, we're also really excited about 2020 in our Pro business. If you think about what Marvin mentioned in the prepared remarks as well as I did, 2019 was all about fundamentals. It was on staffing. It was on services. We moved into 2020. We're now going to lap the investments that we made in 2019. As we made these investments, the Pro customers took them some time to start to catch on. And as we continue to see the Pro business get better and better, but that was all on fundamentals in '19. We've been testing our new Pro loyalty platform. The Pro customers' overwhelming excitement about the benefits they're going to have from there. As we think about personalized offers, we think about being able to track spending. As we think about business management tools for the Pro, none of that was ever available.

Hey, look, we're also really excited about 2020 in our Pro business. If you think about what Marvin mentioned in the prepared remarks as well as I did, 2019 was all about fundamentals. It was on staffing. It was on services. We moved into 2020. We're now going to lap the investments that we made in 2019. As we made these investments, the Pro customers took them some time to start to catch on. And as we continue to see the Pro business get better and better, but that was all on fundamentals in '19. We've been testing our new Pro loyalty platform. The Pro customers' overwhelming excitement about the benefits they're going to have from there. As we think about personalized offers, we think about being able to track spending. As we think about business management tools for the Pro, none of that was ever available.

2019 was all about fundamentals that there's on staffing is on service as we move into 2020, we're now going to lap the investments. We made in 2019 as we may these investments to pro customers ticked comes from time to start to catch on and as we continued should the pro business get better and better but that was on fundamentals.

In 19.

We've been testing, our new pro loyalty platform the pro customers overwhelming excitement about the benefits are going to have from there as we think about personalized offers and think about being able to track spending as a thing about business management tools for the pro none of that was ever that will the our quote.

Marvin Ellison: Our quote support program, exclusive for pros. So really excited about all the things we're rolling out from a pro standpoint in 2020, and we'll continue to capture market share and gain traction. So Seth, just in conclusion on Q1, we have a lot of confidence in the growth of the business based on the specific initiatives that we have in place and how we've built our business plans from the bottom up for really the first time based on the expectations of these initiatives. We just have to go out and execute, and that's the expectation going into 2020.

Our quote support program, exclusive for pros. So really excited about all the things we're rolling out from a pro standpoint in 2020, and we'll continue to capture market share and gain traction. So Seth, just in conclusion on Q1, we have a lot of confidence in the growth of the business based on the specific initiatives that we have in place and how we've built our business plans from the bottom up for really the first time based on the expectations of these initiatives. We just have to go out and execute, and that's the expectation going into 2020.

Port program exclusive for pros, so really excited about all the things we're rolling out from a pro standpoint in 2020 and will continue.

Captured market share and gain traction so thats just in conclusion on Q1, we have a lot of confidence and the growth of the business based on these specific initiatives and we have inflation, how we built our business plans from the bottom up following the first time.

Based on the expectations of these initiatives, we just have to go on to execute.

And thats the expectations going into 2020.

Okay. Thanks, I'll leave it there. Thanks appreciate it.

Joseph McFarland: Okay. Thanks. I'll leave it there. Thanks. Appreciate it.

Seth Sigman: Okay. Thanks. I'll leave it there. Thanks. Appreciate it.

Okay.

Marvin Ellison: Thank you.

Marvin Ellison: Thank you.

Thank you. Our next question comes from the line of Scot Ciccarelli with RBC capital markets. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Scott Ciccarelli with RBC Capital Markets. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Scot Ciccarelli with RBC Capital Markets. Please proceed with your question.

Good morning, guys Scot Ciccarelli.

Scott Ciccarelli: Good morning, guys. Scott Ciccarelli. So system upgrades always sound like a great idea and provide a lot more speed and flexibility. However, making the changes themselves are often cumbersome and filled with risks. So especially given, let's call it, some of the issues you guys faced in Q1 2019, how do you make sure you guys don't kind of stub your toe as you implement all these different system upgrades?

Scot Ciccarelli: Good morning, guys. Scott Ciccarelli. So system upgrades always sound like a great idea and provide a lot more speed and flexibility. However, making the changes themselves are often cumbersome and filled with risks. So especially given, let's call it, some of the issues you guys faced in Q1 2019, how do you make sure you guys don't kind of stub your toe as you implement all these different system upgrades?

So system upgrades only sound like a great idea and provide a lot more speed and flexibility however, making the changes in sales are often cumbersome and certainly the risk so, especially given let's call. It sounds like the issues you guys faced in the first quarter of 2019, how do you make sure you guys don't kind of step you tell as you implement all these different system upgrade.

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Okay. Thanks for question and the thing that you tried not to do is set aggressive financial target based on the implementation or delivery of a system and so if you take above the list of things that you just heard from Joe any deal on where we believe we're going to gain ourselves benefit.

Marvin Ellison: I think it's a fair question. The thing that we've tried not to do is set aggressive financial targets based on the implementation or delivery of a system. So if you think about the list of things that you just heard from Joe and Bill on where we believe we're going to gain our sales benefit in Q1 in the first half of the year, there was no system dependencies listed. We have some big system things coming, and I can give you a list of those. But other than what we're expecting from e-commerce, there's really no big dependency on systems. Look, this is a big business.

Marvin Ellison: I think it's a fair question. The thing that we've tried not to do is set aggressive financial targets based on the implementation or delivery of a system. So if you think about the list of things that you just heard from Joe and Bill on where we believe we're going to gain our sales benefit in Q1 in the first half of the year, there was no system dependencies listed. We have some big system things coming, and I can give you a list of those. But other than what we're expecting from e-commerce, there's really no big dependency on systems. Look, this is a big business.

