LOWES COMPANIES INC - 10-Q Quarterly Report

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LOWE'S COMPANIES, INC. - INDEX -
			Page No.
PART I - Financial Information
	Item 1. Financial Statements

		Consolidated Balance Sheets - October 29, 2004 (Unaudited),
		October 31, 2003 (Unaudited) and January 30, 2004	3

		Consolidated Statements of Current and
		Retained Earnings (Unaudited) - three and nine months
		ended October 29, 2004 and October 31, 2003	4

		Consolidated Statements of Cash Flows (Unaudited) -
		nine months ended October 29, 2004 and October 31, 2003	5

		Notes to Consolidated Financial Statements (Unaudited)	6-10

		Report of Independent Registered Public Accounting Firm	11

	Item 2. Management's Discussion and Analysis of Financial Condition and		12-17
		Results of Operations

	Item 3. Quantitative and Qualitative Disclosures about Market Risk		18

	Item 4. Controls and Procedures		18

PART II - Other Information
	Item 5. Other Information		19-20

	Item 6. Exhibits		20

	Signature		21

	Exhibit Index		22

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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements

Lowe's Companies, Inc. Consolidated Balance Sheets In Millions, Except Par Value Data
			(Unaudited) October 29, 2004	(Unaudited) October 31, 2003	January 30, 2004
Assets
	Current assets:
	Cash and cash equivalents		$ 479	$ 1,196	$ 1,446
	Short-term investments		171	126	178
	Accounts receivable - net		54	225	146
	Merchandise inventory		5,853	5,006	4,584
	Deferred income taxes		100	81	59
	Other assets		96	64	106

	Total current assets		6,753	6,698	6,519

	Property, less accumulated depreciation		13,407	11,425	11,945
	Long-term investments		153	119	169
	Other assets		199	229	241

	Total assets		$ 20,512	$ 18,471	$ 18,874

Liabilities and Shareholders' Equity
	Current liabilities:
	Current maturities of long-term debt		$ 31	$ 77	$ 77
	Accounts payable		2,596	2,334	2,212
	Accrued salaries and wages		281	283	335
	Other current liabilities		2,001	1,625	1,576

	Total current liabilities		4,909	4,319	4,200

	Long-term debt, excluding current maturities		3,661	3,681	3,678
	Deferred income taxes		773	588	657
	Other long-term liabilities		84	21	30

	Total liabilities		9,427	8,609	8,565

	Shareholders' equity:
	Preferred stock - $5 par value, none issued		-	-	-
	Common stock - $.50 par value;
	Shares issued and outstanding
	October 29, 2004	772
	October 31, 2003	786
	January 30, 2004	787	386	393	394
	Capital in excess of par		1,427	2,176	2,237
	Retained earnings		9,273	7,293	7,677
	Accumulated other comprehensive (loss) income		(1)	-	1

	Total shareholders' equity		11,085	9,862	10,309

	Total liabilities and shareholders' equity		$ 20,512	$ 18,471	$ 18,874

See accompanying notes to the unaudited consolidated financial statements.

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Lowe's Companies, Inc. Consolidated Statements of Current and Retained Earnings (Unaudited) In Millions, Except Per Share Data

	Three Months Ended				Nine Months Ended
	October 29, 2004		October 31, 2003		October 29, 2004		October 31, 2003
Current Earnings	Amount	Percent	Amount	Percent	Amount	Percent	Amount	Percent
Net sales	$ 9,064	100.00	$ 7,802	100.00	$ 27,914	100.00	$ 23,586	100.00
Cost of sales	6,013	66.34	5,361	68.71	18,605	66.65	16,299	69.10
Gross margin	3,051	33.66	2,441	31.29	9,309	33.35	7,287	30.90
Expenses:
Selling, general and administrative	1,902	20.99	1,450	18.59	5,723	20.49	4,165	17.66
Store opening costs	32	0.35	37	0.47	71	0.26	83	0.35
Depreciation	226	2.49	192	2.46	650	2.33	555	2.35
Interest	40	0.44	42	0.54	133	0.48	135	0.57
Total expenses	2,200	24.27	1,721	22.06	6,577	23.56	4,938	20.93
Pre-tax earnings	851	9.39	720	9.23	2,732	9.79	2,349	9.97
Income tax provision	329	3.63	272	3.49	1,051	3.77	888	3.77
Earnings from continuing operations	522	5.76	448	5.74	1,681	6.02	1,461	6.20
Earnings from discontinued operations, net of tax	-	0.00	4	0.05	-	0.00	8	0.03
Net earnings	$ 522	5.76	$ 452	5.79	$ 1,681	6.02	$ 1,469	6.23

Weighted average shares outstanding - Basic	772		786		778		784

Basic earnings per share:
Continuing operations	$ 0.68		$ 0.57		$ 2.16		$ 1.86
Discontinued operations	-		0.01		-		0.01
Basic earnings per share	$ 0.68		$ 0.58		$ 2.16		$ 1.87

Weighted average shares outstanding - Diluted	792		808		799		805

Diluted earnings per share:
Continuing operations	$ 0.66		$ 0.55		$ 2.11		$ 1.83
Discontinued operations	-		0.01		-		0.01
Diluted earnings per share	$ 0.66		$ 0.56		$ 2.11		$ 1.84

Cash dividends per share	$ 0.04		$ 0.03		$ 0.11		$ 0.08

Retained Earnings
Balance at beginning of period	$ 8,782		$ 6,865		$ 7,677		$ 5,887
Net earnings	522		452		1,681		1,469
Cash dividends	(31)		(24)		(85)		(63)
Balance at end of period	$ 9,273		$ 7,293		$ 9,273		$ 7,293

See accompanying notes to the unaudited consolidated financial statements.

