Q1 2020 Earnings Call

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Category reworking levels and a million people without.

The two per store layer level.

We're NATO stroke in the early we've always tried to be there when you in your home if needed us most.

[music] working together to keep your whole working.

Well, we'll continue to do.

No. It's what you know.

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On Memorial Day, we honor those who may be ultimate sacrifice the loose commitment to military personnel is bigger than just one day, we were founded by two Gi and today, we're proud to employ over 20000, better that's why we honor the sacrifices military families of me and why we committed to say.

Leading military families nearly $3 billion over the past three years through a 10% discount we honor every single day lows. Thanks, you for your service to the home we all share.

Home unites us.

[music] right now.

So many of us are turning living rooms.

Good morning, everyone and welcome to the low company first quarter 2020, earning conference call.

Michelle and I'll be your operator for today's call.

Other minor this conference is being recorded.

I will now Oh.

Roman Vice President of Investor Relations. Thank you you may begin.

Thank you and good morning, everyone here with me today, our Marvin Ellison, our President and Chief Executive Officer, they'll both our executive Vice President merchandising, Joe Mcfarland, our executive Vice President stores, and they've done our executive Vice President and Chief Financial Officer.

We'd like to remind you that our notice regarding forward looking statements is included in our press release. This morning, which can be found unload investor relations website.

During this call we will be making comments that are forward looking including our expectations for fiscal twentytwenty.

Actual results may differ materially from those expressed or implied as a result of various risks.

Certainties an important factor.

Putting those discussed in the risk factors Mdna and other sections of our annual report on form 10-K, and our other SEC filings. Additionally, we'll be discussing in certain non-GAAP financial measure a reconciliation of these items to U.S. GAAP can be found in this mornings press release and on our Investor Relations website with that I'll turn the call over to Marvin.

Good morning, everyone. This is an unprecedented Tom as we all navigate the ongoing global economic social and help impractical cope with my team.

I'd like to start out by extending my best wishes for the health and safety to you and to your family.

Like most retailers, we began to first quarter focus on meeting our internal financial plan, while executing our Q1 retail strategy.

However, due to the global Health crisis calls bar code with my team everything changed in late February.

And we immediately pivoted boss Dabbing, a cross functional Kobin 19 Task Force opening your company wide Command Center and Reprioritizing, our Q1 objective.

As a company our focus shifted from one of your business to achieve our financial plan to functioning as an essential retail we're operating in a pandemic with three key priority.

First creating a safe store environment for our associates and our customer.

Second providing support for our community, including healthcare providers and first responders and third.

Financially supporting our sources during this unprecedented Tom.

As a result of these new priorities in the first quarter, we invested $340 million to support our associates healthcare workers first responders and community.

In addition, we've committed $50 million of charitable contribution for communities to do our part in this time of need.

I'd like to begin by highlighting a few of the operational actions that we took in response to covert 90.

And later in the call Joe will provide more details on these efforts.

In early March we shortened our store operating hours by closing three hours earlier each day at seven P.M.

So we could increase third party cleaning routines and restock show.

During the hours that our stores were opened we implemented several operational changes to ensure the safety of our associates and our customers.

Including the garden centers, our stores averaged 144000 square feet of space.

To develop our social distancing safety procedures, our team took a strategic data driven approach tracking historical customer traffic patterns and identifying areas where customers tend to congregate.

Based on this analysis, we implemented additional safety in social distancing protocols and three distinct area.

Point to self checkout.

Outside garden and to pay debt.

Our store team with saw effective at implementing in executing the enhance safety guidelines that are customer service scores improved 200 basis points year over year into first quarter.

This is truly an incredible accomplishment and a reflection of our commitment to customer service even in this unprecedented environment.

Also to provide our valued associated with a much deserved day off to spin with their families and their loved ones, we close all stores and distribution centers on Easter Sunday.

This decision negatively impacted sales and operating income, but it was absolutely the right thing to do far associates.

We have a unique in a resilient business model that operates well when our communities need us most.

This a hurricane fluid tornado or global health crisis, we are committed to being there for our customer.

And I'm pleased that over the past 18 months, we've established the agility to provide our customers with the essential products they need to keep their home safe and functional and their businesses running.

None of our success in the first quarter would have been possible without the outstanding commitment of our store sources working under unprecedented condition.

Our field leaders also distinguished themselves during the quarter Division Presidents Regional Vice Presidents district managers and build merchant abandoned our normal routines and spent time each week visiting stores to provide leadership support and guidance for store managers and frontline leader.

As someone who started out the retail career as a $4.35 on our part time store associates I understand the importance of seeing the leaders of the company out on the front lines doing a crisis.

Let me now turn to our first quarter results, which reflect the benefits of our retail fundamental strategy.

Improvement in our overall execution and the strength of a home improvement business model.

For the first quarter, we delivered strong sales growth would total company comp sales growing 11.2%.

Our U.S home improvement comps was 12.3%.

Due to strong demand from both DIY and pro customer.

Overall demand strengthened as we move through the quarter and Thats sales momentum has continued into the month of mate.

For the quarter DIY comp slightly outpaced pro corrupt and the uptick in DIY demand was partly driven by the arrival of spring weather in many western and southern geography as.

As well as a customer mindset that was heavily concentrated on the home.

We serve broad based project activity ranging from outdoor landscaping and other beautification projects, two essential indoor repair and maintenance work and long deferred home projects to do list that customers hadn't previously tackle given a busy schedule.

Comp sales were pro was strong support of our focus on retail fundamentals, including job like quantities will flex will delivery and the improved service model that we put in place in 2019.

And as you would expect we saw increased demand and cobot related products, such as cleaning supplies and appliances like refrigerators and freezers.

Partially offsetting these gains with softness in heavy indoor installation categories, such as kitchen, and Bath as customers were reluctant to invite people into their homes.

In total we estimate that the net impact of co related sales contributed approximately 850 basis points truck total company comp growth.

Which includes 80 basis points of cleaning product.

70 basis points of refrigerators, and freezers sales and 700 basis points in acceleration of projects primarily for the DIY customers.

As we move to the quarter. There was also a sharp uptick in sales on lows dotcom.

<unk>, 80% overall.

<unk>, even stronger growth rates <unk> customers.

Online penetration increased to 8% of total sales.

From a geographic perspective, we had broad based growth would positive cops and all 15 geographic regions and all three <unk> Division.

Regions that al perform the toll accompany comps were Atlanta.

Charlotte.

Dallas.

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Nashville, Los Angeles, Saint Louis and Seattle.

And once again to wessells are performing geographic division.

The geographic footprint of our stores in a U.S. also played a role in our strong sales performance into one.

To cope with 19 crisis created less disruption in rural areas of the country.

Only one quarter of our store based is located.

A rule stores outperformed accompany cop you want to over 250 basis points.

Conversely on average our urban stores experience with more demand disruption from to cope at 900 crisis.

Approximately 10% of our <unk> basis classified as urban and just subset of stores underperformed accomplish by more than 400 basis point.

In Canada, we posted negative comp sales as performance was adversely impacted my store closures and other regulatory related operating restriction.

We have initials in place to improve performance and remain confident in the long term potential of our Canadian business.

During the quarter, we shifted our marketing efforts by dramatically limiting our promotional messaging instead, highlighting our commitment tar communities and our appreciation for frontline associate.

In fact, as he presenting sparser on E.S.P. and for the NFL draft, which posted record setting viewership. We ran a campaign a spotlight and thank our sources and how they support their communities and the first responders at a time of crisis.

Auto accident like closing on Easter, reducing promotions closing stores throughout was early each day and limiting customer access to key areas like paint and garden limited ourselves in a quarter. They are reflection of our culture into the fundamental commitment to the safety of our soldiers in our customers.

<unk> also showed at Wal consumers will sheltering in place disk quarter, they had an opportunity to rediscover lows both in store and online and improvements we made in our business over the last 18 must allow us to meet the customer demand.

I'm also pleased at doing this time of high levels of unemployment in our country blow says heart over 100000 store So's just for the spring season.

In addition to assist other retails an operating safely in this exceptionally challenging environment, we shared our best practices with the retail industry leaders Association.

The only competitive we're focused on right now is a covert 19 virus.

Although our current and future environments, it's unpredictable.

Confident in our ability to execute and continue to provide the central products and services that our communities need.

And then closing I'm tremendously proud of our Sosa and would like to again to express my heartfelt appreciation for a hard work and their dedication.

And also want to think I've been to partners or they're great efforts to step up to the challenges that this pandemic has presented and we'll debt I will turn to call over to Joe to discuss the actions that we've taken to support our customers operate effectively and keep our socialist state.

Thanks, Marvin a good morning, everyone I'd like to begin by Echo in Marvin's appreciation for the tremendous work that are assess it to done during this crisis across or stores and distribution network.

As always or highest priority is to health and safety of our associates and customers.

I'll take a moment to review the operational changes that we implemented this quarter in response to cope with 19.

We began with an immediate assessment of how to best sold Tate social distancing in our operations.

Quickly acted to implement the following.

<unk> floor markers, adding social distancing ambassadors to manage customer traffic flow.

Averaging new technology available on handheld smart devices to monitor store traffic, helping store managers limit customers based on the store footprint in line with regulatory requirements and removing product from our stores to help free up additional space for our customers, especially in high traffic areas as Marvin mentioned on average our story.

As or 144000 square feet in size, including the Garden Center.

Therefore, we also deployed at data driven process to implement additional safety measures in areas, where customers tend to congregate such our point to sell registers. The garden center and the paint desk for example, in our garden centres, we utilized or merchandising services teams or M.S.T.D.'s to remove shelving product.

Encouraged customers to spread out and at the Garden Center entrance, we've set of one way traffic flows and limited the number of customers entering any one time.

Tincher clean safe operating environment, we implemented more stringent cleaning procedures added more hours for our third party cleaning service and closed our stores three hours earlier at seven PM to allow for increased cleaning and restocking activities.

We also determine that keeping our stores open until seven PM allowed for enough operating hours during the day to minimize concentrations customer traffic.

<unk> was one of the first retailers to install plexiglass yields a point of sale areas in all stores. We also distributed gloves in master associates to wear during their shifts.

As a reflection of our commitment to our associates, we provided them with additional financial assistance totaling $290 million in incremental investment in the first quarter.