In Q1 in the first for the year. There was no systemic dependencies listed we have some big system things coming and I can give you a list the doe, but other than what we're expecting from E. Commerce, There's really no big dependency on systems.

And look this is a big business, it's a complicated business.

Marvin Ellison: It's a complicated business, but we are just very pleased that we have a group of leaders that have been in their roles for a full calendar year to Bill's point, and that creates more continuity than we've had here in a while. Always a risk, but we think the risk is muted because we don't have high dependencies.

It's a complicated business, but we are just very pleased that we have a group of leaders that have been in their roles for a full calendar year to Bill's point, and that creates more continuity than we've had here in a while. Always a risk, but we think the risk is muted because we don't have high dependencies.

But we are just very pleased that we have a group of leaders that have been in their roles for a full calendar year to Bill's point and that creates more continuity then Dan we've had here in awhile. So always the risk, but we think the risk was muted because we don't have high dependencies and Scott. This is Dave I'll just add to it.

Dave Denton: And Scott, this is Dave. I'll just add a couple of things. One is we're rolling out these systems in waves. So we're putting them in not in a big bang, but over time, number one. And number two, we have a very robust piloting and testing program such that we're out in the field, either here in the corporate office or out in the stores, running them in a certain market or location to make sure that the functionality is adequate before we roll it out completely to the store environment.

Dave Denton: And Scott, this is Dave. I'll just add a couple of things. One is we're rolling out these systems in waves. So we're putting them in not in a big bang, but over time, number one. And number two, we have a very robust piloting and testing program such that we're out in the field, either here in the corporate office or out in the stores, running them in a certain market or location to make sure that the functionality is adequate before we roll it out completely to the store environment.

Couple of things one is we're rolling out these systems in waves. So we're putting them in not in a big Bang, but overt overtime number one and number two we have a very robust highlighting testing programs such that we're out in the field either here in the corporate office throughout the fourth wanting them in a certain market our location to make sure that.

Functionality is adequate equally roll it out completely to the store environment.

Thats really helpful. And then just just a quick hopefully a quick follow up there.

Scott Ciccarelli: That's really helpful. Just hopefully a quick follow-up here. Payables inventory has been down a little bit for the last couple of quarters here. Does that start to stabilize as we roll into 2020, Dave?

Scot Ciccarelli: That's really helpful. Just hopefully a quick follow-up here. Payables inventory has been down a little bit for the last couple of quarters here. Does that start to stabilize as we roll into 2020, Dave?

Payables inventories stand down.

On a little bit for the last couple of quarters here does that start to stabilize as we roll into 2020, Dave Yeah, I wish I would expect that our inventories are going to stabilize through 2020, we do take over time, we have the opportunity to reduce inventory in a in a major way. However, we're still building the systems and processes to be able to do that.

Dave Denton: Yeah. I would expect that our inventories are going to stabilize through 2020. We do think over time we have the opportunity to reduce inventories in a major way. However, we're still building the systems and processes to be able to do that in a very systemic fashion. So think about 2020 as a point in time where we will be stable, making sure that we have the right inventory in the stores to support job lot quantities for the pro and support our in-stock environment, but not a big year in which we'll yield performance from an inventory reduction perspective.

Dave Denton: Yeah. I would expect that our inventories are going to stabilize through 2020. We do think over time we have the opportunity to reduce inventories in a major way. However, we're still building the systems and processes to be able to do that in a very systemic fashion. So think about 2020 as a point in time where we will be stable, making sure that we have the right inventory in the stores to support job lot quantities for the pro and support our in-stock environment, but not a big year in which we'll yield performance from an inventory reduction perspective.

Very systemic fashion. So think about 2020 is as a point in time, where we will be stable, making sure that we have the right inventory in the stores to support the job lot quantities for the pro and support our in stock environment, but not to be yard, which will yield performance from the inventory reduction perspective.

Okay, great. Thanks, guys.

Scott Ciccarelli: Okay. Great. Thanks, guys.

Scot Ciccarelli: Okay. Great. Thanks, guys.

Thank you. Our next question comes from the line of Michael Lasser with <unk>. Please proceed with your question.

Dave Denton: Got it.

Dave Denton: Got it.

Operator: Thank you. Our next question comes from the line of Michael Lasser with UBS. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Michael Lasser with UBS. Please proceed with your question.

Good morning, Thanks, a lot for taking my question. So there was a good execution Miss Miss happened in the first quarter of last year, because execution Ms tap in the fourth quarter.

Michael Lasser: Good morning. Thanks a lot for taking my question. So there was an execution mishap in Q1 of last year. There was an execution mishap in Q4. Marvin, you've been involved in some very sizable retailers. Is Lowe's just more prone to these types of execution issues? And at what point in the transformation can we expect to see more consistent and sustainable execution? And then I have a follow-up. Thank you.

Michael Lasser: Good morning. Thanks a lot for taking my question. So there was an execution mishap in Q1 of last year. There was an execution mishap in Q4. Marvin, you've been involved in some very sizable retailers. Is Lowe's just more prone to these types of execution issues? And at what point in the transformation can we expect to see more consistent and sustainable execution? And then I have a follow-up. Thank you.

Revenue been involved in some very sizable retailers. It's low it's just more prone to these types of execution issues and at what point in the transformation can we expect to see more consistent and sustainable execution than to have follow up. Thank you Mark I think if I think it's a fair question.