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Lowe's
Companies, Inc.

Notes
to Consolidated Financial Statements (Unaudited)

Note 1: Basis
of Presentation - The accompanying Consolidated
Financial Statements (Unaudited) have been reviewed by an independent
registered public accounting firm and, in the opinion of management, they
contain all adjustments necessary to present fairly the financial position
as of October 29, 2004 and October 31, 2003, the results of operations for
the three and nine months ended October 29, 2004 and October 31, 2003, and
cash flows for the nine months ended October 29, 2004 and October 31, 2003.

These interim financial statements should be read in conjunction with the
audited financial statements and notes thereto included in the Lowe's
Companies, Inc. (the "Company") Annual Report on Form 10-K for the fiscal
year ended January 30, 2004 (the "Annual Report"). The financial results for
the interim periods may not be indicative of the financial results for the
entire fiscal year.

Certain prior period amounts have been reclassified to conform to current
presentation.

Note 2: Earnings Per Share - Basic earnings per share ("EPS") excludes
dilution and is computed by dividing net earnings by the weighted average
number of common shares outstanding for the period. Diluted EPS is
calculated based on the weighted average shares of common stock as adjusted
for the potential dilutive effect of stock options and convertible notes at
the balance sheet date. The dilutive effect of the assumed conversion of the
$580.7 million Senior Convertible Notes, issued in October 2001, has been
excluded from diluted EPS for the three and nine months ended October 29,
2004 and October 31, 2003 because none of the conditions that would permit
conversion had been satisfied during the periods. See Note 11 for discussion
of the final consensus reached by the Emerging Issues Task Force ("EITF")
regarding Issue No. 04-08, "The Effect of Contingently Convertible Debt on
Diluted Earnings per Share," and a discussion of the related anticipated
impact of this consensus on the calculation of diluted earnings per share.

Lowe's Companies, Inc. Consolidated Statements of Cash Flows (Unaudited) In Millions
		Nine Months Ended
		October 29, 2004	October 31, 2003
Cash flows from operating activities:
	Net earnings	$ 1,681	$ 1,469
	Earnings from discontinued operations, net of tax	-	(8)
	Earnings from continuing operations	1,681	1,461

	Adjustments to reconcile earnings from continuing operations to net cash provided by operating activities:
	Depreciation and amortization	663	571
	Deferred income taxes	75	87
	Loss on disposition/writedown of fixed and other assets	26	23
	Stock-based compensation expense	61	28
	Tax effect of stock options exercised	14	21
	Changes in operating assets and liabilities:
	Accounts receivable - net	92	(37)
	Merchandise inventory	(1,269)	(1,033)
	Other operating assets	10	32
	Accounts payable	384	543
	Other operating liabilities	376	336
	Net cash provided by operating activities from continuing operations	2,113	2,032

Cash flows from investing activities:
	Decrease (increase) in investment assets:
	Short-term investments	114	144
	Purchases of long-term investments	(108)	(282)
	Proceeds from sale/maturity of long-term investments	15	189
	Increase in other long-term assets	(32)	(87)
	Fixed assets acquired	(2,116)	(1,664)
	Proceeds from the sale of fixed and other long-term assets	101	50
	Net cash used in investing activities from continuing operations	(2,026)	(1,650)

Cash flows from financing activities:
	Net decrease in short-term borrowings	-	(50)
	Repayment of long-term debt	(70)	(21)
	Proceeds from employee stock purchase plan	30	25
	Proceeds from stock options exercised	71	86
	Cash dividend payments	(85)	(63)
	Repurchase of common stock	(1,000)	-
	Net cash used in financing activities from continuing operations	(1,054)	(23)

	Net cash used in discontinued operations	-	(16)

Net (decrease) increase in cash and cash equivalents		(967)	343
Cash and cash equivalents, beginning of period		1,446	853
Cash and cash equivalents, end of period		$ 479	$ 1,196

See accompanying notes to the unaudited consolidated financial statements.

	Three Months Ended		Nine Months Ended
(In Millions, Except Per Share Data)	October 29, 2004	October 31, 2003	October 29, 2004	October 31, 2003

Basic earnings per share:
Earnings from continuing operations	$ 522	$ 448	$ 1,681	$ 1,461
Earnings from discontinued operations, net of tax	-	4	-	8
Net earnings	$ 522	$ 452	$ 1,681	$ 1,469
Weighted average shares outstanding	772	786	778	784
Basic earnings per share; continuing operations	$ 0.68	$ 0.57	$ 2.16	$ 1.86
Basic earnings per share; discontinued operations	-	0.01	-	0.01
Basic earnings per share	$ 0.68	$ 0.58	$ 2.16	$ 1.87

Diluted earnings per share:
Net earnings	$ 522	$ 452	$ 1,681	$ 1,469
Net earnings adjustment for
interest on convertible debt, net of tax	3	3	8	8
Net earnings, as adjusted	$ 525	$ 455	$ 1,689	$ 1,477
Weighted average shares outstanding	772	786	778	784
Dilutive effect of stock options	4	5	4	4
Dilutive effect of convertible debt	16	17	17	17
Weighted average shares, as adjusted	792	808	799	805
Diluted earnings per share; continuing operations	$ 0.66	$ 0.55	$ 2.11	$ 1.83
Diluted earnings per share; discontinued operations	-	0.01	-	0.01
Diluted earnings per share	$ 0.66	$ 0.56	$ 2.11	$ 1.84

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Note 3: Discontinued Operations - During the fourth
quarter of fiscal 2003, the Company sold 26 commodity-focused locations
operating under The Contractor Yard name (the "Contractor Yards"). This sale
was effected to allow the Company to continue to focus on its retail and
commercial business. The Company has reported the results of operations of
the Contractor Yards as discontinued operations for the periods presented,
which were as follows:

