Net Sales - Net sales consists primarily of revenue, net of sales tax, associated with contracts with customers for the sale of goods and services in amounts that reflect consideration the Company is entitled to in exchange for those goods and services.

The following table presents the Company’s sources of revenue:



(In millions)	Three Months Ended				Nine Months Ended
(In millions)	November 2, 2018		November 3, 2017		November 2, 2018		November 3, 2017
Products	$	16,293	$	15,903	$	52,527	$	50,720
Services	665		657		1,999		1,915
Other	457		210		1,136		490
Net sales	$	17,415	$	16,770	$	55,662	$	53,125

Revenue from products primarily relates to in-store and online merchandise purchases, which are recognized at the point in time when the customer obtains control of the merchandise, which is at the time of in-store purchase or delivery of the product to the customer. A provision for anticipated merchandise returns is provided through a reduction of sales and cost of sales in the period that the related sales are recorded. Under ASU 2014-09, the merchandise return reserve is presented on a gross basis, with a separate asset and liability included in the consolidated balance sheets as of reporting periods after February 2, 2018. Reporting periods prior to the adoption of ASU 2014-09 reflect merchandise return reserves on a net basis. As of November 2, 2018, anticipated sales returns of $229 million are reflected in other current liabilities, and the associated right of return assets of $151 million are reflected in other current assets. As of November 3, 2017, the merchandise return reserve, net of the associated asset, was $85 million reflected in other current liabilities.

Revenues from services primarily relate to professional installation services the Company provides through subcontractors related to merchandise purchased by a customer. In certain instances, installation services include materials provided by the subcontractor, and both product and installation are included in service revenue. The Company recognizes revenue associated with services as they are rendered, and the majority of services are completed within one week from initiation.

Deferred revenue is presented for merchandise that has not yet transferred control to the customer and for services that have not yet been provided, but for which tender has been accepted. Deferred revenue is recognized in sales either at a point in time when the customer obtains control of merchandise through pickup or delivery, or over time as services are provided to the customer. Deferred revenues associated with amounts received for which customers have not taken possession of the merchandise or for which installation has not yet been completed were $945 million at November 2, 2018 and $952 million at November 3, 2017. The majority of revenue for goods and services is recognized in the quarter following revenue deferral.

Stored-value cards

In addition, the Company defers revenues from stored-value cards, which include gift cards and returned merchandise credits, and recognizes revenue into sales when the cards are redeemed. The liability associated with outstanding stored-value cards was $411 million and $452 million at November 2, 2018, and November 3, 2017, respectively, and these amounts are included in deferred revenue on the consolidated balance sheets. Upon adoption of ASU 2014-09, the Company recognizes income from unredeemed stored-value cards in proportion to the pattern of rights exercised by the customer. Amounts recognized as breakage were insignificant for the three and nine months ended November 2, 2018 and November 3, 2017.

Extended protection plans

The Company also defers revenues for its separately-priced extended protection plan contracts, which is a Lowe’s-branded program for which the Company is ultimately self-insured. The Company recognizes revenue from extended protection plan sales on a straight-line basis over the respective contract term. Extended protection plan contract terms primarily range from one to five years from the date of purchase or the end of the manufacturer’s warranty, as applicable. Deferred revenue from extended protection plans recognized into sales were $97 million and $293 million for the three and nine months ended November 2, 2018, respectively, and $92 million and $273 million for the three and nine months ended November 3, 2017, respectively. Incremental direct acquisition costs associated with the sale of extended protection plans are also deferred and recognized as expense on a straight-line basis over the respective contract term and were insignificant at November 2, 2018 and November 3, 2017, respectively. The Company’s extended protection plan deferred costs are included in other assets (noncurrent) on the consolidated balance sheets. All other costs, such as costs of services performed under the contract, general and administrative expenses, and advertising expenses are expensed as incurred.

The liability for extended protection plan claims incurred is included in other current liabilities on the consolidated balance sheets and was not material in any of the periods presented. Expenses for claims are recognized when incurred and totaled $47 million and $141 million for the three and nine months ended November 2, 2018, respectively, and $43 million and $119 million for the three and nine months ended November 3, 2017, respectively.

Disaggregation of Revenues

The following table presents the Company’s net sales disaggregated by merchandise division:



	Three Months Ended						Nine Months Ended
	November 2, 2018			November 3, 2017			November 2, 2018			November 3, 2017
(In millions)	Total Sales		%	Total Sales		%	Total Sales		%	Total Sales		%
Building & Maintenance ¹	$	7,322	42	$	7,202	43	$	22,042	40	$	21,069	40
Home Décor ²	6,959		40	6,874		41	21,207		37	20,688		39
Seasonal ³	2,570		15	2,382		15	10,964		20	10,573		20
Other	564		3	312		1	1,449		3	795		1
Total	$	17,415	100	$	16,770	100	$	55,662	100	$	53,125	100


¹	Building & Maintenance includes the following product categories: Lumber & Building Materials, Millwork, Rough Plumbing & Electrical, and Tools & Hardware


²	Home Décor includes the following product categories: Appliances, Fashion Fixtures, Flooring, Kitchens, and Paint


³	Seasonal includes the following product categories: Lawn & Garden and Seasonal & Outdoor Living

The following table presents the Company’s net sales disaggregated by geographical area:



(In millions)	Three Months Ended				Nine Months Ended
(In millions)	November 2, 2018		November 3, 2017		November 2, 2018		November 3, 2017
United States	$	15,991	$	15,279	$	51,319	$	49,102
International	1,424		1,491		4,343		4,023
Net Sales	$	17,415	$	16,770	$	55,662	$	53,125

Practical Expedients

Sales commissions and selling-related goods or services are considered immaterial and are expensed as incurred because the amortization period of the assets would be one year or less. These costs are reflected within selling, general and administrative expenses.