Marvin Ellison: Mark, I think it's a fair question. Look, in any large business, you're going to have execution risk. But for us, coming out of Q4, it's really more about understanding the competitive marketplace and having the agility to react to it. And when you have limited system capabilities, it really creates agility limitations. And what I mean by that is when we came to the conclusion for marketing spend that we were not where we needed to be relative to the quarter, we just didn't have the sophistication or the agility to pivot as quickly as we needed to. That is more related to internal capabilities than execution issues. Look, and there are always going to be execution issues no matter how good you are as a business. What I can tell you is one year into this multi-year transformation, I feel great about this team.

Marvin Ellison: Mark, I think it's a fair question. Look, in any large business, you're going to have execution risk. But for us, coming out of Q4, it's really more about understanding the competitive marketplace and having the agility to react to it. And when you have limited system capabilities, it really creates agility limitations. And what I mean by that is when we came to the conclusion for marketing spend that we were not where we needed to be relative to the quarter, we just didn't have the sophistication or the agility to pivot as quickly as we needed to. That is more related to internal capabilities than execution issues. Look, and there are always going to be execution issues no matter how good you are as a business. What I can tell you is one year into this multi-year transformation, I feel great about this team.

And look at any large business, you're going to have execution risk, but for us coming out of Q4.

It's really more about understanding the competitive marketplace and have a the agility to react to it and when you have limited.

Mhm capabilities, it really create agility limitations and what I mean by that is when we came to the conclusion for marketing spend that we were not where we needed to be relative to the quarter. We just didnt have the sophistication already agility pivoted.

Quickly as we needed to.

That is more related to.

Internal capabilities, then execution issues.

No I was going to be execution issues no matter. How good you are as a business. When I can tell you is one year into this multiyear transformation I feel great about the stake I feel great about what we've accomplished I feel great about 2019.

Marvin Ellison: I feel great about what we've accomplished. I feel great about 2019, and we have a significant amount of confidence going into 2020. But yeah, there will always be execution risk. We'll always hold ourselves to a high standard. But I feel really good about how we executed throughout the quarter, even though it wasn't perfection.

I feel great about what we've accomplished. I feel great about 2019, and we have a significant amount of confidence going into 2020. But yeah, there will always be execution risk. We'll always hold ourselves to a high standard. But I feel really good about how we executed throughout the quarter, even though it wasn't perfection.

And we have a significant amount of confidence going into 2020, but yet it will always be execution risk will always hold ourselves to high standard, but I feel really good about how we executed throughout the quarter, even though it wasn't perfection.

That's very helpful and part of the.

Joseph McFarland: That's very helpful. Part of the question comes from the fact that you will be lapping some big inventory build-up in the first quarter, which could create some noise as you have to lap that. The view is that execution will improve. Is that fair?

Michael Lasser: That's very helpful. Part of the question comes from the fact that you will be lapping some big inventory build-up in the first quarter, which could create some noise as you have to lap that. The view is that execution will improve. Is that fair?

Question comes from the fact that you will be lapping some big inventory buildup in in the first quarter, which could create some noise as you have to lap that the view is that execution will will improve it is that fair.

It is absolutely fair and look I'll go back to a couple of comments that's already been stated first the value of having leaders in their positioning for you're saying every seasonal cycle is critically important and merchandising and strong operations in finance and in supply chain. So.

Marvin Ellison: No, it's absolutely fair. And look, I'll go back to a couple of comments that's already been stated. First, the value of having leaders in their position for a full year, seeing every seasonal cycle, is critically important in merchandising, in store operations, in finance, and in supply chain. And we have that. And clarity of what we're trying to get accomplished and having just better tools and resources available. So we feel really good about our execution. If you think about for a second, we're able to roll out an entirely new scheduling and labor management system. We're able to leverage expenses, improve service, improve our margin rate coming off of a tough Q1 throughout the year. So we think our execution really picked up significantly throughout the year, and we think we'll carry that momentum into 2020.

Marvin Ellison: No, it's absolutely fair. And look, I'll go back to a couple of comments that's already been stated. First, the value of having leaders in their position for a full year, seeing every seasonal cycle, is critically important in merchandising, in store operations, in finance, and in supply chain. And we have that. And clarity of what we're trying to get accomplished and having just better tools and resources available. So we feel really good about our execution. If you think about for a second, we're able to roll out an entirely new scheduling and labor management system. We're able to leverage expenses, improve service, improve our margin rate coming off of a tough Q1 throughout the year. So we think our execution really picked up significantly throughout the year, and we think we'll carry that momentum into 2020.

We have that and clarity of what we're trying to get accomplish and having just better tools and resources available. So.

We feel really good about our execution. If you take about four sector, we're able to roll out entirely new scheduling and labor management system, we're able to leverage expenses improved service improve our margin rate coming off a top Q1 throughout the year. So we think execution really picked up.

Significantly throughout the year, we think we're carrying that momentum into 2020.

In a quick follow for Dave It looks like your gross margin guidance for 2020 is pointing to a 32 spot 3% growth gross margin at the midpoint, which would suggest you will recoup everything that you lost in the first half of 2019 why wouldn't you get it all back particularly in light of.

Michael Lasser: A quick follow-up for Dave. It looks like your gross margin guidance for 2020 is pointing to a 32.3% gross margin at the midpoint, which would suggest you won't recoup everything that you lost in the first half of 2019. Why wouldn't you get it all back, particularly in light of what seems to be some steady gross margin progress in Q4?