(In Millions)	Three Months Ended October 31, 2003	Nine Months Ended October 31, 2003
Net sales from discontinued operations	$ 122	$ 322
Pre-tax earnings from discontinued operations	6	14
Income tax provision	2	6
Earnings from discontinued operations, net of tax	$ 4	$ 8

Note 4: Accounts Receivable - In May 2004, the
Company entered into an agreement with General Electric Company and its
subsidiaries ("GE") to sell its then-existing portfolio of accounts
receivable to GE. During the term of the agreement, which ends on December
31, 2009, unless terminated prior to this date, GE also purchases at face
value new accounts receivable originated by the Company and services these
accounts. These receivables arise primarily from sales of goods and services
to the Company's commercial business customers. This agreement was effected
primarily to enhance the Company's service to its commercial business
customers through the use of GE's specialized support staff in servicing
these accounts, as well as the functionality of GE's information systems
platform.

In accordance with Statement of Financial Accounting Standards ("SFAS") No.
140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," the Company accounts for the transfers as
sales of the accounts receivable. When the Company sells receivables, it
retains interests in those receivables. These interests include the
Company's interest in its funding of a loss reserve and its obligation
related to GE's ongoing servicing of the receivables sold. Any gain or loss
on the sale is determined based on the previous carrying amounts of the
transferred assets allocated at fair value between the receivables sold and
the interests retained. Fair value is based on the present value of expected
future cash flows taking into account the key assumptions of anticipated
credit losses, payment rates, late fee rates, GE's servicing costs and the
discount rate commensurate with the uncertainty involved. Due to the
short-term nature of the receivables sold, changes to the key assumptions
would not materially impact the recorded gain or loss on the sale of
receivables or the fair value of the retained interests in the receivables.

The initial portfolio of receivables sold to GE in May of 2004 totaled $147
million. Total receivables sold to GE since program inception through the
end of the third quarter of fiscal 2004 totaled $870 million. During the
three and nine months ended October 29, 2004, the Company recognized losses
of $13 million and $22 million, respectively, on these sales, which
primarily relate to the fair value of the obligations incurred related to
servicing costs that are remitted to GE monthly. At October 29, 2004, the
fair value of the retained interests was a net liability of $2 million and
was determined based on the present value of expected future cash flows.

Note 5: Property - Property is shown net of
accumulated depreciation of $3.7 billion at October 29, 2004, $3.0 billion
at October 31, 2003 and $3.1 billion at January 30, 2004.

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Note 6: Supplemental Disclosure -

Supplemental disclosures of cash flow information:

Note 7: Credit
Arrangements - The Company has a $1 billion senior credit facility which
became effective in July 2004 and expires in July 2009. This facility
replaced an $800 million senior credit facility and is available to support
the Company's $1 billion commercial paper program and for short-term
borrowings. Borrowings made are priced based upon market conditions at the
time of funding in accordance with the terms of the senior credit facility.
The senior credit facility contains certain covenants, including maintenance
of a specific financial ratio. The Company was in compliance with these
covenants at October 29, 2004. Fifteen banking institutions are
participating in the $1 billion senior credit facility. As of October 29,
2004, no commercial paper was outstanding and there were no outstanding
loans under the facility.

Note 8: Comprehensive Income - Total comprehensive income, comprised
of net earnings and unrealized holding gains (losses) on available-for-sale
securities, was substantially the same as net earnings of $522 million and
$452 million for the three months ended October 29, 2004 and October 31,
2003, respectively. Total comprehensive income was $1.680 billion and $1.469
billion compared to net earnings of $1.681 billion and $1.469 billion for
the nine months ended October 29, 2004 and October 31, 2003, respectively.

Note 9: Accounting for Stock-Based Compensation - The Company has three
stock incentive plans which are described more fully in Note 10 to the
consolidated financial statements presented in the Annual Report.

Effective fiscal 2003, the Company adopted the fair value recognition provisions
of SFAS No. 123, "Accounting for Stock-Based Compensation," prospectively for
all employee awards granted or modified after January 31, 2003. Therefore, in
accordance with the requirements of SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure," the cost related to stock-based
employee compensation included in the determination of net earnings for the
three and nine month periods ended October 29, 2004 and October 31, 2003 is less
than that which would have been recognized if the fair-value-based method had
been applied to all awards since the original effective date of SFAS No. 123.
During the three months ended October 29, 2004 and October 31, 2003, the Company
recognized compensation expense totaling $20 million and $13 million,
respectively, relating to stock options and awards, which generally vest over
three years. During the nine months ended October 29, 2004 and October 31, 2003,
the Company recognized compensation expense totaling $61 million and $28
million, respectively.

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The fair value of each option grant is estimated using the Black-Scholes option
pricing model. The assumptions used to determine the fair value of options
granted during the nine months ended October 29, 2004 have not changed
significantly from those disclosed in the Annual Report. The following table
illustrates the effect on net earnings and earnings per share in each period if
the fair-value-based method had been applied to all outstanding and unvested
awards.

	Nine Months Ended
(In Millions)	October 29, 2004	October 31, 2003
Cash paid for interest (net of amount capitalized)	$164	$168
Cash paid for income taxes	$894	$726

Note 10: Shareholders' Equity
- The Company repurchased 18.4 million common shares during the first
nine months of fiscal 2004 at a cost of $1 billion under the share
repurchase program authorized by the Board of Directors in December 2003. No
further amounts are authorized to be repurchased under this program.