We made to special payments to hourly associates to help with unexpected expenses one in March and one in may with each payment consisting of $300 for full time and $150 for part time and seasonal associates.

And for the month of April we instituted a temporary wage increase of $2 per hour for all hourly associates.

Further protect the health of our associates and those around them. We opera 14 days of emergency paid leave for all associates, who needed it and for those at higher risk for severe illness from covert 19, we offered emergency paid leave up to four weeks.

And the shore sport to our dedicated frontline managers, we have provided them with an additional two weeks of paid vacation to recharge and spend time with their families.

We also extended Tele medicine services to all associates in their families whether or not they were enrolled in lows medical plans.

And to do our part in protecting frontline medical workers first responders, we committed $50 million a support to our communities this year, including approximately $10 million worth of essential protective products, including and 95 masks.

And as online demand increased smart devices lattices system Bell bottom line pickup in store and partial shipping orders more efficiently.

In fact, this quarter, we rolled out curbside pickup in a matter of days. This rapid response would not have been possible technology, we deployed in 2019.

A new customer centric scheduling system and scheduling effectiveness tools also allowed us to monitor store traffic versus socit availability and delivered customized tiered sets of priorities for stores based on their capacity level.

As we look forward, we remain committed to our retail fundamental strategy and investing for future growth.

Enclosing I'm incredibly proud of power Associates responded and adapted to this challenging environment. They serve our customers in communities anytime a tremendous need and we remain committed supporting them as are most valuable assets.

Really pleased to announce at 100 per cent of our stores earn their winning together profit sharing bonuses this corridor totalling $87 million.

<unk> stronger than expect to store performance misrepresents incremental 24 million dollar payment to our front line associates above the target payment level. Thank you know now turn the call over to Bill.

Thanks, Joe and good morning, everyone has Marvin mentioned, we posted us home improvement comparable sales growth of 12.3% and the first quarter driven by outperformance in essential D.I.Y. in pro categories.

14, or 15 merchandising departments generated positive comps with weakness limited to installation heavy product in kitchens in back.

We saw a very strong coded related demand for essential cleaning products belong with other homes entities, such as refrigerators freezers in D.I.Y. home repair products.

There's customers isolated in their homes this quarter they engaged in a variety of projects, which drove double digit comps incor spring related categories paint in other critical repair and maintenance categories.

During the quarter, we posted double digit comps in lumber, which benefited from strong unit demand from both pro India I like customers, but continues to be driven by our improved investments in job lot quantity.

Core pro categories also performed well with double digit comps in rough plumbing hardware and tools.

Within rough plumbing would deliver double digit growth in piping fittings as our expansion of job lot quantities. In this area continues to pay off along with growth in other essential categories like air filtration pumps in water filtration.

Or hardware business benefited from the strength in fasteners in our general hardware categories supported by the addition of pro brands like fastened Master G.R.K. and Powerpro one as these product categories are the critical project Completers for both the pro and the D. I like customer.

In tools, we continue to see a strong customer response to our craftsmen program.

But we also saw strength from the launch of our new cobalt X.T.R. 24 bolt power tool platform as both the heavy D.I.Y. and pro customer.

Quickly recognizing the quality and performance of this great product.

Within our key pro tool brand such as to Walt the number one power tool brand in industry.

We continued to see nice growth across all segments and we are pleased with the results. We are seen through the addition of our exclusive to Walt 12 volt compact line of power tools.

Lastly, we continue to showcase new and innovative tool products from Bosh Lufkin Spider in the Tabu H.P.T., along with cobalt to build on the strength of our tools business.

These brands combined with our investment in job black quantities.

Prove pro service model or driving new customer trial, increasing our shared wallet with our existing pro customers.

As Marvin and Joe indicated the progress we made on our strategic initiatives in 2019 positioned us to execute well this quarter.

For example, having our merchants in place for the entire year allowed us to fully plan for the spring season and respond to the rapidly changing operating requirements. We are currently facing.

I'm also proud of our vendor partnerships in our recent brand introductions, both of which have allowed us to better meet the customer demand.

Take a moment to mention just a few of the suppliers, who made an extraordinary effort to keep our stores well stocked this quarter despite their own challenging operating environments.

Within our building products categories, some of our suppliers that deserve special shout out for Charlotte pipe <unk>.

E.C.M.D. shark bite in Idaho Force group.

In home decor three m.

<unk> and Samsung were true standouts in in our hard lines business Killmon, Bonnie old Castle, and MTD products went above and beyond in their response.

And finally I'd be remiss, if I didn't give a big thank you to the efforts put forth by that cleaning products safety zone in Medline as these three suppliers went above and beyond to provide us with hand, sanitizer and gloves for our frontline associates.

Turning back to our associates, our field merchandising teams played a critical role in helping our stores adjust to the changing environment long with being on the ground to respond to 10 tornadoes in two earthquakes that impacted parts of the U.S. during the quarter.

And our merchandising service team or Emus tea also went above and beyond as they were ready to do whatever was needed during the quarter to help our stores respond to significant increases in demand.

This quarter or M.S.T.'s were key in our ability to quickly reconfigure our scores to support social distancing.

The support of these teams is invaluable because they are the boots underground focused on taking the time consuming task off the shoulders of our Red Vest associates.

In looking ahead, we continue to make investments to drive future growth in in the second quarter. We're excited about our roll out of Simpson's strong tie framing hardware and fasteners.

These trusted pro products will be available in stores nationwide with an expanded assortment on lows dot com.

Helping pros to fulfill all their hardware needs in one place saving them time and money.

And it's spring is now a ride across the country. We will continue to leverage our position is the number one destination for outdoor power equipment in the U.S. with our leading brands such as John Deere Honda Husqvarna errands, and Craftsman to provide customers with an outstanding selection of products to help them complete their outdoor projects at the.

The same time, we're proud off our customers that top two brands in grilling Weber <unk>.

As we've discussed previously we remain focused on completing our Google cloud migration in the second quarter to ensure that we build a strong infrastructure for Los Dot com.

And the teams are working quickly to add capabilities to Los Dot com over the next three quarters that will further enhance the customer experience in to continue to grow sales on this digital platform in closing we were made committed to the work ahead to serve our customers in our communities as they navigate the public health challenge of covert 19, well.

Building capabilities to serve them, even better in the future. Thank you and are now turn the call over to Dave.

Thank you Bill and good morning, everyone.

I'll begin this morning, Bobby view into liquidity actions that we took during the quarter and providing an update on our capital allocation priorities.

Given the uncertain economic outlook, we decided to bolster our liquidity to plan for any unforeseen disruption.

Q1, we raise $4 billion and senior notes and increase the capacity of a revolving credit facility by $770 million.

After we paying 500 million of senior notes do in April 2020, we now have 6 billion up cash and cash equivalent on the balance sheet.

As well as Threebillion and Undrawn capacity on a revolving credit facility.

Which can be made available for any unanticipated needs and liquidity.

We believe that we have more than adequate liquidity to manage to any of the potential scenarios that we could be facing.

During the quarter, we also decided to halt our share repurchases program.

Furthermore, we do not anticipate doing any more share repurchase is this year beyond what we executed in the quarter.

Q1, we were purchased 9.6 million shares for $947 million at an average price of $98 in 45 cents per share.

We remain committed to returning capital to shareholders through our dividend program and there's always we looked for ways to drive shareholder value over the long term.

Also consistent with our capital allocation framework, we are continuing to prioritize investments in the business for future growth.

In the corridor capital expenditures totalled $328 million and we are still planning for a total of $1.6 billion in capital expenditures through this year.

Certain cases, we have we prioritize some capital project to focus on the near term need to improve our omni channel capability.

But our expectations for the total spending 2020.

Change.

Now turned to review up our operating performance beginning with the income statement E. Q1, we generated gap diluted earnings per share of one dollar and 76 cents per share compared to $1.31 in the first quarter of L.Y. and increase the 35%.

And the quarter there was a very modest impact on operating income related to that previously inhouse Canadian restructuring.

My comments from this 0.41 includes certain non gap comparisons where applicable.

Q1, we delivered adjusted diluted earnings per share, but dollar 77 cents, an increase of 45% compared to the prior year.

These results exceeded expectations, largely due to stronger than expected sales and gross margin rate, particularly in the latter half of the quarter.

Sales for the first quarter, we're $19.7 billion, an increase of 11.2% on a comparable basis versus the prior year period.

Total average ticket growth of 9.7%.

Transactions grew by 1.2%.

U.S. cop sales were up 12.3% in the quarter and we were encouraged to see strengthen our performance across both D.I.Y. and pro customers.

Across all geography.

R.U.S. monthly costs increased as we move through the quarter.

With 5.1% in February.

8.9 per cent in March and 20.4% in April.

February's financial performance was largely in line with our expectations.

But beginning of March we saw sales impacted by covert related prep activities and customers working on long delayed projects as they sheltered in place.

Also lows dot com sales picked up meaningfully in March as more customers increasingly utilized online shopping options.

Sales continue to accelerate into April with a large step up and then not loews Dot com sales also increase significantly what comps of over 150% and a month.

While are installed sales declined approximately 50%.

As many customers were unwilling to allow installation work in their homes.

This wrong broad base trends that we saw on April have continued in the may was strength across both D.I.Y.N. pro and across nearly all merchandising categories and all geography.

Or may month today, U.S. cop sales have been trendy at or above April result, with strong double digit comps across all geographic regions.

Gross margin was 33.1% of sales in the first quarter and increase of 164 basis points compared to Q1 of L.Y.

Gross margin rate improved 110 basis point driven both by the actions that we took last year to lower product costs and improve our pricing and promotional perform it.

As well as a 40 basis point benefit from lower promotional activities throughout the quarter.

As Marvin mention the company pulled back on promotional marketing in an effort to limit non essential traffic.

Going to stay at home orders across the nation.

Gross margin also benefited from approximately 55 basis points related to favorable product mix.

S. G.N.A. for Q1 was 21.3% of sales and improvement a 45 basis points over the prior year.

This included $320 million of covert related expenses incurred during the quarter with 275 million in financial assistance for frontline associates.

Approximately 35 million, we lady fit cleaning and other pandemic related operating expenses and approximately $10 million and charitable contributions.

While the 320 million dollar of coping related expenses resulted in S.G.N.A.D. leverage of 160 basis points.