Michael Lasser: A quick follow-up for Dave. It looks like your gross margin guidance for 2020 is pointing to a 32.3% gross margin at the midpoint, which would suggest you won't recoup everything that you lost in the first half of 2019. Why wouldn't you get it all back, particularly in light of what seems to be some steady gross margin progress in Q4?

It seems to be steady gross margin progress in the fourth quarter.

Yes, really excellent question as I said in my prepared remarks, we expect a 50 to 70 basis point expansion in alive in.

Dave Denton: Yeah. Really excellent question. As I said in my prepared remarks, we expect a 50 to 70 basis points expansion in OI in 2020 with an equal contribution both from gross margin, and SG&A leverage. If you look at that, we expect that during 2020, we will achieve rate neutrality versus our rebaseline level on our like-for-like product gross margin level. We will then incur some additional pressure from both supply chain and shrink. So that's what's kind of dragging us down a little bit as we cycle into 2020, and we're working to offset those longer term. But I feel really good about the progress we're making in 2020. We're getting back to that neutrality level. Now we're trying to cycle over those investment areas.

Joe McFarland: Yeah. Really excellent question. As I said in my prepared remarks, we expect a 50 to 70 basis points expansion in OI in 2020 with an equal contribution both from gross margin, and SG&A leverage. If you look at that, we expect that during 2020, we will achieve rate neutrality versus our rebaseline level on our like-for-like product gross margin level. We will then incur some additional pressure from both supply chain and shrink. So that's what's kind of dragging us down a little bit as we cycle into 2020, and we're working to offset those longer term. But I feel really good about the progress we're making in 2020. We're getting back to that neutrality level. Now we're trying to cycle over those investment areas.

2020, with an equal contribution both from gross margin in yesterday leverage.

If you look at that we expect that drilling 2020, we will achieve late neutrality bolsters, our re baseline level on a like for like product.

Gross margin level, we will need an inflow some additional pressure from bill supply chain in shrink. So those are that thats whats kind of drag us down a little bit as we cycle into 2028, and we're working to offset those longer term what I feel really good about the progress we're making in 2020 were getting back to that neutrality level now.

I will try to cycle both of those investment areas.

That's very helpful and good luck in the spring. Thank you. Thank you.

Michael Lasser: That's very helpful. Good luck in the spring. Thank you.

Michael Lasser: That's very helpful. Good luck in the spring. Thank you.

Dave Denton: Thank you.

Joe McFarland: Thank you.

Thank you. Our next question comes from the line of Chuck Grom Gordon Haskett. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.

Thanks, Good worry a lot of lot of things going on with pro just wondering if you could just update where you are penetration at this point in time, and where you think it could go over the next over the next couple of years.

Chuck Grom: Thanks. Good morning. A lot of good things going on with Pro. Just wondering if you could just update where you are penetration at this point in time and where you think it could go over the next couple of years.

Chuck Grom: Thanks. Good morning. A lot of good things going on with Pro. Just wondering if you could just update where you are penetration at this point in time and where you think it could go over the next couple of years.

So for Chuck. This is this is marvin.

Marvin Ellison: So Chuck, this is Marvin. Our penetration hasn't materially changed from what we called out earlier in 2019, and we'll call it between 20% and 25%. We have intentionally not set a penetration target because we believe setting an artificial target could lead us to be focused on something other than what's in the best interest of the customer. What we're trying to do is be a very customer-centric organization in how we think. Now, Joe outlined in his prepared comments some key things that we're doing relative to Pro loyalty and CRM. Do we have an expectation that we're going to see our Pro penetration pick up in 2020? Absolutely.

Marvin Ellison: So Chuck, this is Marvin. Our penetration hasn't materially changed from what we called out earlier in 2019, and we'll call it between 20% and 25%. We have intentionally not set a penetration target because we believe setting an artificial target could lead us to be focused on something other than what's in the best interest of the customer. What we're trying to do is be a very customer-centric organization in how we think. Now, Joe outlined in his prepared comments some key things that we're doing relative to Pro loyalty and CRM. Do we have an expectation that we're going to see our Pro penetration pick up in 2020? Absolutely.

Our penetration hasn't materially changed from what we called out earlier in 19 anymore color between 20, and 25% we have we're intentionally not fit.

Penetration target because we believe silicon artificial target could lead us to be focused on something other than what's in the best interest of the customer what what we're trying to do is be a very customer centric organization and how we think now Joe outlined in his prepared comments in key things that would.

Doing relative prolong realty in CRM do we have an expectation and we're going to see our pro penetration pickup in 2020, absolutely. We haven't set a target what we do have expectations on what we're going to be able to generate from new customers.

Marvin Ellison: We haven't set a target, but we do have expectations on what we're going to be able to generate from new customers, average ticket growth, and frequency of visits, because we're going to know this customer intimately based on having real data and not based on intuition. So that's a long-winded way of saying penetration is about the same, and we are not setting targets, but we have an expectation we're going to grow the business in 2020. That is important too, that you just realized. In 2019, we focused on all of the kind of basics. So as we roll into 2020, as I mentioned, Pro loyalty. We have also focused on our Pro outside sales with strategic partnerships. We have the MSH business that has been under construction that we're pleased with what's happening there.

We haven't set a target, but we do have expectations on what we're going to be able to generate from new customers, average ticket growth, and frequency of visits, because we're going to know this customer intimately based on having real data and not based on intuition. So that's a long-winded way of saying penetration is about the same, and we are not setting targets, but we have an expectation we're going to grow the business in 2020.