Note 11: Recent Accounting
Pronouncements - In January 2003, the Financial Accounting Standards Board
("FASB") issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of
Variable Interest Entities, an interpretation of ARB 51." In December 2003, the
FASB issued a revision to FIN 46 to make certain technical corrections and
address certain implementation issues that had arisen. FIN 46 provides guidance
on the identification and consolidation of variable interest entities, or VIEs,
which are entities for which control is achieved through means other than
through voting rights. The provisions of FIN 46 are required to be applied to
VIEs created or in which the Company obtains an interest after January 31, 2003.
For VIEs in which the Company holds a variable interest that it acquired before
February 1, 2003, the provisions of FIN 46 were effective for the first quarter
of 2004. The adoption of FIN 46, as revised, did not have a material impact on
the Company's financial statements.

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In October 2004, the EITF reached a consensus on EITF Issue No. 04-08,
"Accounting Issues Related to Certain Features of Contingently Convertible Debt
and the Effect on Diluted Earnings per Share." Based on the EITF's conclusion,
the dilutive effect of contingently convertible debt instruments should be
included in the calculation of diluted earnings per share regardless of whether
the contingency has been met. The FASB has indicated that EITF 04-08 will be
effective for reporting periods ending after December 15, 2004. The Company has
reviewed the provisions of EITF 04-08 and has determined that the adoption will
result in a reduction of diluted earnings per share due to the inclusion of the
contingently convertible common stock associated with its $580.7 million Senior
Convertible Notes issued in October 2001. Once EITF 04-08 is effective, the
Company will be required to retroactively adjust diluted earnings per share
calculations for all periods presented. If EITF 04-08 had been effective as of
October 29, 2004, the Company estimates that diluted earnings per share for the
three months ended October 29, 2004 and October 31, 2003 would have been $0.65
and $0.56, respectively, compared to $0.66 and $0.56, as reported. The Company
estimates that diluted earnings per share for the nine months ended October 29,
2004 and October 31, 2003 would have been $2.09 and $1.82, respectively,
compared to $2.11 and $1.84, as reported.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Lowe's Companies, Inc.

We have reviewed the accompanying consolidated balance sheets of Lowe's
Companies, Inc. and subsidiaries (the "Company") as of October 29, 2004 and
October 31, 2003, and the related consolidated statements of current and
retained earnings for the three-month and nine-month periods then ended, and
of cash flows for the nine-month periods ended October 29, 2004 and October
31, 2003. These interim financial statements are the responsibility of the
Company's management.

We conducted our reviews in accordance with standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and
making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with standards of the Public Company Accounting Oversight Board
(United States), the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.

Based on our reviews, we are not aware of any material modifications that
should be made to such consolidated financial statements for them to be in
conformity with accounting principles generally accepted in the United
States of America.

We have previously audited, in accordance with auditing standards of the
Public Company Accounting Oversight Board (United States), the consolidated
balance sheet of Lowe's Companies, Inc. and subsidiaries as of January 30,
2004, and the related consolidated statements of earnings, shareholders'
equity, and cash flows for the year then ended (not presented herein); and
in our report dated March 19, 2004 (April 2, 2004, as to the third paragraph
in Note 10), we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet as of January 30, 2004 is fairly
stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.

/s/ DELOITTE &
TOUCHE LLP

Charlotte, North
Carolina

November 22, 2004

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Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis summarizes the significant factors affecting
the Company's consolidated operating results, liquidity and capital resources
during the three and nine months ended October 29, 2004. This discussion and
analysis should be read in conjunction with the financial statements and
financial statement footnotes that are included in the Company's Annual Report
on Form 10-K for the fiscal year ended January 30, 2004 (the "Annual Report"),
as well as the financial statement footnotes contained in this report.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The following discussion and analysis of the results of operations and
financial condition are based on the Company's financial statements that
have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of such financial
statements requires management to make estimates that affect the reported
amounts of assets, liabilities, revenues and expenses and related
disclosures of contingent assets and liabilities. The Company bases these
estimates on historical results and various other assumptions management
believes to be reasonable, the results of which form the basis for making
estimates concerning the carrying values of assets and liabilities that are
not readily available from other sources. Actual results may differ from
these estimates.

The Company's significant accounting polices are described in Note 1 to the
consolidated financial statements presented in the Annual Report. In
addition to those previously noted significant accounting policies,
management believes that the following accounting policies affect the more
significant estimates used in preparing the consolidated financial
statements found in this report on Form 10-Q.

Merchandise Inventory

The Company records an inventory reserve for the potential loss associated
with selling discontinued inventories below cost. This reserve is based on
management's current knowledge with respect to inventory levels, sales
trends and historical experience relating to the liquidation of discontinued
inventory. Management does not believe the Company's merchandise inventories
are subject to significant risk of obsolescence in the near-term, and
management has the ability to adjust purchasing practices based on
forecasted sales trends and general economic conditions. However, changes in
consumer purchasing patterns could result in the need for additional
reserves. The Company also records an inventory reserve for the estimated
shrinkage between actual physical inventories taken. This reserve is based
primarily on actual shrinkage results from previous physical inventories.
Differences in actual shrinkage results realized during completed physical
inventories could result in revisions to previously estimated shrinkage
reserves. Management believes it has sufficient current and historical
knowledge to record reasonable estimates for both of these inventory
reserves.

Vendor Funds

The Company receives funds from vendors in the normal course of business
for a variety of reasons, including purchase-volume-related rebates,
defective merchandise allowances, advertising allowances, reimbursement for
selling expenses, displays and third-party, in-store service related costs.
Management uses projected purchase volumes to determine earnings rates,
validates those projections based on actual and historical purchase trends
and applies those rates to actual purchase volumes to determine the amount
of funds earned by the Company and receivable from the vendor. Amounts
earned could be impacted if actual purchase volumes differ from projected
purchase volumes.