Impact was more than offset by payroll average at 105 basis points, driven by higher sales and improve store efficiencies.

Advertising leverage 40 basis points.

Unemployed insurance leverage a 25 basis points.

Adjusted operating income margin increase 208 basis points to 10.16% sales.

Note that covert relate expenses are not excluded from our adjusted results.

The effective tax rate was 25.1% compared to 16.6% last year.

Prior year quarter benefited from the change in approach related to the exit from Mexico operation.

He adjusted effective tax rate was 25% above the prior year rate of 22.9%.

At $14.3 billion inventory of slightly lower than the prior your level.

Now before I close let me address our 2020 business outlet.

Spite are solid performance this quarter and strong sales momentum continuing into may we're withdrawing our prior guidance for the full year 2020 fails operating income and earnings per share.

And this unprecedented operate environment, we like other companies have limited visibility into the future business trends.

Which result, and and and usually wide range of potential outcomes for our 2020 financial performance.

However, going forward, we would like to provide additional transparency regarding our performance.

It is my expectation that will be giving more frequent periodic updates on our results throughout the second quarter.

In closing remain competent about the future of our business at our ability to continue to drive sustainable long term shareholder value.

Bible you'd like to extend my appreciation see associates at Lowe's across the world, who wisdom to meet the challenges, but this global health crisis.

Operator, we are now ready for question.

Thank you we are now.

And it seems like that's the question, please Taiwan and your talcum powder.

Question.

Yeah and oil.

I see some as many individuals so we actually you people on the top one question and one.

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And the line I mean gotten like Morgan Stanley What's your question.

Thanks. Good morning, everyone. My first question is on inability of calm I know, it's an impossible question.

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Not going to provide much guidance, but from a planning perspective right. There's a third right now your inventory position looks pretty reasonable so what are your expectations.

Cher, Hi, you're thinking about the search and then leveling off and then but should be a recession theoretically now and and for the backup it here.

And this is Marvin I'll take the first or that I, let Dave.

The second base.

You're right. This is a very unique an unprecedented environment that way, but what we can tell you.

We had very strong sales in April as they mentioned in his <unk> that momentum S. continue to to make that includes a triple digit clubs and lows dot com that also transition to label intimate.

We don't anticipate we're gonna see negative what we do anticipate within a sea shell start to moderate at some point in a lot of order disk or and then it back half of the year.

Interesting about this environment is that this is not a housing recession you go back to 2008 2009, you're in a housing recession and so the home improvement business was directly impacted this is obviously different.

Saying steel sustain strands almost because the sheltering in place and they're finding those projects around the house, having said that.

Like every other company out there we have very limited visibility to what's gonna happen in the out much in out orders, but we do feel as though even in this unprecedented environment, we have a really good execution plan.

Resulting Q1 reflected this holiday that yeah, I, just add kind of a couple of points. One real time, we're tactically respond me and manage into the increased demands for consumers for these are essential products that are seen in our four so one we'll find a working on that statistically importantly worse still wondering are long.

<unk>, well, making investments to date and drive long term shareholder value.

Out here, so we had not deviate from that playbook in three we have developed a variety of.

I guess plan that can allow us to flex fulfill the merchandising perspective to lean N.T. more nondiscretionary type items.

Over the back habit, if required and second.

Oh with all the tools, we couldn't play population naked able to flex our labor and operating expats profiles to manage in in a a slightly softer demand environment.

Okay and then my follow up is there I I doubt with plus 20 type of calm sounds like that's what you're running any anything and T.I.Y. yellow flag and it sounds like the pro is also pasting the d. I like customer at the moment can you talk about anything you're you're hearing as far as the type of job and if they're there.

Backlog, it's starting to fill up.

Well I think what what's interesting is this distress remains in India, <unk>, but for us to focus.

<unk> healthy and that customer that's transition primarily to outside project.

Also as a reminder, our customer is these smaller what we call it a pickup truck.

Oh was left impacted in this.

<unk> downturn, Dan the larger more industrial Oh, so even though oh was not as robustness D. why are pro growth is still is strong and a quarter and that's spread continues and and and their pipeline is more delayed and not cancel and now you're starting to see those jobs picked up.

Another interesting data boy is in the states that are beginning to reopen we're seeing our stores outperformed a toll company in those locations, which which to US is a is a day to fly, but it but as a as a glimmer of hope that were able to sustain are <unk>.

Months, even when there is a broader competitive landscape out there, but but again, saying and does a lot. We don't know there's a lot of uncertainty, but as they say we have a lot of lovers that we can poll from an expense management perspective, and and build boats and Joe Macfarlane <unk> really details label.

From that 2000 May 2009 period, when we had to transition.

<unk> two or more repair of main this type of strategy, we know how to do that so if that is a requirement we have a very experienced murchison operators that could make that too.

Right. Thanks, Good luck.

Thank you I mean next question comes from the line up my <unk>.

Question.

Morning, and Clobbered, taking my question why would I know you're not expecting negative <unk> look at that age under date, <unk> <unk> <unk> <unk> <unk> pulling for words demand from each year period, and if that's the case why wouldn't council meeting.

Well <unk>, we don't use <unk> because these were projects that were on to customers to do list that they simply didn't have time to get too I mean, a as a reminder, maybe we're in the essential retail business and two thirds of what we sell his nondiscretionary and.

And what we saw a lot as customers coming in and fixing things that they had just delayed so we don't see it as a pool or at all look we're we're blessed to be opening we'll very thankful.

<unk>.

But this is without question the most challenging environment <unk> I've ever worked then and when we look at what the customers are buying and we look at the sustainability of it we don't see what occurred and Q1, we don't see what occurred in April.

All we just see it as a unique demands shifting based on their competitive landscape based on coastal sheltering in place.

[noise] understood and then a click two parter for days.

First part is if we strip out the benefit in gross margin you stop whose paper all mixed in from advertising and promotion it looks like he's still haven't recoup everything that you you Boston the first quarter of last year at what point will you be able to reach everything that you lost in gross margin or you just couldn't structure.

Shall be lower in your commentary around to share repurchases indicated that you're not going to do it for for this year what happens if there's a v. shaped recovery or the business continues to perform very well under what conditions with you were doing share a <unk>. Thank you very much yeah.

It's our expectation that he would recover by the end of the year, our gross margin to the baseline rate that we talked about that was our prior guidance and were were largely working on that day any day out I'd say, there's a combined team between early merchandising finance focused against that effort and I I actually really pleased with.

Progress they made and we can continue to push forward. So it's I feel like we're really good stead, there and we're kind of making the right invest much to improve our performance and then secondly from a share repurchase perspective listen, we'll wait and see I think the good news is at the moment, our cash flow is very well Boston barely straw, which showed up our ballot.

Eat them or quality perspective, let's just kind of watching she just give them the dynamic nature of this market and she will be stand <unk>, we'll watch it carefully as we go through the bounces yet.

It's very much.

<unk>.

Thank you my next question.

<unk> <unk> segment, let's credit.

What's your question.

You guys get morning, Thanks for taking the question I Wonder if looks a little bit on S.G.N.A., obviously very good leverage in the quarter you discussing incremental cost obviously, but you had some offsets I'm just wondering if you can elaborate on some of those positive offsets in the quarter, how sustainable or those as you look into the second quarter and then just regarding the 320.

Clinical costs, how should we be thinking about that bucket as well. Thanks.

So so I'll I'll take the first part is that I handed over to Joe Macfarlane I think that.

The key to our ability to have the the leverage performance what was the new scheduling and labor management system.

Thing is everything in our so since I've been incredibly her wallich doing this time, but the ability to make sure. We could look at the demands of the business by location by Department of the story to schedule effectively wasn't large parts I'll, let your Macfarlane top about.

What we were able to benefit from the labor labor scheduling system. In addition to US another expense related initiatives that they drove it operation.

<unk> so as a as we've been working on our 60 40, and again that is to shift our labor productivity from tasking just shelling out we are well on our way in our 60 40 transition it should be thinking about things and Margaret mentioned, the customer centric schedule that we were able to.

Really dial in our our associate staffing based on departments that were lifting.

Reallocate labor in the area store that we're suffering yeah and also the smartphones the ability for.

Associates to to be able to sustain 150 per cent cops and dot com and a month of April 80 per cent for the quarter would not have been doable, we not a dozen things like our pick out.

And the smartphone applications as it really loudly associates to set up a curbside delivery insist that they're a number of things throughout the quarter of the operation initiatives that we continue to stay focused on our centralize receiving so a lot of things.

Allow us to gave that leverage yeah. So I'll just add that you'll get a shout out to all the obscene should really be a very focused and really got a lot efficiencies. This quarter. However, there there will be additional costs that we won't occur as the new operating model goes for we incurred cleaning incremental costs for clean including social.

Distancing ambassadors and our stores to me at age the cues in a in flow through from traffic respecting some some of those costs, which we inquired about 35 million in the first quarter are probably ongoing for about for this year.

And what about the 275 million how much of that is ongoing past the first quarter.

So so sad made an our goal is to take care of our association.

Route that in Q1, we invested roughly $340 million in our associates.

In our customers in communities.

We're going to continue to make sure that we take care of our services as this pandemic continues to drive a unique environment in our stores.

Anything else, it's difficult for us that project, then that's going to be but as an example of we paid out $80 million and especially payments in March.

Two to all the wage increase while they're so sits in a month April another 80 plus million dollars and special pages for them up and May Joe talked about the winning together payment that we're going to make over and above the target for them lots of June and so we've looked at the least bar associated <unk> would make the appropriate decision based.

On what we think is is in their best interest.

Okay. Thank you for that you just to follow up here on that May quarter to day trend are you seeing the composition of growth change at all between D.I.Y. and pro and are you seem to pick up in some of those weaker installation heavy categories like kitchen in Bath any signs that those are starting to improve more as the restrictions are using here. Thank you. So I'll I'll.

Take the first followed Joe talk about didn't stop used to show that the is is yes do you out why remains very very strong scroll is improving and remember what I said, because our pro was a smaller pickup truck throw the dead pro tends to be less impacted by macro economic factor.

So the <unk> healthy, but they're getting even more healthy as the week and days progressive throughout the year and as I mentioned in stays the reopening we see strengthen our business, but we also see split in these urban store locations remember I mentioned in the first quarter our remote stores.

