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Growing in the Midst of Challenge

Growing in the Midst of Challenge. Robert Niblock, Chairman & CEO Lowe’s Companies, Inc. Presentation to CCIM-NC Triad Forecast March 4, 2009. Growing in the Midst of Challenge. The Lowe’s Story Today’s Economy & Consumer Anxiety Changing Retail Environment Effects on Lowe’s & CCIM

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Growing in the Midst of Challenge

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  1. Growing in the Midst of Challenge Robert Niblock, Chairman & CEO Lowe’s Companies, Inc. Presentation to CCIM-NC Triad Forecast March 4, 2009

  2. Growing in the Midst of Challenge • The Lowe’s Story • Today’s Economy & Consumer Anxiety • Changing Retail Environment • Effects on Lowe’s & CCIM • Growing & Sharing in the Triad

  3. The Lowe’s Story • From humble beginnings as North Wilkesboro Hardware • To the world’s second largest home improvement chain • And we’re not done yet!

  4. Growing since 1946, Lowe’s is in all 50 US states and we entered Canada in 2007

  5. Our current expansion stretches 15+ years 160 151 149 147 Relo New 140 136 125 120 112 115 101 100 80 80 56 45 60 42 47 60-70 37 26 40 31 31 20 24 25 20 18 19 5 14 4 4 4 11 3 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009e e = Estimate

  6. Billions in Retail Sales During this time, revenue has grown … $52 $48.3 $48.2 $46.9 $47 $43.2 $42 $36.5 $37 14-Year CAGR = 16% $30.8 $32 $26.1 $27 $21.7 $22 $18.4 $17 $15.4 $12.9 $10.8 $12 $9.1 $7.4 $6.4 $7 $2 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

  7. Driving investment in stores and distribution Dollars in Millions Over $20 Billion in Real Estate Capital in 6 Years!

  8. Million SqFt Across All Stores Ranking Lowe’s as one of the largest US holders of commercial real estate 186.6 174.1 157.1 160 140.1 140 123.7 120 108.8 100 94.7 80.7 80 67.8 57 60 47.8 39.9 40 33.7 26.8 20.9 20 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 88% Ownership of 2008 Real Estate

  9. Growing in the Midst of Challenge • The Lowe’s Story • Today’s Economy & Consumer Anxiety • Changing Retail Environment • Effects on Lowe’s & CCIM • Growing & Sharing in the Triad

  10. 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Housing turnover sees deep lows 7.6 Mil Existing Home Sales, SAAR 4.5 Mil - 41% Source: National Association of Realtors

  11. 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Existing single family home prices $227,000 $176,000 - 22.5% Source: National Association of Realtors

  12. 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Foreclosures increasing First mortgage loan defaults, ths, SAAR 3,000 Sources: Equifax, Moody’s Economy.com

  13. 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Unemployment surges (likely all of 2009) U-6 16 13.9% 14 12 Headline 10 7.6% 8 6 4 2 0

  14. 150 140 130 120 110 100 90 80 70 60 50 40 30 20 Confidence – At all-time low Consumer confidence: 1985 = 100 1969 1974 1979 1984 1989 1994 1999 2004 2009 Sources: Conference Board

  15. Consumers have lost $16 trillion Household net worth, $ Tril 70 64 Trillion 60 50 48 Trillion 40 30 20 10 0 2006 2007 2008 Current

  16. Consumer changes fuel the downturn The markings of a fundamental shift are beginning to surface as consumers take the first steps toward “owning” their problems – economic, social and personal – as they move ahead, toward solutions. -- Yankelovich Monitor 2008/2009 What is part of the good life? 72%of consumers agree that: The economic downturn has helped me prioritize what’s most important in my life Good Health 82% Financial Security 74% Home You Own 73% Happy Marriage 69% Children 59% Control Over One’s Life 59% Source: Yankelovich Monitor 2008/2009, Yankelovich Consumers Dollars & Sense 2009, GfK Roper Annual Report 2008 (US)