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Under EITF Issue No. 02-16, "Accounting by a Customer (Including a Reseller)
for Certain Consideration Received from a Vendor," cooperative advertising
allowances and in-store service funds are treated as a reduction of
inventory cost, unless they represent a reimbursement of specific,
incremental and identifiable costs incurred by the customer to sell the
vendor's product. Substantially all of the cooperative advertising and
in-store service funds that the Company receives do not meet the specific,
incremental and identifiable criteria in EITF 02-16. Therefore, for
cooperative advertising and in-store service fund agreements entered into
after December 31, 2002, which was the effective date of the related
provision of EITF 02-16, the Company treats funds that do not meet the
specific, incremental and identifiable criteria as a reduction in the cost
of inventory and recognizes these funds as a reduction of cost of sales when
the inventory is sold. There is no impact to the timing of when the funds
are received from vendors or the associated cash flows.

The Company historically treated volume-related discounts or rebates as a
reduction of inventory cost and reimbursements of operating expenses
received from vendors as a reduction of those specific expenses. The
Company's historical accounting treatment for these vendor-provided funds is
consistent with EITF 02-16 with the exception of certain cooperative
advertising and in-store services provided by third parties for which the
costs are ultimately funded by vendors. The Company previously treated the
cooperative advertising allowances and in-store service funds as a reduction
of the related expense.

Self-Insurance

The Company is self-insured for certain losses relating to worker's
compensation, automobile, general and product liability claims.
Self-insurance claims filed and claims incurred but not reported are accrued
based upon management's estimates of the discounted aggregate liability for
uninsured claims incurred using actuarial assumptions followed in the
insurance industry and historical experience. These estimates are subject to
changes in forecasted payroll, sales and vehicle units, as well as the
frequency and severity of claims. Although management believes it has the
ability to adequately record estimated losses related to claims, it is
possible that actual results could differ from recorded self-insurance
liabilities.

OPERATIONS

The Company's sales in the third quarter of fiscal 2004 increased 16.2%
over sales in the third quarter of fiscal 2003, with comparable store sales
growth of 5.2%, as compared to the same quarter of the prior year. For the
nine months ended October 29, 2004, sales increased 18.3% and comparable
store sales increased 6.6%.

The increase in comparable store sales was driven by increased customer
traffic and the execution of the Company's merchandising, marketing and
operating strategies. The Company experienced positive performance across
product categories and regions during the quarter, driven by consumers'
willingness to invest in their homes. This was evidenced by the strong
comparable store sales increases in larger ticket categories, including
outdoor power equipment and cabinets and counter tops. In addition, the
remerchandising efforts implemented to improve customers' shopping
experience in the Tool World area drove comparable store sales increases for
the tool category.

The Company also experienced incremental sales during the quarter from a
series of hurricanes that hit Florida and the Gulf Coast during August and
September. Offset to some degree by the impact of being closed during the
passing of these storms, incremental hurricane-related sales of lumber,
building materials and other preparatory or restoration items positively
impacted comparable store sales in the quarter by approximately 100 basis
points. In addition, increases in the prices of lumber and plywood
positively impacted comparable store sales for the quarter by approximately
150 basis points.

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The sales increase during the third quarter of 2004 was also attributable to
the addition of 13.8 million square feet of retail selling space relating to
new stores since last year's third quarter. The following table presents
sales and store information excluding discontinued operations:

	Three Months Ended		Nine Months Ended
(In millions, except per share data)	October 29, 2004	October 31, 2003	October 29, 2004	October 31, 2003
Net earnings, as reported	$ 522	$ 452	$ 1,681	$ 1,469

Deduct: Total unrecognized stock-based employee compensation expense determined under the fair-value-based method for all awards, net of related tax effects	(10)	(15)	(31)	(46)

Pro forma net earnings	$ 512	$ 437	$ 1,650	$ 1,423

Earnings per share:
Basic - as reported	$ 0.68	$ 0.58	$ 2.16	$ 1.87
Basic - pro forma	$ 0.66	$ 0.56	$ 2.12	$ 1.81

Diluted - as reported	$ 0.66	$ 0.56	$ 2.11	$ 1.84
Diluted - pro forma	$ 0.65	$ 0.54	$ 2.08	$ 1.78

	Three Months Ended		Nine Months Ended
	October 29, 2004	October 31, 2003	October 29, 2004	October 31, 2003
Sales (in millions)	$9,064	$7,802	$27,914	$23,586
Sales increases	16.2%	23.5%	18.3%	17.5%
Comparable store sales increases	5.2%	12.2%	6.6%	6.5%
Average ticket	$63.72	$60.27	$63.39	$59.05
At end of quarter:
Stores	1,031	906
Sales floor square feet (in millions)	117.5	103.7
Average store size square feet (in thousands)	114	114

Gross margin was 33.7% of sales for
the quarter ended October 29, 2004 compared to 31.3% for last year's comparable
quarter, representing an increase of 237 basis points. Gross margin for the nine
months ended October 29, 2004 was 33.4% versus 30.9% for the first nine months
of 2003, representing an increase of 245 basis points. As a result of the
reclassification of vendor funds in accordance with EITF 02-16, vendor funds for
cooperative advertising and in-store services are now classified as a reduction
of the cost of inventory. This change contributed 307 basis points of the
increase in gross margin for the quarter and 249 basis points for the nine
months ended October 29, 2004.

The hurricanes experienced in Florida and the Gulf Coast had a negative impact
on the gross margin rate for the quarter due to product mix, as incremental
sales were driven by lower margin products including lumber, building materials,
roofing and generators, as well as additional freight costs and damaged
inventory.