Dramatically out before and urban smallest almost 650 basis points, we're starting to see don't urban if market start to improve as wall and <unk> and so as as they mentioned as a broad geographic positive double digit forms that were saying and joking talk a little bit about the installer. So from the install piece Marvin mention that.

Install heavy related categories, you know for a quarter or significantly down as referenced in a negative cops and kitchen about as we hit progress through the quarter back and look week by week, we have a really robust dashboard that we look at that includes things.

Future Leach and sit on the exterior installation projects were really seeing that business coming back very very quickly. So we're very pleased there we are making progress the interior projects, but that will be slow and that'll be tempered as our consumers feel more and more comfortable.

Allowing our pros in their home at our stores there huh.

Okay. Thanks, guys Festival.

Thank you are next question comes from the line <unk> whatever core eyesight. Please proceed what's your question.

Hi, Thanks.

But I had a follow up for Dave and then <unk> I had one on that they've just the the 340 is that she did Sir 320 on code that is any of that cruel, but something is basically you might get paid out later this year like extra vacation or was that basically.

Some of the corridor and then Margaret.

<unk>.

It's largely costs from a quarter, there's always some cools based on when things actually get paid but largely this is a expenses that are curved into one.

Perfect and you and and it sounds like you're comfortable if the if the leverage ratio falls from 2.7 down to to to.

Yeah. If if the results are strong you you want us to be more conservative on the balance sheet.

That's correct and you don't get our leverage ratio as we said today, we're probably a little bit over to eight at at this point in time, but if you let the cash that we have our balance sheet, well well below that and I think it just given the unprecedented environment, where operating then we're just going to be conservative here for a while until we try to see how this plays out about here.

Makes total sense and and Marvin you're talking about the the digital surge and also pilots happening by geography, and and by even customer I could you give us some more about the the changes and improvements you're making in the multi channel experience and and just any metrics around the customers that are using it that might be.

Newer now behaving differently or more frequently since they they use all this dot com.

Oh, what I can tell you Greg <unk>. We're just please that the work that we put into.

Stabilizing and Modernising was that starting to pay dividends as we mentioned the last couple of pause back last year, you know the entire dot com site was on a decade old platform is so weird a process of transition that will will be complete just porter, but that allowed us to take on the the man.

<unk> was saying is that your customers simply want a shop.

The way that they choose to in the past we couldn't accommodate that you know Joe mentioned this repaired comments when you start to to get requests from customizable curbside, we put that up and going in three days I mean, this time last year, we've been impossible to do that cause we didn't have the infrastructure bill bolts in emerging teams also died.

Nice job of adding additional skews, an allergy pill talk about something that worked and merchandising done.

<unk> has allowed us to drive the dotcom business in in some of the future work that that we have in place to drive dotcom 40000, a year.

This bill So you know just a lot of work from the online teams blows the core emergency too you know get relevance cues online relevant categories product. In addition to being able to support the operation work that goes on inside the store, but along that I you know as I mentioned in like opening comments the capabilities that the teens continued to work on.

You know to enhance delivery operations did schedule deliveries to be able to shift from any of our locations all of that work continuing to to to go in to be put in place through the balance of the year. So just lots of improvement little continues to go on low stuck in Greg Other point I'm, making me I would say roughly 90% of our dot com.

Sales I fulfill all picked up at a store.

And and plus that's significant because anytime the customer can pick it up at a store that helps us to defer the cost of operating a platform.

The good news is lost I caught a little only get better but about sort of here and as I mentioned were triple digit growth in April triple digit growth from what today and and we can sustain that and we're having improved functionality for the customer each and every weekend does something that we're excited about the future.

Great job guys. Good luck. Thank you.

Oh, Yeah I looked question comes from the line, Eric Showered with Cleveland Research paper signature question.

[noise] two two things first of all in terms of on line the.

Pick up in store fulfilled its store I know you said that.

Filled from the store, but how much of this is is getting delivered in the mail and how much of it is getting picked up at the store can just give us what that number watching the quarter.

So Greg is Joe So just over 60% of our orders are picked up in store and then the incremental is fulfilled primarily three store.

Okay.

And then secondly in terms of the the promotion and merchandising strategy for two Q. I guess a question for bill the strategy around promotions and events for Memorial day and fourth of July how are you planning on that and then curious as you look back to how you manage spring Black Friday.

The reduced effort to drive traffic did you end up seeing or how material, what's the negative impact on sales from that.

And then bridge that how you think about memorial day in July 4th as well.

This is Marvin I'll take the spring Black Friday, the Hell at Bill talk about Memorial day issue too.

So when we look at spring Black Friday, we receive minimal incremental sales benefit from the vet.

Due to the distribution process of print media, we were unsuccessful and pull into tab from distribution.

Look at all other forms of media.

Although the traffic driving mechanisms 40 event was pooled so.

<unk> so from that the cells were were minimal and let me make sure just for the brought all use the other fine how we look at print media.

Praises the least affected marketing medium and we have.

And total sales contribution to generate about credit or lows 0.7 per se. So I know there was a lot of.

Discussion that spring Black Friday was a benefit us in a quarter, but as I said it was it was incrementally minimal at best in addition to that.

You know we close for Easter.

And we were forecasting Easter to be a plus 200 million dollar a day and when Dave then Jodie fault I'm divorced I sat down and made that decision to flows we had no idea at that time I would make the sales up but we felt like it within the best interests of our associates and their families or give them a day, all and we would just take.

The the financial.

<unk>.

The lack of a better term for that decision, but we felt like that it was simply culturally the right thing to do so when we take the clothes for Easter.

We take pulled on all the traffic driving mechanism to spray Black Friday.

<unk> your best turned into a negative environment for myself effective for us. So so that kinda summarizes eastern spring Black Friday looking in a room Mirella Bill talk about two to American in regards to the pricing strategy as we've shared with you before you know our intention has always been to.

Change the pricing strategy at Lowe's and get to be more of an everyday competitive race programming. So that we're really started a year ago. He can use into 2020. So as we look at Memorial Day, you know Memorial day can be very consistent you know we operated cute one and as we get into the bag has continued with July July 4th.

And father's day, you know, we'll get again trying to implement that the pieces in the place to the pricing strategy. You know more of a you know a normal pains from you know being relevant for data meeting relevant for the holiday in July 4th. So that's how about particular in every last quota I'll I'll make an I think they will close with.

Comment is I mean at the end of the day, we want to.

Be a value oriented retail and but we don't want to be promotional <unk> I think that's what the support the bill if if it is very first day here. So you may not see <unk> using traffic driving media to get it could make footsteps in the store and is unique environment that we're operating in well window.

<unk> company, and we want them to see a value on the shelf because if there's a time that you ever needed a value for customers. This is one of those times, but we will be very cognizant unconscious of not driving traffic in in an environment, where is it that may put people at risk and that's something that we're going to balance really.

<unk> yeah into more of his point you know obviously, we you know our stores, there's a lot of value in our stores from the items that we sell and if you just look in the will be in there and he looked at the number of items that any promoted this year versus the number items that we sold on promotion last year, we're down to about 24%.

Oh, that's helpful like it.

Thank you I liked question comes from the line of code mixing with Goldman Sachs. Please okay. What's your question.

How could running.

<unk> I just wondered what took hard to <unk> do you have like yeah, how Oh, we acquired customers <unk> during the first quarter and.

So how many customers.

<unk>. Okay. This this was marvelous a really good question what I will tell you that this was such a unique quarter.

And we were sold focused on the first and foremost making sure that we were looking into the health and safety of our soldiers in our customers.

That is not a day to said that we spend a ton of time looking at.

Candidly as I said I'm I prepare comments.

The moment, we started to address the challenges a covert 19 Bar Association customers, we became less focus on the financial performance of the company and we came became more focused on trying to provide essential products that our customers in communities need. It I'm sure. We can get that data and we could probably sharing to invest relation.

See if you get it for you, but we were just so focus on just trying to run this business sort of our customer service our communities and keep our Sosa save the there are a lot of data says we didn't pay a lot of attention to this.

Okay, that's got that.

I realized are very very strong.

Yeah.

<unk>.

Yeah.

Category.

Category.

I mean, I'd trade aren't by the crowd.

No average ticket remain strong we have seen no trade down Ah.

Our customer segment has been surprisingly resilient and.

As I stated earlier customers rediscovered low we we know that for a fact.

But again patents have been strong they've been very consistent.

And working taking as you can imagine to try cut out a day by day albino basis, So we could make the necessary adjustment.

Okay.

Michelle look I think one more question please.

Thank you are I know question no line Christopher.

J.P. Morgan.

What's your question.

[noise] Thanksgiving morning to to to margin questions first Dave I'm I'm in gross margin 150 year over year. You don't you think about that the lower promotion and the next benefit how did the underlying expansion play out relative to your path plan and then you know.

In an environment hypothetically, where you know they the category goes flat or or less tape down in Los thing they'll digits in the back half of the year because in the recession lingers longer.

Do you think about you know as she and eight dollar <unk> or payroll d. leverage and that sort of environment, given now that the strong flexibility that you've shown.

Oh for the past 18 month. Thank you.

Sure. So yeah, Okay goes marginal flip the Joe talk a bit about S.G.A., obviously from the Gulf margin perspective is my.

Yeah. My prepared climax, we made really nice progress I think maybe the best way to look at it is in February. So when we entered the here you are actually wanting our played walk we had worked between snacks and merchandising to improve our class complements apart and more data vendors to manage our promotional Kate it's more effectively.

And I think were largely hitting and and hitting our plan. If not you know probably a little bit in advance of our plan as we went into February obviously, we got turbocharged Tibet from across large an expansion perspective due to code that in the back half of a quarter, but I feel like the underlying elements that you put in place or driving.

<unk> appointments there we still have to work to do when I Don misses that this is a marathon not a spread up I think we have to white pieces together to to play out improve on marching performance. Both in the short term, but the long term and maybe I'll flip it the Joe talk a bit about S.G.N.A.

Good thanks, Chris So from an S.G.N.A. standpoint, the team did a really nice job in a few one obviously is David mentioned that we looked forward. It would be continued strong sales we have a rule of thumb based on sales out performance and payroll leverage but in addition.

The hard work that the ops team is done putting new engineers labor standards and labor engine. The team built the mix between ticket and transactions and we're very common our ability to continued to leverage on this gina.