Average ticket growth frequency of visits because we're going to know this customer intimately based on having real data and not based on intuition. So thats a long way of saying.

Patients, obviously, and we are not setting targets that we have an expectation going to grow the business in 2012, it's important to GE just realized 2019, we focused on all of the kind of basis and so we were on slide 20, as I mentioned for loyalty we have also.

That is important too, that you just realized. In 2019, we focused on all of the kind of basics. So as we roll into 2020, as I mentioned, Pro loyalty. We have also focused on our Pro outside sales with strategic partnerships. We have the MSH business that has been under construction that we're pleased with what's happening there.

Focused on our pro outside sales with strategic partnerships, we have the message business that has been under construction.

Pleased with what's happening there and so I think you'll get a much cleaner picture as we roll forward in 2020 on what an actual penetration has.

Marvin Ellison: And so I think you'll get a much cleaner picture as we roll forward in 2020 on what an actual penetration is.

And so I think you'll get a much cleaner picture as we roll forward in 2020 on what an actual penetration is.

Okay. That's great and then on the merchandise service teams that you have installed in 2019, where any metrics you can provide about you know the productivity that use the productivity improvement that you've seen.

Chuck Grom: Okay. That's great. And then on the merchandising service teams that you've installed in 2019, is there any metrics you could provide about the productivity improvement that you've seen when you layer in those MSTs? And I think just to clarify, I think you said you're adding 7,000 in the first half of 2020. Just a perspective of how many you have in place today would be great. Thanks.

Chuck Grom: Okay. That's great. And then on the merchandising service teams that you've installed in 2019, is there any metrics you could provide about the productivity improvement that you've seen when you layer in those MSTs? And I think just to clarify, I think you said you're adding 7,000 in the first half of 2020. Just a perspective of how many you have in place today would be great. Thanks.

You layer in those Msps and I think just to clarify it I think you said, you're adding 7000 in the first half a 20, just just perspective of how many you have in place today would be great. Thanks.

Chuck This is bill so.

William Boltz: Yeah. Chuck, this is Bill. So the big role for our MST team is to improve the level of base service inside of our stores. And so in addition to that, they also assist with project work. With the additional folks that we're adding in 2020, it's really about improving our service level and then being able to also tackle a number of the projects that we have to do. So we're excited about being able to grow this team. And we continue to thank our vendor partners for their participation. And it allows us to provide a better level of service, be more ready. So we're already excited about where that's going.

Bill Boltz: Yeah. Chuck, this is Bill. So the big role for our MST team is to improve the level of base service inside of our stores. And so in addition to that, they also assist with project work. With the additional folks that we're adding in 2020, it's really about improving our service level and then being able to also tackle a number of the projects that we have to do. So we're excited about being able to grow this team. And we continue to thank our vendor partners for their participation. And it allows us to provide a better level of service, be more ready. So we're already excited about where that's going.

Yeah, the big Big role for our unless TTM managed to improve the level of phase service inside of our stores and so in addition to that they also assist with project work with the additional folks that were adding in 2020, it's really about improving our service level and then.

Unable to also tackle a number of the projects that we have to do so we're excited about being able to grow this team and.

We continue to thank our vendor partners for their participation and it allows us to provide better level of servers be more ready.

So we're already.

And excited about where that's going.

Great. Thank you.

Chuck Grom: Great. Thank you.

Chuck Grom: Great. Thank you.

Thank you. Our next question comes from the line of Eric Bosshard with Cleveland Research Company. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Eric Bosshard with Cleveland Research Company. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Eric Bosshard with Cleveland Research Company. Please proceed with your question.

Good morning to two things are question on a follow up the the 2.5 brick and mortar comp and for Q, you've invested the last four or five quarters and improving the in store experience. When you look at that number relative to your peer.

Chuck Grom: Good morning. Two things are a question on a follow-up. The 2.5 brick-and-mortar comp in Q4, you've invested the last four or five quarters in improving the in-store experience. When you look at that number relative to your peer, curious how you'd characterize it. It seems a bit underwhelming. And I guess the core question is, what is limiting the core brick-and-mortar growth of the business? And what do you do in 2020 to materially improve it? Or is this as good as it gets?

Eric Bosshard: Good morning. Two things are a question on a follow-up. The 2.5 brick-and-mortar comp in Q4, you've invested the last four or five quarters in improving the in-store experience. When you look at that number relative to your peer, curious how you'd characterize it. It seems a bit underwhelming. And I guess the core question is, what is limiting the core brick-and-mortar growth of the business? And what do you do in 2020 to materially improve it? Or is this as good as it gets?

Curious how you characterize it it seems a bit underwhelming then I guess the core question is what is limiting the core brick and mortar growth of the business and what do you do it 20 to materially improve it or is this as good as a caps.

No. This is marvin.

Marvin Ellison: No, Eric, this is Marvin. Candidly, we're not spending time looking at anything other than the customer and our internal execution. So for us, when we look at year-over-year improvement and we look at improvement in our store execution, we believe we're making progress. So if you think about it for a second, a lot of home improvement transactions begin online. They may not consummate online, but they begin online. So on one hand, it is a true omnichannel environment where research and also product education happens online, and then that drives traffic to the store. If you have limitations online, not only does it hurt your dot-com sales, it actually hurts your brick-and-mortar sales because it limits the amount of traffic where people will show up after having quality, efficient research and decide to buy. So we think it's part and parcel that Lowe's.com has to improve.