  17. Growing in the Midst of Challenge • The Lowe’s Story • Today’s Economy & Consumer Anxiety • Changing Retail Environment • Effects on Lowe’s & CCIM • Growing & Sharing in the Triad

  18. Retailers and malls face protracted declines Fourth Quarter 2008 Retail Sales Same Store Sales Change Overall Sales Change Office Depot -18% -15% Gap -14% -13% Home Depot -13% -17% J.C. Penney -11% -10% Lowe’s -10% -4% Sears Holdings -8% -12% Target -6% -2% Wal-Mart US 2% 8% Source: RetailingToday.com, wsj.com

  19. Retailers closing stores and cutting jobs Circuit City To Close All Stores; More Than 35,000 Jobs Lost Associated Press, January 16, 2009 Home Depot to Close Design Centers and Cut Jobs (7,000) Associated Press, January 26, 2009 Sears closes 24 more stores Associated Press, February 26, 2009 Stock Building Supply to Close 86 Branches, Eliminate 3,000 Jobs Building Online, October 24, 2008 Target lets go of 9 percent of its headquarters workforce (1,000) Minneapolis-St.Paul Star Tribune, January 28, 2009

  20. Retail expansion slows sharply JC Penney to cut store openings in ’09 (20 in ’09 vs. 38 in ’08) Reuters, June 25, 2008 Lowe’s cuts store openings (60-70 in 2009 vs. 115 in 2008) CNBC, February 20, 2009 Wal-Mart cutting US store openings further (191 in 2009, 140-150 in 2010 vs. 218 in 2008) Reuters, October 27, 2008 Cuts 20/year in 2009/2010 Wall Street Journal, August 20, 2008

  21. Growing in the Midst of Challenge • The Lowe’s Story • Today’s Economy & Consumer Anxiety • Changing Retail Environment • Effects on Lowe’s & CCIM • Growing & Sharing in the Triad

  22. Changing retail real estate conditions THEN • Prices accelerate to unsustainable levels • Lower lending standards & higher leverage • Instances of bidding contest & backup offers NOW • Lack of available credit and leverage • Rapidly declining property values • Fewer retail and other development options

  23. Greater pressures on adequate return Driving Sales • Many Lowe’s new stores require $30 million in annual sales to drive profitability • Need adequate freight flow, limited operating constraints and ability to merchandise product Managing Costs • Reasonable environment management, such as stormwater conditioning, greenspace and set-asides • Reasonable compliance expectations, such as building codes, ordinances and infrastructure

  24. How CCIM and retail work together • Informing developers and lenders of realistic property value expectations • Advocate for reasonable federal, state and local environment and compliance regulations • Limit development and local upgrade requests to minimize excess building costs • Work with Lowe’s and other retailers to provide efficient flow of goods, easy customer access (including contractors) and outdoor merchandising

  25. Growing in the Midst of Challenge • The Lowe’s Story • Today’s Economy & Consumer Anxiety • Changing Retail Environment • Effects on Lowe’s & CCIM • Growing & Sharing in the Triad

  26. Located near Hwy 29 and E Cone Blvd in Greensboro Lowe’s 2771 of NE Greensboro, NC

  27. Lowe’s 2771 of NE Greensboro, NC

  28. Lowe’s 2771 of NE Greensboro, NC

  29. Located near NC Highway 150 and West Clemmonsville Rd. Extension Lowe’s 2653 of South Winston Salem, NC

  30. Lowe’s 2653 of South Winston Salem, NC

  31. Over $395,000 in Triad giving since 2006 High Schools $19,500 $20,200 Middle Schools $70,615 Elementary Schools $250,000 International Civil Rights Museum Crosby Scholars - Winston-Salem $10,000 Habitat for Humanity $25,000 $395,315

  32. Growing in the Midst of Challenge • The Lowe’s Story • Today’s Economy & Consumer Anxiety • Changing Retail Environment • Effects on Lowe’s & CCIM • Growing & Sharing in the Triad

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