Great. Thank you very much for calling him today and I'm talking about lows.

Safe and healthy.

Thank you. This includes today's topic to me that's an extra like this time. Thank you for your presentations and have a wonderful.

[laughter].

[laughter].

[music].

[music].

[music].

[laughter].

[laughter] good morning, everyone and welcome to the low companies first quarter 2020 or any topic call.

My name is Michelle and I will be your operator for the costs.

I've never mind the conference it's being recorded.

I will not <unk> Vice president of Investorrelations. Thank you you may be good.

Thank you and good morning, everyone here with me today are Marvin Ellison, our president and Chief Executive Officer, they'll both our executive Vice President merchandising, you'll Mcfarland, our executive Vice President stores, and they've done our executive Vice President and Chief Financial Officer I.

I would like to remind you that are notice regarding forward looking statements is included in our press release. This morning, which can be found a load investor relations website.

During this call we will be making comments that are forward looking including our expectations for fiscal twentytwenty.

Actual results may differ materially from those expressed or implied as a result of various <unk> uncertainties, an important factors, including those discussed in the risk factors Mdna and other sections of our annual report on form 10, k. and or other S.U.C. filing.

<unk>, we'll be discussing certain non gap financial matters.

Conciliation of these item to U.S. gap can be found in this morning's press release, and our Investor relations website with that altering the call over to Marvin.

Good morning, everyone. This is an unprecedented time as we all navigate the ongoing global economic social and health impacts Hope Cobin 19.

I like to start out by extending my best wishes for the health and safety to you into your family.

Like most retailers, we began to first quarter focus on meeting our internal financial plan, while executing R. Q1 retail strategy.

However, due to the global health crisis calls Mark covert 19, everything changed in late February and we immediately pivoted boss stabbing a cross functional Cobin 19 task force opening a company wide command center and Reprioritizing R. Q1 objective.

As a company our focus shifted from running a business to achieve our financial plan to functioning as any central retail or operating in a pandemic with three key priority.

First creating a safe store environment for associates and our customers.

Second providing support for our community, including health care providers, and first responders and third.

Financially supporting our soldiers during this unprecedented town.

As a result of these new priorities in the first quarter, we invested $340 million to support our <unk> health care workers first responders and communities.

In addition, we've committed $50 million of charitable contribution far communities to do our part in this time of need.

I like to begin by highlighting a few of the operational actions that we took in response to cope with I.T.

And later in the call Joe will provide more details on these efforts.

In early March we shorten are still operating hours by closing three hours earlier each day at seven pm.

So we could increase the reported cleaning routines and restock shell.

During the hours that are stores Roland we implemented several operational changes to ensure the safety of our soldiers on our customers.

Including the garden centers are stores average 144000 square feet of space.

To develop our social distancing safety procedures are team took a strategic data driven approach tracking historical costs, what traffic patterns and identifying areas where customers tend to congregate.

Based on this analysis, we implemented additional safety in social distancing protocols.

Read the state area.

Want to sell checkout outside garden and the paint death.

Our store team was so affected by the implementing an executing the enhanced safety guidelines that our customer service scores improve 200 and basis points.

A year and the first quarter.

This is truly an incredible accomplishment and a reflection of our commitment to customer service even in this unprecedented environment.

Also to provide our value to social equity much deserved day off to spend with their family and a loved one we close all stores and distribution centers on Easter Sunday.

This decision negatively impact itself an opera the income, but it was absolutely the right thing to do far so.

We have a unique in a resilient business model that operates well when our communities need us most well this a hurricane lowered tornado or global health crisis.

We are committed to being there for our customers.

And I'm pleased that over the past 18 months, we've established the agility to provide our customers with these such a product they need to keep their home safe an auction off and their businesses running.

None of our success in a first quarter would've been possible without the outstanding commitment of our store sauces working on the unprecedented condition.

I'll fill leaders also distinguish themselves during the quarter Division Presidents regional Vice-presidents district managers and spill merchants abandon a normal routines and spent time each week visit next door to provide leadership support and guidance far store managers and frontline leader.

As someone who started out there retail career as a $4 35 send an hour part time store associate I understand the importance of seeing the leaders of the company out on the front lives doing work right.

Let me now turned to our first quarter results, which reflect the benefits of our retail fundamental strategy.

Improvement in our overall execution and the strength of a home improvement business model.

The first quarter, we delivered strong sales growth would total company cop cells growing 11.2%.

<unk> home improvement cops was 12.3%.

Strong demand from both D.R.Y. and pro customer.

Overall demand strengthened as we move to the quarter and that self momentum has continued into them off of me.

What a quarter the I'll walk cop slightly outpaced pro corrupt and the uptick in D.R.Y. demand was partly driven by the arrival of spring weather and many western and southern geography.

As well as a customer mindset that was heavily concentrated on the whole.

We sort of broad based project activity ranging from outdoor landscaping and other beautification project too essential indoor repair and maintenance work and long differ home projects to to do list that customers hadn't previously tackle given a busy schedule.

Come sells for pro strong supporter of our focus on retail fundamentals.

Children job like quantities.

Flexible delivery and improve service from all that we put in place in 2019.

And as you would expect we saw increase demand and cobot related products, such as cleaning supplies and appliances like refrigerators and freezers.

Partially offsetting these games with softness in heavy indoor installation categories, such as kitchen in Bath as customers were reluctant to invite people into their homes.

In total we estimate that the net impact of covert related sales contributed approximately 850 basis points taught told Copney cop grow.

Which includes 80 basis points of cleaning product.

70 basis points of refrigerator freezer cells, and 700 basis points to an acceleration a project primarily for the D.R.Y. customers.

Moved to the core there was also a sharp upticking sales on lows dot com.

Customers began to shop more and more online.

Investment in a lot infrastructure in progress to date with a Google cloud migration greatly improves sites stability and allowed us to effectively handled the increased traffic.

The quarter lowest dot com cells were off 80% overall.

<unk>, even stronger growth rates for pro customers.

Penetration increase to eight per cent of total sales.

From a geographic perspective, we had broad base growth what positive cops and all 15 geographic regions and all three U.S. Division.

Regions that outperformed atoll, Copney cops were Atlanta.

Charlotte.

Dallas.

<unk>.

Nashville, Los Angeles, Saint Louis and Seattle.

And once again, the west will that top performing geographic division.

The geographic footprint of our stores in the U.S. also played a role in our strong sales performance into one.

To cope with 900 crisis create it less disruption in rural areas of the country, where approximately one quarter of our store based is located.

Our role source outperformed <unk> over 250 basis points.

Conversely on average our urban store the experience more demand disruption from the corporate 19 crisis.

Approximately 10% of our <unk> basis classified as urban and just subset of stores underperform to copy caught by more than 400 basis point.

In Canada, we posted negative top sales as performance was adversely impacted by store closures and other regulatory related operating restriction.

We have initials in place to improve performance and remained competent in the long term potential of our Canadian business.

During the quarter, we shifted our marketing efforts by dramatically limiting our promotional messaging instead, highlighting our commitment tar communities and our appreciation for for a lot of soldiers.

In fact, as he presented Sparser on E.S.P. and for the NFL draft, which posted record setting viewership. We ran a campaign the spotlight and thank our sauces and how they support their communities and the first responders and a time of crisis.

Auto accident like closing on Easter, reducing promotions closing stores throughout was early each day and limiting customer access to key areas like paint and garden limited ourselves and a quarter. They are reflection of our culture and to the fundamental commitment to the safety of our soldiers in our customers.

<unk> also showed at Wal consumers was sheltering in place just quarter. They had an opportunity to rediscover lows both in store and online and improvements we made in our business over the last 18 mosque allowed us to meet the customer demand.

I'm also pleased at doing this time of high levels of unemployment in our country blows at heart over 100000 store. So just for the spring season.

In addition to assist other retails an operating safely in this exceptionally challenging environment, we shared our best practices with the retail industry leaders Association.

The only competitive threat were focus on right now there's a covert 19 virus.

Although our current and future environments, it's unpredictable I'm confident in our ability to execute.

Continue to provide the central products and services that our communities neat.

And in closing I'm tremendously proud of our Sosa and will like to again to express my heartfelt appreciation for a hard work and their dedication.

And also want to think I've been to partners for their great efforts to step up to the challenges that this pandemic us presented and what that I will turn to call over to Joe to discuss the actions that we've taken to support our customers operate effectively and keep our sources say.

Thanks, Marvin a good morning, everyone I'd like to begin by echoing marvin's appreciation for the tremendous work that are associated done during this crisis across or stores and distribution network.

As always or highest priority is to health and safety of our associates and customers.

I'll take a moment to review the operational changes that we implemented this quarter in response to cope with 19.

We began with an immediate assessment of how to best facilitates social distancing in our operations and then quickly acted to implement the following.

<unk> floor markers, adding social distancing ambassadors to manage customer traffic flow.

Bridging new technology available on handheld smart devices to monitor store traffic, helping store managers limit customers based on the store footprint in line with regulatory requirements and removing product from our stores to help free up additional space for our customers, especially in high traffic areas as Marvin mansion on average our story.

144000 square feet and size, including the Garden Center.

Therefore, we also deployed at data driven process to implement additional safety measures in areas, where customers tend to congregate such our point to sell registers, the garden center and the paint desk.

For example, in our garden centres.

Biased or merchandising services teams or M.S.T.D.'s to remove shelving in product to encourage customers spread out.

And at the Garden Center entrance, we set up one way traffic flows and limited the number of customers entering it any one time.

Tincher clean safe operating environment, we implemented more stringent cleaning procedures added more hours for a third party cleaning service enclosed our stores three hours early at seven PM to allow for increased claiming in restocking activities.

We also determined that keeping our stores open until seven PM allowed for enough operating hours during the day to minimize concentrations of customer traffic.

Lotus one of the first retailers didn't stop plexiglass yields a point of sale areas in all stores. We also distributed gloves and master associates to wear during their shifts.

As a reflection of our commitment to our associates, we provided them with additional financial assistance totally $290 million in incremental investment in the first quarter.

We made to special payments to hourly associates to help with unexpected expenses one in March and one in may with each payment consisting of $300 for full time and $150 for part time and seasonal associates.

And for the month of April we instituted a temporary wage increase of $2 per hour for all hourly associates.