Marvin Ellison: No, Eric, this is Marvin. Candidly, we're not spending time looking at anything other than the customer and our internal execution. So for us, when we look at year-over-year improvement and we look at improvement in our store execution, we believe we're making progress. So if you think about it for a second, a lot of home improvement transactions begin online. They may not consummate online, but they begin online. So on one hand, it is a true omnichannel environment where research and also product education happens online, and then that drives traffic to the store. If you have limitations online, not only does it hurt your dot-com sales, it actually hurts your brick-and-mortar sales because it limits the amount of traffic where people will show up after having quality, efficient research and decide to buy. So we think it's part and parcel that Lowe's.com has to improve.

Candidly, we're not spending your time looking at anything other than the customer and our internal execution. So for US we look at year over year improvement and we look at improvement in our strong execution. We believe we're making progress. So if you think about it for second a lot of how.

Home improvement transactions begin online they may not consummate online for they begin online so.

On one hand, as a true omni channel environment were research and also product education happens online and did it drives traffic to store.

Limitations on line not only doesn't hurt your dotcom sales you'd actually hurt your brick and mortar sales recalled it limits the amount of traffic where people will show up after having quality efficient research and decide to buy so so we've got good part and parcel at Lowe's Dot com has to improve when that improve it live.

Marvin Ellison: And when that improves, it lifts the entire company from an e-commerce standpoint, from an omnichannel standpoint, and from a brick-and-mortar perspective. But if you think about the things that Bill talked about with the fact that we just changed out our entire in-store strategy. We just created an entire off-shelf program. We just cleared up seasonal space upfront for the first time. That's going to be consistent. In every store, we can actually set spring. We can set events. We can set holiday gift centers. So all of these things are about creating space productivity in the stores. In addition to that, I'll just let Bill walk through some of the other key drivers of spring and some of the things that we've invested in that we think will continue to create better brick-and-mortar sales.

And when that improves, it lifts the entire company from an e-commerce standpoint, from an omnichannel standpoint, and from a brick-and-mortar perspective. But if you think about the things that Bill talked about with the fact that we just changed out our entire in-store strategy. We just created an entire off-shelf program. We just cleared up seasonal space upfront for the first time. That's going to be consistent. In every store, we can actually set spring. We can set events. We can set holiday gift centers. So all of these things are about creating space productivity in the stores. In addition to that, I'll just let Bill walk through some of the other key drivers of spring and some of the things that we've invested in that we think will continue to create better brick-and-mortar sales.

The entire copy from E Commerce standpoint from an omnichannel standpoint, and from a brick and mortar perspective, but are you thinking about the things that bill talked about with the fact that.

We just changed out our entire income strategy, we just created and try all shelf program, which is cleared up a seasonal space upfront for the first time has to be consistent and every store we could actually set.

Spraying, we consider that events, we can set holiday gifts centers. So all of these things about creating space productivity in the stores. In addition to that others, let bill walk through some of the other key drivers of spraying and some other things we've invested in it we think we'll continue to create better brick and mortar sales yeah, you know the other.

William Boltz: Yeah. I think another big part that we've invested in is around the training for our associates in the store. And so between Joe and myself, we've put together just a lot of product knowledge training for our teams supported by our vendors, but really wanting to make sure that we can raise the level inside the aisle, inside the store. I touched on in my earlier comments about all of the different product launches that are coming, all of the different capabilities that are coming from Lowe's.com, and a couple of them that came on board in the fall of last year. I touched on the cross-merchandising program. We didn't have one until late last year. And so that's going to get a full year of that rollout.

Bill Boltz: Yeah. I think another big part that we've invested in is around the training for our associates in the store. And so between Joe and myself, we've put together just a lot of product knowledge training for our teams supported by our vendors, but really wanting to make sure that we can raise the level inside the aisle, inside the store. I touched on in my earlier comments about all of the different product launches that are coming, all of the different capabilities that are coming from Lowe's.com, and a couple of them that came on board in the fall of last year. I touched on the cross-merchandising program. We didn't have one until late last year. And so that's going to get a full year of that rollout.

I think another big part that we've invested in is around the training for our associates in the store and so between join myself, we put together.

Just a lot of product knowledge training for our teams supported by our vendors.

Really wanting to make sure that we can raises the level inside the I'll inside the store I touched on my earlier comments about all the different product launches that are coming all the different capabilities that are that are coming from lows dot com and a couple of them. They came onboard in the fall of last year I touched on the cross merchandising program, we didn't have one.

Until late last year, and so that's going to get a full year of that of that.

That rollout and then we've got field merchants on the ground inside of our regions to help us we find these assortment as we continue to work on improving our productivity and then as I just touched on with the MLP team being able to expand those folks allows us to speed up how we service bays inside the store and how we get more things done.

William Boltz: And then we've got field merchants on the ground inside of our regions to help us refine these assortments as we continue to work on improving our productivity. And then, as I just touched on with the MST team, being able to expand those folks allows us to speed up how we service the bays inside the store and how we get more things done. So we're excited about that.

And then we've got field merchants on the ground inside of our regions to help us refine these assortments as we continue to work on improving our productivity. And then, as I just touched on with the MST team, being able to expand those folks allows us to speed up how we service the bays inside the store and how we get more things done. So we're excited about that.

So we're excited look and Eric it's a really is a fair question and the only comment I'll make is the importance of the pro business.

