Investor Relations

LETTER TO SHAREHOLDERS

We are growing again. Lowe’s 2010 comparable store sales increased 1.3% – the first such increase since 2005. From 2005 to 2010 our total U.S. sales increased by 12.9%, while the home improvement market defined by the North American Industrial Classification System (NAICS) 444 declined 10.4%, indicating that we increased our market share during this period of contraction. During that time, we continued to focus on the strengths that have differentiated us as a home improvement retailer: great service, operational excellence and innovative merchandising.


In 2010, we generated solid earnings and cash flow as we grew our unit market share in 10 of 19 product categories. We delivered on our brand promise by helping customers take advantage of government stimulus programs like cash for appliances and energy tax credits. We also offered great values with national brands like StainMaster® carpet and Valspar® paint, and with our private brands like allen + roth® home décor and Kobalt® tools that offer exceptional style and function at a great price. Additionally, we provided strong credit offers and affordable delivery and installation options. Further, we completed the roll-out of our District Commercial Account Specialist (DCAS) and Project Specialist Exteriors (PSE) programs to more effectively reach customers at their job site or home. Finally, while we further tempered our store expansion, we invested in new capabilities that will help us generate more sales in our existing stores.

Looking forward, we expect customers will increase their spending as the cycle of declining home values ends and as they become more confident in the employment outlook. But we can’t rely solely on the strengthening economy. Strong employment growth and the bottom in home values are not expected until later in 2011.We believe we can grow market share by focusing on the opportunity we have with existing customers – in other words, garnering a greater share of wallet. Our research tells us customers are spending cautiously, stretching out projects or buying only a few items instead of many, but they are still highly engaged in home improvement. To win their business, we have to give them a sense of control, recognizing their personal needs and their desire for simplicity and value. Our commitment is to deliver better customer experiences by pulling together the best combination of possibilities, support and value for customers.

Consider The Possibilities

In 2010, we took the first steps in our journey to transform Lowe’s from a home improvement retailer to a home improvement company. What’s the difference? To my mind, a successful home improvement retailer stocks shelves with the inventory customers want and provides great service. A home improvement company stretches beyond the confines of brick and mortar stores to provide inspiration, products and support to customers whenever and wherever they choose, often still in their local store – or perhaps through our contact center, on the Web, or with a Lowe’s representative in their home or at their job site. As you can see, being a home improvement company quickly expands the possibilities available to customers, and I invite you to further consider those possibilities with us in this report. Some possibilities are already in place while others are still under development, but they all are part of a coordinated effort to provide better experiences to the more than 15 million customers who visit our stores weekly, or experience Lowe’s from their homes or wherever else they choose.

We’ve made some important first steps, but we know we still have a long journey to fully realize our promise to provide better experiences to customers. I am very appreciative of our more than 234,000 employees for their resilience throughout the recession and the sluggish start to the recovery. I am certain they will continue to display teamwork, creativity and flexibility as we implement new systems and processes that will transform Lowe’s from a great home improvement retailer to an even better home improvement company.

Thank you for your interest in Lowe’s and for considering
the possibilities with us.
Sincerely,

Robert A. Niblock
Robert A. Niblock
Chairman of the Board and Chief Executive Officer

Financial Highlights
Congratulations Larry Stone, President and COO