Further protect the health of our associates and those around them. We operate 14 days emergency paid leave for all associates, who needed it and for those at higher risk for severe illness from coping 19, we operate emergency paid leave up to four weeks.

And the shore sport to our dedicated frontline managers, we have provided them with an additional two weeks of paid vacation to recharge and spend time with their families.

We also extended Tele medicine services to all associates and their families whether or not they were enrolled in Los medical plans.

And to do our part and protecting frontline medical workers first responders, we committed $50 million for it to our communities this year.

Looting approximately $10 million worth of essential protective products, including M. 95 masks.

And as online demand increased smart devices loud associates to felt fine lines pick up at store and parcel shipping orders more efficiently.

In fact, this quarter, we rolled out curbside pickup in a matter of days. This rapid response would not have been possible at the technology, we deployed in 2019.

A new customer centric scheduling system and scheduling effectiveness tools also allowed us to monitor store traffic versus availability and deliver customized tiered sets of priorities for stores based on their capacity level.

As we look forward, we remain committed to our retail fundamental strategy and investing for future growth.

In closing I'm incredibly proud of power associates responded and adapt it to this challenging environment. They serve our customers in communities anytime with tremendous need and we remain committed supporting them as are most valuable asset.

I'm really pleased to announce at 100 per cent of our stores earn their winning together profit sharing the bonuses. This corridor totalling $87 million based on stronger than expected star performance Misrepresents incremental 24 million dollar payment to our front line associates above the target payment level. Thank you know and out turned to call over to bill.

Thanks, Joe and good morning, everyone has Marvin mentioned, we posted us home improvement comparable sales growth of 12.3% and the first quarter driven by outperformance an essential D.I.Y. in pro categories.

14, or 15 merchandising departments generated positive comps with weakness limited to installation heavy product in kitchens in Bath.

We saw a very strong coded related demand for essential cleaning products, along with other homes <unk>, such as refrigerators, freezers and D.I.Y. home repair products.

Customers isolated in their homes this quarter they engaged in a variety of projects, which drove double digit comps incor spring related categories paint in other critical repair and maintenance categories.

During the quarter, we posted double digit comps in lumber, which benefited from strong unit demand from both pro indie I like customers, but continues to be driven by our improved investments in job lot quantities.

Core pro categories also performed well with double digit comps in rough plumbing hardware and tools.

Within rough plumbing would deliver double digit growth in piping fittings has our expansion of job lot quantities. In this area continues to pay off along with growth in other essential categories like air filtration pumps in water filtration.

Or hardware business benefited from the strength in fasteners in our general hardware categories supported by the addition of pro brands like fashion Master G.R.K. in Powerpro one.

These product categories are the critical project Completers for both the pro and the D. I like customer.

Tools, we continue to see a strong customer response to our Craftsman program.

But we also saw strength from the launch of our new cobalt X.T.R. 24 bolt power tool platform as both the heavy D.I.Y. and pro customer.

Quickly recognizing the quality and performance of this great product.

Within our key pro tool brand such as to Walt the number one power tool brand in industry.

We continue to see nice growth across all segments and we are pleased with the results. We are seen through the addition of our exclusive to Walt 12 volt Compaq line of power tools.

Lastly, we continue to showcase new and innovative tool products from Bosh Lufkin Spider in Metabo H.P.T., along with cobalt to build on the strength of our tools business.

These brands combined with our investment in job black quantities in our improve pro service model or driving new customer trial, and increasing our share of wallet with our existing pro customers.

As Marvin and Joe indicated the progress we made on our strategic initiatives in 2019 positioned us to execute well this quarter.

For example, having our merchants in place for the entire year allowed us to fully plan for the spring season.

Respond to the rapidly changing operating requirements. We are currently facing.

I'm also proud of our vendor partnerships in our recent brand introductions, both of which have allowed us to better meet the customer demand.

Like to take a moment to mention just a few of the suppliers, who made an extraordinary effort to keep our stores well stocked this quarter despite their own challenging operating environments.

Within our building products categories, some of our suppliers that deserve a special shout out her Charlotte pipe <unk>.

E.C.M.D. shark bite in Idaho Force group.

In home decor three m.

<unk> and Samsung were true stand out in in our hard lines business Killmon, Bonnie old Castle, and MTD products when above and beyond in their response.

And finally I'd be remiss, if I didn't give a big thank you to the efforts put forth by Zap cleaning products safety zone in Medline. These three suppliers went above and beyond to provide us with hand, sanitizer and gloves for our front line associates.

Turning back to our associates, our field merchandising teams played at critical role in helping our stores adjust to the changing environment, along with being on the ground to respond to 10 tornadoes in two earthquakes that impacted parts of the U.S. during the quarter.

And our merchandising service team Paramus tea also went above and beyond as they were ready to do whatever was needed during the quarter to help our stores respond to significant increases in demand.

This quarter or M.S.T. is where key in our ability to quickly reconfigure our stores to support social distancing.

The support of these teams is invaluable because they are the boots underground focused on taking the time consuming task off the shoulders of I read best Associate.

And looking ahead, we continue to make investments to drive future growth and in the second quarter. We're excited about our roll out of Simpson's strong tie framing hardware and fasteners.

These trusted pro products will be available in stores nationwide with an expanded assortment on lows dot com.

Helping pros to fulfill all their hardware needs in one place saving them time and money.

And it's spring is now a ride across the country. We will continue to leverage our position is the number one destination for outdoor power equipment in the U.S. with our leading brands such as John Deere Honda Husqvarna errands, and Craftsman to provide customers with an outstanding selection of products helped him complete their outdoor projects at the.

The same time, we're proud to offer customers the top two brands in grilling Weber <unk>.

As we've discussed previously we remain focused on completing our Google cloud migration in the second quarter to ensure that we build a strong infrastructure for Los Dot com.

And the teams are working quickly to add capabilities to Los Dot com over the next three quarters that will further enhance the customer experience in to continue to grow sales on this digital platform in closing we were made committed to the work ahead to serve our customers in our communities as they navigate the public health challenge of covert 19, well.

Building capabilities to serve them, even better in the future. Thank you and are now turn the call over to Dave.

Thank you Bill good morning, everyone.

I'll begin this morning, Bobby view into liquidity actions that we took during the quarter and providing an update on our capital allocation priorities.

Given the uncertain economic outlook, we decided to bolster our liquidity to plan for any unforeseen disruption.

In Q1, we raise $4 billion and senior notes.

Police the capacity of a revolving credit facility by $770 million.

After we paid 500 million of senior notes do in April 2020, we now have 6 billion up cash in cash equivalent on the balance sheet.

As well as Threebillion and Undrawn capacity on a revolving credit facility, which can be made available for any unanticipated eaten liquidity.

We believe that we have more than adequate liquidity to manage to any other potential scenarios that we can be facing.

During the quarter, we also decided to halt are sheerly purchases program.

Furthermore, we do not anticipate any.

Any more share repurchase this this year beyond what we executed in the quarter.

Q1, we were purchased 9.6 million shares for $947 million at an average price of $98 in 45 cents per share.

We remain committed to be turning capital to shareholders through our dividend program and there's always we looked for ways to drive shareholder value over the long term.

Also consistent with our capital allocation framework, we are continuing to prioritize investments in the business for future growth.

In the quarter capital expenditures total $328 million and we are still planning for a total of $1.6 billion in capital expenditures through this year.

In certain cases, we have leap prioritize some capital projects to focus on the near term need to improve our omni channel capabilities.

But our expectations for the total spending 2020.

Change.

Oh now turn to review of our operating performance beginning with the outcome statement E. Q1 with generated gap diluted earnings per share of one dollar and 76 cents per share compared to $1.31 into first quarter L.Y. and increase the 35%.

In the quarter, there was a very modest impact on operating income related to that previously inhouse Canadian restructuring.

Comments from this 0.41 clue certain non gap comparisons where applicable.

Q1, we delivered adjusted diluted earnings per share $1.77 cents, an increase at 45% compared to the prior year.

These results exceeded expectations, largely due to stronger than expected sales and gross margin rate, particularly in the latter half of the quarter.

Sales for the first quarter word $19.7 billion, an increase of 11.2% on a comparable basis versus the prior year period.

Total average ticket growth of 9.7%.

Transactions grew by 1.2%.

U.S. cop sales were up 12.3% and a quarter and we were encouraged to see strengthen our performance across both D.I.Y. and pro customers and across all geography.

R.U.S. monthly costs increased as we move through the quarter.

5.1% in February.

8.9 per cent in March and 20.4% in April.

February's financial performance was largely in line with our expectations.

But beginning to March we saw sales impacted by covert related prep activities and customers working on long delay projects as they sheltered in place.

Also lows dot com sales picked up meaningfully in March as more customers increasingly utilized online shopping options.

Continue to accelerate into April with a large step up from enough.

Those dot com sales also increased significantly what comps of over 150% and <unk>.

All are installed cells declined approximately 50 per cent.

As many customers were unwilling to allow installation work in their homes.

This wrong broad base trends that we saw on April have continued in the may with strength across both D.I.Y. and pro.

And across nearly all merchandising categories and all geography.

Or made him up to date us cop sales have been trendy at or above people result.

Strong double digit comps across all geographic regions.

Gross margin was 33.1% of sales in the first quarter and increase of 164 basis points compared to Q1 of L.Y.

Gross margin rate improved 110 basis point driven both by the actions that we took last year to lower product costs and improve our pricing and promotional performance.

As well as X. 40 basis points benefit from lower promotional activities quarter.

As Marvin mention the company pull back on promotional marketing in an effort to limit non essential crap it.

Them to stay at home orders across the nation.

Gross margin also benefited from approximately 55 basis points related to favorable product mix.

S. G.N.A. for two one was 21.3% of cells.

And improvement of 45 basis points over the prior year.

This included $320 million of Cobra related expenses incurred during the quarter with 275 million in financial assistance for frontline associates.

Approximately 35 million <unk> cleaning and other pandemic related operating expenses.

And approximately $10 million and charitable contributions.

While the 320 million dollar of covert related expenses resulted in S.G.N.A.D. leverage of 160 basis points.

Impact was more than offset by payroll leverage of 105 basis points, driven by higher sales and improve store efficiencies.

Advertising leverage 40 basis points.

Unemployed insurance leverage at 25 basis points.

Adjusted operating income March an increase 208 basis points to 10.16% sales.