Marvin Ellison: Look, and Eric, it's a fair question. The only other comment I'll make is the importance of the pro business. In home improvement, if you don't have a healthy pro business, you really become the victim of weather patterns. You become the victim of a lot of different things that drive normal retail traffic patterns. But irrespective of the weather outside, pros have to work. So a really robust pro business creates store-based productivity that continues to really benefit you throughout different weather patterns and times of year. One of the reasons why we've been so vested in pro is it goes directly to your question. We can create a better productivity in our brick-and-mortar stores and have more sustained growth in our productivity. Work in progress. But look, one year into this multi-year transformation, I'm very pleased with where we are.

Marvin Ellison: Look, and Eric, it's a fair question. The only other comment I'll make is the importance of the pro business. In home improvement, if you don't have a healthy pro business, you really become the victim of weather patterns. You become the victim of a lot of different things that drive normal retail traffic patterns. But irrespective of the weather outside, pros have to work. So a really robust pro business creates store-based productivity that continues to really benefit you throughout different weather patterns and times of year. One of the reasons why we've been so vested in pro is it goes directly to your question. We can create a better productivity in our brick-and-mortar stores and have more sustained growth in our productivity. Work in progress. But look, one year into this multi-year transformation, I'm very pleased with where we are.

In home improvement if you don't have a healthy pro business, you really become the victim of weather patterns, you come to victim of a lot of different things and drive more.

Normal retail traffic Adams.

Irrespective of what Assad pros after work and so a a really robust pro business create strong base productivity.

Continues to really benefit you throughout different weather patterns in times of years will want to reasons, while we've been so vested in pro is it goes directly to your questions. So we can create.

Better productivity in our brick and mortar stores and have more sustained growth in our productivity. So work in progress one year into this multiyear transformation I'm very pleased with where we are.

And then a follow up two important categories just quickly lump sum perspective on the relative trend to performance versus threeq or the first three quarters a year in flooring I know that you've invested and got to reset activity. There curious if you've seen comp improvement as a result of that and then also appliances did that take a notable.

Chuck Grom: Then a follow-up. Two important categories. Just quickly, I'd love some perspective on the relative trend performance versus Q3 or the first three quarters of the year. Florian, I know that you've invested and gone through reset activity. I'm curious if you've seen comp improvement as a result of that. Then also appliances. Did that take a notable step down in growth relative to where the prior trend had been based on how things shook out in Q4?

Eric Bosshard: Then a follow-up. Two important categories. Just quickly, I'd love some perspective on the relative trend performance versus Q3 or the first three quarters of the year. Florian, I know that you've invested and gone through reset activity. I'm curious if you've seen comp improvement as a result of that. Then also appliances. Did that take a notable step down in growth relative to where the prior trend had been based on how things shook out in Q4?

Step down in growth relative to where the prior trended bad based on how things shook out in for Q2.

So Eric it's built so on the appliance side, we continue to outpace the store were continued.

William Boltz: So, Eric, this is Bill. So on the appliance side, we continue to outpace the store. We're continuing to leverage our number one position. Pleased with how our appliance performance had demonstrated all year long. Then when you look at flooring, we've made a lot of investments in flooring. We're seeing continued growth in luxury vinyl plank. We're starting to see signs of growth now in our soft flooring business, which had lagged for years. We're seeing growth in new products. So anything that was new was introduced, like in decorative wall tile, laminate, anything that's water-resistant, all of those trending very well. Then we'll continue to refine that category. It's important for us to be able to get that shopper into our store and drive that portion of our business. So we're going to continue to tweak it.

Bill Boltz: So, Eric, this is Bill. So on the appliance side, we continue to outpace the store. We're continuing to leverage our number one position. Pleased with how our appliance performance had demonstrated all year long. Then when you look at flooring, we've made a lot of investments in flooring. We're seeing continued growth in luxury vinyl plank. We're starting to see signs of growth now in our soft flooring business, which had lagged for years. We're seeing growth in new products. So anything that was new was introduced, like in decorative wall tile, laminate, anything that's water-resistant, all of those trending very well. Then we'll continue to refine that category. It's important for us to be able to get that shopper into our store and drive that portion of our business. So we're going to continue to tweak it.

Leverage our number one position pleased with our appliance performance at an had demonstrated all year long and then we'd look at flooring and made a lot of investments in flooring. We're seeing continued growth in luxury vinyl plank. We're convinced we're starting to see lines signs of growth now in our soft flooring.

Business, which had leg for years, we're seeing growth in new products, so anything that.

This new was introduced like in decorative wall tile.

Laminate anything as water resistant all of those trending very well and then.

We'll continue to refine that category, it's important for us to be able to get back shopper in them into our store and drive that portion of our business or the contingent week.

Okay, one more question.

Dave Denton: We're going to take one more question.

Marvin Ellison: We're going to take one more question.

Thank you. Our final question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.

Operator: Thank you. Our final question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.

Operator: Thank you. Our final question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.

Hey, good morning, I'll make a quick.

Michael Lasser: Hey. Good morning. I'll make it quick. Can you quantify or are you trying to quantify some of these holiday marketing appliances, some of the lapping of the PSI, to get back to what you think you would have comped? I realize it's imprecise, and it sounds like, Marvin, you still weren't pleased with the outcome but wanted to clarify that.

Simeon Gutman: Hey. Good morning. I'll make it quick. Can you quantify or are you trying to quantify some of these holiday marketing appliances, some of the lapping of the PSI, to get back to what you think you would have comped? I realize it's imprecise, and it sounds like, Marvin, you still weren't pleased with the outcome but wanted to clarify that.