Selling, general and administrative expenses ("SG&A") were 21.0% of sales for
the quarter ended October 29, 2004 versus 18.6% in last year's third quarter,
representing an increase as a percentage of sales of 240 basis points. The
reclassification of vendor funds in accordance with EITF 02-16 resulted in an
increase of 299 basis points as a percentage of sales for the quarter ended
October 29, 2004. The offsetting decreases as a percentage of sales were driven
by the Company's credit program performance and bonus expense. During the first
nine months of 2004, SG&A was 20.5% of sales compared to 17.7% in the same
period of the prior year, representing an increase as a percentage of sales of
approximately 280 basis points. The reclassification of vendor funds in
accordance with EITF 02-16 resulted in 323 basis points of the increase as a
percentage of sales for the nine months ended October 29, 2004.

Store opening costs were $32 million for the quarter ended October 29, 2004
compared to $37 million in last year's third quarter. This represents costs
associated with the opening of 35 stores during the third quarter of 2004 (34
new and one relocated) compared to 38 stores for the comparable period last year
(36 new and two relocated). Store opening costs for the nine months ended
October 29, 2004 were $71 million, compared to $83 million last year. This
represents costs associated with the opening of 84 new stores during the first
nine months of 2004 (80 new and four relocated) compared to 83 stores during the
first nine months of the prior year (79 new and four relocated). The reduction
in store opening costs from the prior year is primarily the result of a decrease
in grand opening advertising.

-15-

Depreciation was $226 million and $650 million for the quarter and nine months
ended October 29, 2004, respectively. This represents an increase of 18% and
17%, respectively, over the comparable periods last year. The increase is
primarily due to the addition of buildings, fixtures, displays and computer
equipment relating to the Company's ongoing expansion program and the increase
in the percentage of owned locations since last year's third quarter. At October
29, 2004, the Company owned 80% of total locations compared to 78% at October
31, 2003. The Company continues to make investments in its business, including
updates to existing stores and new technology to ensure its customers' needs are
met and to maintain its competitive advantage.

The Company's effective income tax rate was 38.7% for the quarter and 38.5% for
the nine months ended October 29, 2004, respectively, compared to 37.8% for last
year's comparable periods. The higher rate during 2004 is primarily related to
expansion in states with higher income tax rates, as well as permanent
differences between book and tax income related to stock-based compensation
expense.

For the third quarter of fiscal 2004, net earnings increased 15% to $522 million
compared to last year's third quarter results. Diluted earnings per share were
$0.66 compared to $0.56 for the comparable quarter of last year. For the nine
months ended October 29, 2004, net earnings increased 14% to $1.681 billion
compared to the same period in the prior year. Diluted earnings per share for
the nine months ended October 29, 2004 were $2.11 compared to $1.84 for the
comparable period of the prior year. The Company's repurchase of 18.4 million
shares of common stock at a cost of $1 billion during the first half of fiscal
2004 had a slight favorable impact on diluted earnings per share for the quarter
and the nine months ended October 29, 2004. No further amounts are authorized to
be repurchased under this program.

LIQUIDITY AND CAPITAL
RESOURCES

The primary sources of liquidity are
cash flows from operating activities and various lines of credit currently
available to the Company. Net cash provided by operating activities from
continuing operations was $2.1 billion for the nine months ended October 29,
2004 compared to $2.0 billion for the nine months ended October 31, 2003. The
primary source of the increase in cash provided by operating activities from
continuing operations in the current year was the increase in net earnings.
Working capital at October 29, 2004 was $1.8 billion compared to $2.4 billion at
October 31, 2003 and $2.3 billion at January 30, 2004.

The primary component of net cash used in investing activities from continuing
operations continues to be opening new stores. Cash acquisitions of fixed assets
were $2.1 billion and $1.7 billion for the nine months ended October 29, 2004
and October 31, 2003, respectively. At October 29, 2004, the Company operated
1,031 stores in 45 states with 117.5 million square feet of retail selling
space, representing a 13.4% increase over the selling space at October 31, 2003.

Cash flows used in financing activities from continuing operations were $1.1
billion for the nine months ended October 29, 2004 compared to $23 million for
the nine months ended October 31, 2003. The increase in cash used in financing
activities during the first nine months of the current fiscal year primarily
resulted from $1 billion of repurchases of common stock under the Company's
share repurchase program, increased cash dividend payments and higher scheduled
long-term debt repayments. Cash used in financing activities from continuing
operations during the first nine months of the prior year primarily resulted
from cash dividend payments, short-term debt repayments and scheduled long-term
debt repayments, offset by proceeds generated from stock option exercises and
employee stock purchase plan share purchases. The ratio of long-term debt to
equity plus long-term debt was 24.8%, 27.2% and 26.3% as of October 29, 2004,
October 31, 2003 and January 30, 2004, respectively.

-16-

The Company has a $1 billion senior credit facility which became effective in
July 2004 and expires in July 2009. This facility replaced an $800 million
senior credit facility and is available to support the Company's $1 billion
commercial paper program and for short-term borrowings. Borrowings made are
priced based upon market conditions at the time of funding in accordance with
the terms of the senior credit facility. The senior credit facility contains
certain covenants, including maintenance of a specific financial ratio. The
Company was in compliance with these covenants at October 29, 2004. Fifteen
banking institutions are participating in the $1 billion senior credit facility
and, as of October 29, 2004, there were no outstanding loans under the facility.