Note that Cobra relate expenses are not excluded from our adjusted results.

The effective tax rate was 25.1% compared to 16.6% last year.

Prior year quarter benefited from the change in approach really to the exit from Mexico operation.

Adjusted effective tax rate was 25% above the prior year rate of 22.9%.

$14.3 billion inventory slightly lower than the prior your level.

Now before I close, let me address or 2020 business outlet.

Spite are solid performance this quarter and strong sales momentum continuing into may we're withdrawing our prior guidance for the full year 2020 fails operating income and earnings per share.

And this unprecedented operate environment, we like other companies have limited visibility into teacher business trends.

Which result, and then and usually wide range of potential outcomes for 2020 financial performance.

However, going forward, we would like to provide additional transparency regarding our performance.

Is my expectation that will be give me more frequent periodic updates on our results throughout the second quarter.

In closing remain confident about the future of our business and our ability to continue to drive sustainable long term shareholder value.

Five I'd like to extend my appreciation to the associates at Lowe's across the world, who wisdom to meet the challenges, but this global health prices.

Operator, we're knowledge for question.

Thank you we are now already.

It seems like that's the question. Please press start one on your telephone keypad. So we can all your question.

Sorry to in order.

From as many individually. So we I think you. Please let yourself so one question and one <unk> <unk>.

Our first question comes from the line I mean gotten like Morgan Stanley pleased to see what's your question.

Thanks. Good morning, everyone. My first question is on.

I know it didn't.

It really answer and you're not going to provide much guidance, but from a planning perspective right. There just started right now your inventory position looked pretty reasonable. So what are your expectation that chair I thinking about the search and then leveling off and then what should be a recession theoretically now and for the backup it here.

And this was Marvin I'll take the first part of that I, let Dave take a second phase you're right. This is a very unique an unprecedented environment that way and but what we can tell you is that we had very strong sales in April as they mentioned in his <unk> that momentum best continue to to make that includes.

Triple digit.

And lows dot com that also transition label intimate.

We don't anticipate we're going to see negative cops do anticipate we've got a sea shell start to moderate at some point in the latter part of this quarter and then it back half of the year.

What's interesting about this environment is this is not a housing recession.

Back to 2000 late 2009, you're in a housing recession and so the home improvement business was directly impacted this is obviously different.

We're saying steel sustain stress from our almost because the sheltering in place and they're finding those projects around the house.

Being said that.

Like every other company out there we have very limited visibility to what's gonna happen in the out lots and outquarters, but we do feel as though even in this unprecedented environment. We have a really good execution plan and you think the results in Q1 reflected that solid Dave adding it yeah, I mean, I just add kind of multiple.

Points, one real time, we're tactically responding and manage into the increased demands for consumers for these essential products that are seen in our store. So one we'll find a working on that second me importantly, we're still want our long term playbook, well, making investments to date is drive long term shareholder value.

The out here. So we had not deviate from that playbook <unk> three we have developed a variety of.

I guess plans that can allow us to flex both from a merchandising perspective shut to lead into more nondiscretionary type items yeah.

Over the back happen if required in second grade able with all the tools to be put in place operational eight to be able to flex our labor.

<unk> some manage in in a slightly softer demand environment.

Okay, and then my follow up in there I I doubt with plus 20 type of calm sounds like that's what you're running any anything and T.I.Y. yellow flag and it sounds like a pro is also pacing.

Right at the moment can you talk about anything you're you're hearing as far as the type of job and if they're they're pipeline or backlog, it's starting to fill up.

Well I think what what's interesting is this distress remains an M.D.L.Y.

The focus.

Remain healthy and that customer s. transition primarily to outside project.

Also as a reminder, our pro customer is the smaller what we call it a pickup truck.

<unk> left impacted.

This.

<unk> downturn, Dan the larger more industrial Oh, so even though oh was not as robust yeah, why <unk> still really strong and a quarter and that's spread continues and their pipeline is more delayed and not cancel and now you're starting to see those jobs picked up.

Another interesting data point is in the states that are beginning to reopen we're see our stores outperformed a toll company car in those locations, which which to us.

Is a is a data point, but it but it's a it's a glimmer of hope they were able to sustain our performance even when there is a broader competitive landscape out there, but but again, saying and does a lot. We don't know does a lot of uncertainty, but as as they said we have a lot of lovers.

Pool from an expense management perspective, and build boats and Joe Mcfarland.

Really detail Playbooks from that 2008 2009 period, when we had to transition you know in our whole life to a more repair made this type of strategy. We know how to do that so if that is a requirement we have a very experienced murchison operators that could make that too.

Right. Thanks, Good luck.

Thank you are next question comes from the line of my <unk>. Please proceed what's your question.

Lording it sloppy kicking my question.

You're not expecting negative com <unk> look at that age under date <unk> point, Oh wouldn't related field of sin pulling for were given the end it from you cheer period.

And if that's the case why wouldn't come sooner and.

Well mark wheel to pull for it because these were projects that were on to customers to do list that they simply didn't have time to get too I mean, a as a reminder, maybe we're in the central retail business and two thirds of what we sell his nondiscretionary.

And what we saw a lot as customers coming in and fixing things that they had just delays. So we don't see it as a pool or at all look we're we're blessed to be opening school very thankful.

<unk>.

But this is without question the most challenging environment <unk> I've ever at work then and when we look at what the customers are buying and we look at the sustainability of it we don't see what occurred and Q1, we'll see what occurred in April as a pool or we just see it as a unique demands shifting based on the competitive landscape.

Oh and based on customer sheltering in place.

[noise] understood it at a click two parter for days.

First part is if we strip out the benefit in the gross margin you saw from paper all mixed in from advertising and promotion. It looks like you still haven't recoup everything that you you Boston the first quarter last year at what point will you be able to reach everything that you lost and goes margin or is it just construct.

Well, we're in your commentary around share repurchases indicated that you're not going to do it for for this year what happens if there's a v. shaped recovery or the business continues to perform very well under what conditions would you <unk>. Thank you very much.

<unk> <unk>, it's our expectation that because we're by the end of the year are close marching to the baseline wait that we talked about that was our prior guidance and we're <unk>, we're largely working on that day and day out I'd say, there's a combined chain between merchandising and the ants focused against that effort and I I'm.

Actually really pleased with the progress made and we can continue to push forward. So if I feel like we're really good stead, there and we're kind of making the right. That's much to improve our performance and then secondly from a share repurchase perspective listen, we'll wait and see I think the good news is at the moment, our cash flow is buried or Boston barely strongly.

Balance sheet or what did he perspective.

Kind of watching she just give them the dynamic nature of this market and she bought me stand <unk> watch it carefully.

She's about this year.

It's very much and good luck.

Okay.

Thank you. My next question comes from the line that segment of credit but please proceed what's your question.

<unk>. Good morning, Thanks for taking the question I wanted to talk a little bit on S.G.N.A., obviously very good leveraging the quarter you discussing incremental cost obviously, but you had some offset I'm. Just wondering if you can elaborate on some of those positive offsets in the corridor, how sustainable or those as you look and see the second quarter and and just regarding the 320.

I think nickel calls actually be thinking about that bucket as well. Thanks.

So so I'll I'll take the first part is that I handed over to John Mcfall, and I think that.

The key to our building.

Have the the leverage performance what was the new scheduling and labor management systems.

Thing is everyday and are so since I've been incredibly hard Warwick doing this time, but the ability to make sure. We could look at the demands up the business by location by Department of the story to schedule effectively wasn't large parse I'll, let you will be followed and talk about.

What we were able to benefit from the labor labor schedule system. In addition to some other expense related initiatives that they drove an operation. Yeah. Thanks said this jones so as a as we've been working on our 60 40, and again that is to shift our labor productivity from tasking just shelling.

We are well on our way in our 60 40 transition it should be thinking about things and Margaret mentioned the customer centric schedule, we were able to really dial in our our associate staffing based on departments that were lifting.

Reallocate labor in the area the store that we're suffering yeah and also the smartphones the ability for you know the associates to to be able to sustain 150 per cent cops and dot com in a month of April 80 per cent for the quarter would not have been doable we not.

I've done things like our pick out.

Yeah in the smartphone applications.

Really allowed the associates to set up a curbside delivery insists that they're a number of things throughout the quarter of the operation initiatives that lead continued to stay focused on our centralize receiving so a lot of things a allowed us to game that leverage yeah. So I'll just add that you'll get a shadow.

All the obscene should really be a very focused and really drive a lot efficiencies. This quarter. However, there there will be additional cloth that we won't occur as the new operating market goes for we incurred clini, it's a little cost for cleaning, including social distancing ambassadors and our sports to me at age.

The cues and it's close to from traffic respecting some some of those costs, which we inquired about 35 more in the first quarter are probably aren't going to about for this year.

And what about the 275 million how much of that is ongoing past the first quarter.

So so sad.

Our goal is to take care of our suppose isn't it will really proud that in Q., why we invested roughly $340 million and our associates in our customers in communities.

We're going to continue to make sure that we take care of ourselves is as this pandemic continues to drive so unique environment in our stores like anything else, it's difficult for us to to projected then that's going to be but as an example, we ate out $80 million in special payments in a month March.

Two dollar wage increase wildly associates in a month April another 80 plus million dollars and special payments for them up and May Joe talked about the winning together payment and we're going to make over and above the target for them lots of June and so we've looked at the least bar associated would make the appropriate decision.

Based on what we think is is in their best interest.

Okay. Thank you for that you just to follow up here on that May quarter to day trends are you seeing the composition of growth change at all between D.I.Y. and pro and are you seem to pick up in some of those weaker installation heavy categories like kitchen is that any signs that those are starting to improve more as the restrictions are easy here. Thank you.

I'll I'll I'll take the first of all the Joe talk about didn't stop these to show that it is yes, D.L.Y. remains very very strong scroll is improving and remember what I said, because our pro was that smaller pickup truck throw that pro tends to be less impacted by macro economic.

Factor them, so that that's souls healthy, but they're getting even more healthy as the weeks and days progressive throughout the year and as I mentioned in stays the reopening we see strengthen our business, but we also see spread in these urban store locations.

Within the first quarter, our remote stores dramatically out before and urban schools, almost 650 basis points, we're starting to see don't urban market start to improve as wall and <unk> and so as as they mentioned, there's a broad geographic positive double digit forms that were saying and joking probably about the answer.