Are you can you quantify you're trying to quantify some of these holiday marketing appliances. Some of the lapping MPS I tend to get back to what you think you would have calmed I realize it's it's it's in precise and it sounds like Marvin you still weren't pleased with the outcome, but wanted to clarify that.

You assume in what we what we know is we had an internal forecasts and.

Marvin Ellison: Simeon, what we know is we had an internal forecast, as all businesses will have going into any season where we had an internal plan. Bill's point about appliances, although we're pleased with the comp and appliance relative to the company comp, it underperformed our internal forecast. When you look at the data, that all came out of early November. Because, as you know, there are a couple of big event periods during the year in appliances, and November happens to be one of the largest. The compressed holiday season and how the customer shopped, we just didn't have the agility in our marketing strategy to take advantage of it. We know what we left on the table.

Marvin Ellison: Simeon, what we know is we had an internal forecast, as all businesses will have going into any season where we had an internal plan. Bill's point about appliances, although we're pleased with the comp and appliance relative to the company comp, it underperformed our internal forecast. When you look at the data, that all came out of early November. Because, as you know, there are a couple of big event periods during the year in appliances, and November happens to be one of the largest. The compressed holiday season and how the customer shopped, we just didn't have the agility in our marketing strategy to take advantage of it. We know what we left on the table.

As it all businesses will have going to any season here, we had an interim plan and build for about a cloud with although we're pleased with a common appliance relative to the company comp did underperform our internal forecast.

And when you look at the data that all came out of early November because as you know there are couple of big even periods due easier in appliances in November happens to be one enlarges.

Andy compressed holiday season, and how to customer shop, we just didnt have the agility and our marketing strategy to take advantage of so we know what we left on the table.

We're not stating that ex Charlie below what we can say is if we would have met expectations in the CAGR with we laid out when we would have been at or above what we had forecasted from a topline standpoint, and so we can definitely see.

Marvin Ellison: We're not stating that externally, but what we can say is if we would have met expectations in the categories we laid out, we would have been at or above what we had forecasted from a top-line standpoint. And so we can definitely see how and why we did not hit the internal number. But even with that, we're pleased with the fact that we were able to leverage expenses and SG&A, and we were able to manage the business much better. I remember not too far in the distant past, if Lowe's didn't beat their top line, there was no way they were going to hit their bottom-line performance. And we did all of that and still leveraged customer service across pro and DIY, so we did it the right way.

We're not stating that externally, but what we can say is if we would have met expectations in the categories we laid out, we would have been at or above what we had forecasted from a top-line standpoint. And so we can definitely see how and why we did not hit the internal number. But even with that, we're pleased with the fact that we were able to leverage expenses and SG&A, and we were able to manage the business much better. I remember not too far in the distant past, if Lowe's didn't beat their top line, there was no way they were going to hit their bottom-line performance. And we did all of that and still leveraged customer service across pro and DIY, so we did it the right way.

How and why we did not hit the current number but even with that we were pleased with the fact that we're able to to leverage expenses and Thats DNA and were able to manage the business much better I remember you know not too far in into distant past due loans didn't beat their top line. It was no.

The way, they're going to hit the bottom line performance and we did all of that is still leverage customer service across pro and DIY. So we did at the right way.

And the short follow up is inventories you've worked them down since the spike in the beginning of the year as you've told US you would now we're in a better position, but let me just paint the other side of it Hey, do you have the right inventory the right level of purchasing newness, where you want to be for the spring.

Chuck Grom: The short follow-up is inventories. You've worked them down since the spike in the beginning of the year, as you've told us you would. Now we're in a better position, but let me just paint the other side of it. Hey, do you have the right inventory, the right level of purchasing, newness, where you want to be for the spring?

Simeon Gutman: The short follow-up is inventories. You've worked them down since the spike in the beginning of the year, as you've told us you would. Now we're in a better position, but let me just paint the other side of it. Hey, do you have the right inventory, the right level of purchasing, newness, where you want to be for the spring?

Yes, I think from a spring perspective very much. So I think as we think about the full year, we'll continue to invest in strategic categories to enhance our business primarily in the pro space at the same time, keeping our inventory levels relatively constant throughout anyway.

Dave Denton: Yeah. I think from a spring perspective, very much so. I think as we think about the full year, we'll continue to invest in strategic categories to enhance our business, primarily in the pro space, at the same time keeping our inventory levels relatively constant throughout 2020.

Joe McFarland: Yeah. I think from a spring perspective, very much so. I think as we think about the full year, we'll continue to invest in strategic categories to enhance our business, primarily in the pro space, at the same time keeping our inventory levels relatively constant throughout 2020.

Okay, great. Thanks, Good luck next year.

Chuck Grom: Okay. Great. Thanks. Good luck next year.

Simeon Gutman: Okay. Great. Thanks. Good luck next year.

Thank you.

Dave Denton: Thank you.

Marvin Ellison: Thank you.

Thank you we have reached the I never question and answer session and the conclusion of today's call. Thank you all for your participation. You may now disconnect your lines and have a wonderful day.

Operator: Thank you. We have reached the end of our question-and-answer session and the conclusion of today's call. Thank you all for your participation. You may now disconnect your lines and have a wonderful day.

Operator: Thank you. We have reached the end of our question-and-answer session and the conclusion of today's call. Thank you all for your participation. You may now disconnect your lines and have a wonderful day.