The Company's 2004 capital budget is $3.4 billion, inclusive of approximately
$321 million of leases, which are primarily ground and operating leases.
Approximately 76% of this planned commitment is for store expansion and new
distribution centers. Expansion plans for 2004 consist of 140 stores, including
four relocations of older stores, increasing sales floor square footage by
approximately 14%. The Company estimates that 3% of the 2004 facilities will be
build-to-suit leases and 97% will be owned.

At October 29, 2004, the Company operated ten regional distribution centers. The
Company is constructing an eleventh regional distribution center in Plainfield,
Connecticut, that is scheduled to open in fiscal 2005. At October 29, 2004, the
Company utilized 12 flatbed distribution centers for the handling of lumber,
building materials and other long-length items.

The Company believes that funds from operations, leases and existing short-term
lines of credit will be adequate to finance the 2004 capital budget and the
Company's operating requirements. However, a substantial downgrade in the
Company's debt rating or a deterioration of certain financial ratios could
adversely affect the availability of funds under existing short-term lines of
credit or through the issuance of new debt. The Company's debt ratings at
October 29, 2004 were as follows:

COMPANY OUTLOOK

Fourth Quarter

During the fourth quarter of fiscal 2004, which ends on January 28, 2005, the
Company expects to open 56 stores reflecting square footage growth of
approximately 14%. Total sales are expected to increase 16% to 17% and
comparable store sales are expected to increase 4% to 5%. All comparisons are
with the fourth quarter of fiscal 2003.

As of November 15, 2004, the date of the Company's third quarter 2004 earnings
release, the Company expected diluted earnings per share of $0.57 to $0.59 which
includes the estimated $0.01 dilutive impact from the adoption of EITF 04-08.
The accounting change required by EITF 04-08 is described in Note 11 to the
interim financial statements included in this report

Fiscal 2004

During fiscal 2004, which ends on January 28, 2005, the Company expects to open
140 stores reflecting total square footage growth of 14%. Total sales are
expected to increase approximately 18% for the year, while comparable store
sales are expected to increase 6% to 7%. All comparisons are with fiscal 2003.

-17-

As of November 15, 2004, the date of the Company's third quarter 2004 earnings
release, diluted earnings per share of $2.66 to $2.68 were expected. This
includes the estimated $0.16 per share impact of EITF 02-16 and the estimated
$0.03 per share impact of EITF 04-08. Excluding the impact of the two accounting
changes, diluted earnings per share of $2.85 to $2.87 would be expected.
Presentation of this adjusted measure of its diluted earnings per share for
fiscal 2004 is intended to enhance comparability of the Company's fiscal 2004
performance with that of other reporting periods. The adjusted measure is
provided solely as supplemental information and is not a substitute for that
information presented in accordance with generally accepted accounting
principles.

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains "forward-looking statements," as such are provided for
by the Private Securities Litigation Reform Act of 1995 (the "Act"). All
statements other than those reciting historic fact are statements that could be
"forward-looking statements" under the Act. Such forward-looking statements are
found in, among other places, "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Statements containing words such as
"expects," "plans," "strategy," "projects," "believes," "opportunity,"
"anticipates," "desires," and similar expressions are intended to highlight or
indicate "forward-looking statements." Although the Company believes that the
expectations, opinions, projections, and comments reflected in its
forward-looking statements are reasonable, it can give no assurance that such
statements will prove to be correct. A wide variety of potential risks,
uncertainties, and other factors could materially affect our ability to achieve
the results expressed or implied by our forward-looking statements including,
but not limited to: (i) changes in domestic economic conditions which can
negatively affect the discretionary income of our customers; (ii) the number of
new housing starts and the level of repairs, remodeling, and additions to
existing homes, as well as general commercial building activity; (iii) the
Company's ability to secure, develop, and otherwise implement new technologies
and processes designed to enhance efficiency and competitiveness; (iv) the
Company's ability to attract, train, and retain highly-qualified associates; (v)
the Company's ability to locate, secure, and develop new sites for store
development; (vi) the Company's ability to respond to fluctuations in the prices
and availability of services, supplies, and products; (vii) the Company's
ability to respond to the growth and impact of competition; (viii) the Company's
ability to address legal and regulatory matters; and (ix) the Company's ability
to absorb lost sales resulting from unanticipated weather conditions.

Any forward-looking statements contained in this Form 10-Q are based upon data
available as of the date of this report and speak only as of such date. The
Company expressly disclaims any obligation to update or revise any
forward-looking statement, whether as a result of new information, change in
circumstances, future events, or otherwise

-18-

Item 3 - Quantitative and Qualitative Disclosures about Market Risk

The Company's market risk has not changed materially since January 30, 2004.

Item 4 - Controls and Procedures

The Company has designed and maintains disclosure controls and procedures to
ensure that information required to be disclosed in its reports filed or
submitted under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
("SEC") rules and forms. These controls and procedures are also designed to
ensure that such information is accumulated and communicated to the Company's
management, including its Chief Executive and Chief Financial Officers as
appropriate, to allow them to make timely decisions about required disclosures.

The Company's management, including its Chief Executive Officer and Chief
Financial Officer, has conducted an evaluation of the effectiveness of
disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b).
Based on that evaluation, which was conducted as of the end of the period
covered by this report on Form 10-Q, the Chief Executive Officer and Chief
Financial Officer concluded that disclosure controls and procedures are
effective in timely alerting them to that information relating to the Company
(including its consolidated subsidiaries) which is required to be included in
its periodic SEC filings.

There has been no change in the Company's internal controls over financial
reporting during the quarter ended October 29, 2004 that has materially affected,
or is reasonably likely to materially affect, internal control over financial
reporting.