You said it from the install piece Marvin mention that are install heavy related categories.

For for the quarter or significantly down as referenced in a negative cops and kitchen bad as we have progressed the quarter and looked week by week, we have a really robust dashboard that we look at that includes things like future leads and sit on the exterior and stuff.

<unk> projects that were really seeing that business come back very very quickly. So we're very pleased there we are making progress the interior projects, but that will be slow and that'll be tempered as our consumers feel more and more comfortable allowing our pros in their home in our <unk>.

Okay. Thanks, guys Festival.

Thank you are next question comes from the line of grass Mallak whatever core eyesight. Please proceed what's your question.

Hi, Thanks silent.

I had a follow up for Dave and then on strategy Marvin I had a lot on that Dave just the the 340.

That she did Sir 320 on code that is any of that cruel, but something that basically you might get paid out later this year like extra vacation or was that basically costs in the corridor and then mark potluck.

It's largely costing the quarter, there's always some cools based on a whim things actually get paid but largely this is a expenses that are curved into one.

Perfected and you and and it sounds like you're comfortable if the if the leverage ratio falls from 2.7 down to to to yeah. If if results are strong yeah. You you want us be more conservative on the balance sheet.

That's correct.

Bridge ratios, we've set today will probably a little bit over to eight at at this point in time, but if you met the cash that we have our balance sheet well below that and I didn't just given the unprecedented environment, where operate and we're just going to be conservative here for a while until we try to see how this plays out about here.

Makes total sense and am Marvin you're talking about the the digital surge and also hi, what's happening by geography, and and by even customer I could you give us some more about the changes and improvements you're making in the multi channel experience and and just any metrics around the customers that are using it that might be.

Newer now behaving differently or more frequently since they they use all this dot com.

Oh, what I can tell you Greg you said, what we're just please that the work do we put into stabilizing and modernising walls dot com starting to pay dividends as we mentioned the last couple of calls back last year, you know the entire dot com site was on a decade old platform is so weird a process.

Transition that so Google flowers will be complete just porter, but that allowed us to take on the man <unk> was saying is that your customers simply want a shop.

The way that they choose to in the past we couldn't accommodate that you know Joe mentioned this are very comments when we start to to get requests from customizable curbside, we put that up and going in three days I mean, this time last you a little bit impossible to do that costs. We didn't have the infrastructure no bill Bolton emerging teams also don't really.

Nice job of adding additional skews, an allergy pill talk about something to work the merchandising done.

<unk> has allowed us to drive the dotcom business in in some of the future work that that we have in place to drive dotcom, Puerto Vallarta yet.

Yeah that this bill so you know just a lot of work from the online came suppose the core emergency too you know get relevant skews online relevant categories product.

In addition to being able to support the operation work that goes on inside the store, but along that like you know as I mentioned in like opening comments the capabilities that the teens continue to work on you know to enhance delivery operations to schedule deliveries to be able to ship for me or locations all of that we're continuing to.

To to go in to be put in place through the balance of the year. So just lots of improvement.

<unk> to make I mean, I would say roughly 90% of our dotcom sales I fulfill picked up at a store.

And and plus that's significant because anytime the costs for can pick it up at a store that helps us to differ <unk> operate platform.

The good news is low dot com only get better, but about a year and as I mentioned word triple digit growth in April or triple digit growth them up to date and and we can sustain that and we're having improved functionality for the customer each and every week and that's something that we're excited about the future.

Great job guys got a lot. Thank you.

Yeah I liked question comes from the line, Eric Showered with Cleveland Research papers you. What's your question.

[noise] two two things first of all in terms of on line the.

Pick up in store fulfilled it store I know you said that fulfilled from the store, but how much of this is is getting delivered in the mail and how much of it is getting picked up at the store can just give us what that number wasn't a quarter.

So Greg is Joe So just over 60% of our orders are picked up in store and then the incremental is fulfilled primarily three store.

Okay.

And then secondly in terms of the the promotion and merchandising strategy for two Q. I guess a question for bell the strategy around promotions and events for Memorial day and fourth of July how are you planning on that and then curious as you look back to how you manage spring Black Friday.

The reduced effort to drive traffic did you end up seeing or how material, what's the negative impact on sales from that.

And then bridge that how you think about memorial day in July 4th as well.

This is more of an I'll take the spring Black Friday, an outlet Bill talk about memorial day and issue too.

So when we look at spring Black Friday, we receive minimal incremental sales benefited from the that.

Due to the distribution process of print media, we were unsuccessful and pull into tab from distribution.

Look at all other forms of media, although the traffic driving mechanisms 40 event was pooled. So so from that the cells were what minimal and let me make sure just for the brought all against the other fine how we look at print media.

Praises the least affected marketing medium to we have.

And <unk>.

Total self contribution to generate about credit loafers 0.7 per se. So I know that was a lot of discussion that spring Black Friday was a benefit us in a quarter, but as I said it was it was incrementally minimal at best in addition to that you know we close for Easter.

And we were forecasting Easter to be a plus 200 million dollar a day and when Dave then Joe Applauding doubles, I sat down and made that decision to flows we had no idea at that time, how we would make the cells up but we felt like it within the best interest of our associates and their families or give them a day, all and we would just.

Take the the financial.

Lack of a better term for that decision, but we felt like that it was simply culturally the right thing to do so when we take they closed for Easter.

Take pulled on all the traffic driving mechanism to spring Black Friday.

Both your best turned into a negative environment from a self effective for us. So so that kind of summarizes eastern spring Black Friday looking into <unk>, we'll talk about two two <unk> in regards to the pricing strategy is we've shared with you before.

Our attention has always been to.

Change the pricing strategy at Lowe's and get to be more of an everyday competitive price programming. So that we're really started a year ago. It continues into 2020. So as we look at Memorial Day, you know Memorial day can be very consistent you know, we operated and she won and as we get into the bag Catherine cute too much July July 4th.

And father's day, you know, we'll get again trying to implement the pieces in the place to the pricing strategy. You know more of a you know a normal pains from you know being relevant for dad Indian relevant for the holiday in July 4th So that's how about particular in every last one I I'll I'll make it I think they will close with.

<unk> is I mean at the end of the day, we want to.

Be a value oriented retail and but we don't want to be promotional <unk> I think that's what the support the Bill has said from it's very first day here. So you may not see us using traffic driving media to get it could make footsteps in the store and just unique environment that we're operating in but wouldn't it.

He was caught man, we want them to see a value on the shelf because if there's a time that you ever needed a value for customers. This is one of those times, but we will be very cognizant unconscious of not driving traffic in in an environment, where is it that may put people at risk and that's something that we're going to <unk>.

Yeah, and some more of his point you know obviously you know our stores, there's a lot of value in our <unk> items that we sell it. He just look in the near the in there and you look at the number of items that he promoted this year versus the number items that we sold on promotion last year, we're down to about 24%.

Oh, that's helpful like it.

Thank you are not question comes from the line of code mixing with Goldman Sachs pleased to see what's your question.

Hi can running quest I.

I just wondered with regard to customer acquisition, you have an idea how oh, we acquired customers <unk> during the first quarter and.

So how many customers.

Yeah. Okay. This this was marvelous a really good question <unk>, what I will tell you that this was like eight unique quarter.

We were so focused on first and foremost.

Making sure that we were looking into the health and safety of our soldiers in our customers.

That is not a data said that we spend a ton of time looking at.

Candidly as I say to my prepare comments.

<unk>, we started to address the challenges a covert 19 Bar Association customers, we became less <unk>.

On the financial for most of the company and we came became more focused on trying to provide essential products that our customers in communities need. It I'm sure. We can get that data and we could probably share and should invest relationship you get it for you, but we were just so focus on just trying to run this business serve our customer serve our community thing keep ourselves to say the there.

A lot of data says we didn't pay a lot of attention to this.

Okay, just set that up while laughing.

Very very strong pretty.

Stronger travel.

Yeah, but that are in that category.

Category.

And we find a tradeoff and the crowd.

No average ticket remains strong we have seen Ah no trade down.

Our customer segment has been surprisingly resilient.

And as I stated earlier customers rediscovered lows, we we know that for a fact.

But again patents have been strong they've been very consistent and working taking as you can imagine to track it out a day by day albino basis, So we could make the necessary adjustment.

Okay.

<unk>.

Take one more question please.

Thank you our final question kind of no line.

What state you more again please.

Thanks, Good morning to to to margin questions first Dave I'm I'm in gross margin.

A 150 year over year, you don't you think about that the lower promotion and the mix benefit how did the underlying expansion play out relative to your path plan and then you know in in an environment hypothetically, where you know they the category it goes flat or or let's say down in Los thing, though.

And the back half of the year, because you know the recession lingers longer how do you think about you know <unk> dollar <unk> or payroll d. leverage in that sort of environment given no. The the strong flexibility that you've shown oh for the past 18 month. Thank you.

Yeah, Okay goes marginal flip the Joe talk a bit about S.G. <unk>, obviously from the Gulf margin perspective is my yeah, My compared climax really really nice progress I think maybe the best way to look at it use in February. So when we entered me here we were actually wanting I played walk we had worked between funny action.

Merchandising to improve our class compliment to partner more deeply with vendors to manage got promotional Kate it's more effectively.

They were largely hitting and and he did not planned if not you know probably a little bit in advance of our plan is when the February obviously, we got turbo charged that some of US margin expansion perspective due to coated in the back half of the quarter, but I feel like the underlying elements that you put in place or driving release.

Performance there, we still have work to do when I. Don. This is that this is a marathon not a threat.

We have to white pieces together to play out improve a margin performance both in the short term, but the long term and they know that the Joe talk a bit about s. Jeanette.

It takes great. So from an S.G.N.A. standpoint, the team did a really nice job in Q1, obviously is David mentioned that we looked forward. It would be continued strong sales we have a rule of thumb based on sales out performance and payroll leverage I, but in addition.

The hard work that the office team is done putting new engineers labor standards and labor engine that the team built the mixed between ticket and transactions and we're very common our ability to let continued to leverage on this gina.

Great. Thank you very much for calling him today and I'm talking about lows.

Safe and healthy.

Thank you <unk> today's topic you may just naturally the time. Thank you for your participation and have a wonderful.

[laughter].

[laughter].