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GuruFocus has detected 4 Warning Signs with Lowe's Companies Inc \$LOW.
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Lowe's Companies Inc (NYSE:LOW)
Cost of Goods Sold
\$42,553 Mil (TTM As of Jan. 2017)

Lowe's Companies Inc's cost of goods sold for the three months ended in Jan. 2017 was \$10,352 Mil. Its cost of goods sold for the trailing twelve months (TTM) ended in Jan. 2017 was \$42,553 Mil.

Cost of Goods Sold is directly linked to profitability of the company through Gross Margin. Lowe's Companies Inc's Gross Margin for the three months ended in Jan. 2017 was 34.41%.

Cost of Goods Sold is also directly linked to Inventory Turnover. Lowe's Companies Inc's Inventory Turnover for the three months ended in Jan. 2017 was 0.97.

Definition

Cost of goods sold (COGS) refers to the Inventory costs of those goods a business has sold during a particular period.

Lowe's Companies Inc Cost of Goods Sold for the trailing twelve months (TTM) ended in Jan. 2017 was 9897 (Apr. 2016 ) + 11972 (Jul. 2016 ) + 10332 (Oct. 2016 ) + 10352 (Jan. 2017 ) = \$42,553 Mil.

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Explanation

Cost of Goods Sold is directly linked to profitability of the company through Gross Margin.

Lowe's Companies Inc's Gross Margin for the three months ended in Jan. 2017 is calculated as:

 Gross Margin = (Revenue - Cost of Goods Sold) / Revenue = (15784 - 10352) / 15784 = 34.41 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

A company that has a moat can usually maintain or even expand their Gross Margin. A company can increase its Gross Margin in two ways. It can increase the prices of the goods it sells and keeps its Cost of Goods Sold unchanged. Or it can keep the sales price unchanged and squeeze its suppliers to reduce the Cost of Goods Sold. Warren Buffett believes businesses with the power to raise prices have moats.

Cost of Goods Sold is also directly linked to another concept called Inventory Turnover:

Lowe's Companies Inc's Inventory Turnover for the three months ended in Jan. 2017 is calculated as:

 Inventory Turnover = Cost of Goods Sold / Average Inventory = 10352 / 10724 = 0.97

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Inventory Turnover measures how fast the company turns over its inventory within a year. A higher inventory turnover means the company has light inventory. Therefore the company spends less money on storage, write downs, and obsolete inventory. If the inventory is too light, it may affect sales because the company may not have enough to meet demand.

Usually retailers pile up their inventories at holiday seasons to meet the stronger demand. Therefore, the inventory of a particular quarter of a year should not be used to calculate inventory turnover. An average inventory is a better indication.

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Lowe's Companies Inc Annual Data

 Jan08 Jan09 Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 COGS 31,556 31,729 30,757 31,663 32,858 33,194 34,941 36,665 38,504 42,553

Lowe's Companies Inc Quarterly Data

 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16 Apr16 Jul16 Oct16 Jan17 COGS 8,963 8,194 9,117 11,367 9,370 8,648 9,897 11,972 10,332 10,352
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