-19-

Part II - OTHER INFORMATION

Item 5 - Other Information

(a) On December 3, 2004, the
Company entered into an agreement (the "Retirement Agreement") with Robert L.
Tillman regarding the terms of his retirement from the Company as Chairman of
the Board of Directors and Chief Executive Officer. Pursuant to the terms of
the Retirement Agreement, Mr. Tillman will continue to serve in those
capacities until January 28, 2005 (the "Retirement Date"), at which time he
will resign as an officer and director of the Company. Robert A. Niblock,
currently the Company's President and a member of the Board of Directors, will
succeed Mr. Tillman as Chairman and Chief Executive Officer on the Retirement
Date.

On the Retirement Date, Mr. Tillman will have deferred stock units, restricted
stock and stock option awards that the Company granted to him on March 1, 2003
and March 1, 2004 that will not be vested. Because Mr. Tillman satisfies the
age and years of service eligibility requirements for retirement (as provided
under those equity incentive awards) and the Board of Directors of the Company
has separately approved his retirement, those outstanding equity awards
granted on March 1, 2004, and those deferred stock units granted on March 1,
2003, will become fully vested on the Retirement Date. Those stock option
awards granted to Mr. Tillman on March 1, 2003 shall continue to vest in
accordance with the vesting schedule previously established for them and will
remain exercisable until the expiration date in the award agreement. In
addition, the Retirement Agreement amends the award agreements for all
outstanding stock options granted to Mr. Tillman prior to March 1, 2003 to
provide that those stock options will not lapse and that they will vest in
accordance with the vesting schedule previously established for them and will
remain exercisable until the respective expiration dates in the award
agreements.

The Company has agreed to reimburse Mr. Tillman for the cost of COBRA
continuation health coverage for him and his wife for a period of 18 months
after the Retirement Date and, thereafter, to reimburse him for the premium
for an individual health coverage policy for him and his wife until such time
that Mr. Tillman and his wife become eligible for Medicare coverage. After Mr.
Tillman and his wife become eligible for Medicare coverage, the Company will
pay the cost of a Medicare supplement policy to maintain his existing level of
coverage. The post-retirement health coverage benefits provided in the
Retirement Agreement will continue for the benefit of Mr. Tillman's wife if he
predeceases her.

The Retirement Agreement also provides for the Company to (A) indemnify Mr.
Tillman in the event of a legal proceeding or investigation relating to his
service as a director or officer of the Company, (B) reimburse him for the
cost of relocating his office from the Company to a new office and, for the
period of two years after the Retirement Date, for the cost of maintaining
such new office with secretarial and administrative support, (C) purchase his
residence (at his election and at his cost basis, including the cost of any
improvements) during the five year period following his Retirement Date, and
(D) pay his reasonable moving expenses if he elects to relocate, irrespective
of whether he elects to cause the Company to purchase his residence. The
Company has also agreed to pay Mr. Tillman the sum of $10,000 to assist him
with the costs he has incurred in connection with the negotiation of his
Retirement Agreement and the planning for his retirement.

The Retirement Agreement also provides that Mr. Tillman will receive any
applicable benefits under the employee benefit plans of the Company in which
he is a participant for services rendered to the Company through the
Retirement Date, and that the benefits so earned by or due to him shall be
paid or provided to him in accordance with the terms of those plans.

For his service to the Company through the Retirement Date, Mr. Tillman will
continue to receive his current regular base salary. He will also be eligible
to receive a cash incentive award based upon the extent to which the Company's
established performance objectives for fiscal 2004 are satisfied, any such
payment to be made on the same date such amounts are paid to then active
employees of the Company. The Company's contributions and credits to Mr.
Tillman's accounts under the Lowe's 401(k) Plan and the Lowe's Companies
Benefit Restoration Plan will be based on the total compensation earned by him
for fiscal 2004.

-20-

This description of the terms and conditions of the Retirement Agreement is
qualified in its entirety by reference to the Retirement Agreement, a copy of
which is attached as Exhibit 10.2 and incorporated herein by reference.

Item 6 - Exhibits

Exhibit 10.1 - Amendment to the
Lowe's Companies, Inc. Employee Stock Purchase Plan - Stock Options for
Everyone, effective September 10, 2004

Exhibit 10.2 - Retirement Agreement - Robert L. Tillman, dated December 3,
2004

Exhibit 31.1 - Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002

Exhibit 31.2 - Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002

Exhibit 32.1 - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2 - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

-21-

SIGNATURE

Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by

the undersigned
thereunto duly authorized.

Current Debt Ratings	S&P	Moody's	Fitch
Commercial paper	A1	P1	F1
Senior debt	A	A2	A

Outlook	Positive	Positive	Positive


		LOWE'S COMPANIES, INC.






December 7, 2004 Date		/s/Kenneth W. Black, Jr. Kenneth W. Black, Jr. Senior Vice President and Chief Accounting Officer

-22-

EXHIBIT INDEX

Exhibit No.

Description

*10.1
Amendment to the Lowe's Companies, Inc.
Employee Stock Purchase Plan - Stock Options for Everyone, effective
September 10, 2004

*10.2
Retirement Agreement - Robert L. Tillman,
dated December 3, 2004

31.1

Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

31.2

Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

32.1
Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of
2002.

32.2
Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of
2002.

* Management contract or
compensatory plan or arrangement required to
be filed as an exhibit to this form.

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 29, 2004

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from ________ to _________

NORTH CAROLINA	56-0578072
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1000 Lowe's Blvd., Mooresville, NC	28117
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code	704-758-1000

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Exhibit No.		Description
*10.1		Amendment to the Lowe's Companies, Inc. Employee Stock Purchase Plan - Stock Options for Everyone, effective September 10, 2004

*10.2		Retirement Agreement - Robert L. Tillman, dated December 3, 2004

31.1		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549