LOWES COMPANIES INC

Lowe's Companies, Inc. is a Fortune 100 company and the world's second largest home improvement retailer, operating in a highly fragmented home improvement market. The company's retail stores and online focus serve individual homeowners and renters completing a wide array of projects, as well as professional customers (Pro customers) that are primarily small to medium sized, including tradespeople, repair and remodelers, and property managers. With the acquisitions of Foundation Building Materials (FBM) and Artisan Design Group (ADG) in 2025, Lowe's is taking an important step in its Total Home strategy to serve larger Pro customers in the residential and commercial markets. Key indicators that affect consumer demand for home improvement products and services include home price appreciation, age of the housing stock, real disposable personal income, housing turnover, and residential and commercial construction.

The home improvement industry includes a broad competitive landscape that continues to evolve. Lowe's competes with national and regional home improvement warehouse chains and lumber yards, as well as traditional hardware, plumbing, electrical, drywall and home supply retailers and distributors, paint stores, lumber yards, garden centers, maintenance and repair organizations, general merchandise retailers, home goods specialty stores, warehouse clubs, online retailers, other specialty retailers, providers of equipment and tool rental, service providers that install home improvement products, and wholesalers. Location of stores and branches, product assortment, product pricing, fulfillment capabilities, and customer service continue to be key competitive factors, while the evolution of technology, including artificial intelligence and machine learning technologies, also underscores the importance of omnichannel capabilities as a competitive factor.

Lowe's is an omnichannel retailer whose focus is on helping customers solve problems and fulfill dreams for their homes. The company generates revenue through the sale of products and services, with revenue from products primarily relating to in-store and online merchandise purchases recognized at the point in time when the customer obtains control of the merchandise. Revenues from services primarily relate to professional installation services provided through subcontractors. The company also generates revenue from extended protection plans (Lowe's protection plans) and other sources. The five pillars of the Total Home strategy are: Drive Pro penetration, Accelerate online sales, Expand home services, Create a loyalty ecosystem, and Increase space productivity.

Lowe's offers a complete line of products for construction, maintenance, repair, remodeling, and decorating across 14 product categories: Appliances, Seasonal & Outdoor Living, Lumber, Lawn & Garden, Hardware, Kitchens & Bath, Building Materials, Rough Plumbing, Paint, Millwork, Tools, Electrical, Flooring, and Décor. A typical Lowe's-branded home improvement store stocks approximately 37,000 items ¹, with additional items available through the online selling channel. The company offers installation services through independent contractors in many product categories, with Kitchens & Bath, Flooring, Appliances, Millwork, and Rough Plumbing accounting for the majority of installed sales. Lowe's also offers extended protection plans for certain products within the Appliances, Kitchens & Bath, Décor, Millwork, Rough Plumbing, Electrical, Seasonal & Outdoor Living, Tools, and Hardware categories. For fiscal 2025, net sales were $86,286 million ², with Home Décor contributing $31,527 million ³ (36.5% of total sales), Building Products contributing $26,533 million ⁴ (30.7% of total sales), Hardlines contributing $24,185 million ⁵ (28.0% of total sales), and Other segment net sales contributing $2,208 million ⁶ (2.6% of total sales).

In fiscal 2025, Lowe's continued to execute on its Total Home strategy, and in December 2024, updated the strategy aligned with the key drivers of home improvement demand. The company completed the acquisitions of Foundation Building Materials (FBM) on October 9, 2025, for an aggregate cash purchase price of $8.8 billion ⁷, and Artisan Design Group (ADG) on June 2, 2025, for an aggregate cash purchase price of $1.3 billion ⁸. These acquisitions are expected to expand the company's Pro customer offering into new distribution channels. The company also continued to deliver on its Perpetual Productivity Improvement (PPI) initiatives, including completing the rollout of its front-end transformation across its store portfolio, streamlining its Freight Flow process, and driving inventory productivity while navigating dynamic trade policies and tariffs.

Net sales for fiscal 2025 increased 3.1% from fiscal 2024 to $86.3 billion ⁹. Comparable sales for fiscal 2025 increased 0.2% ¹⁰, consisting of a 3.0% increase in comparable average ticket ¹¹, partially offset by a 2.8% decrease in comparable customer transactions ¹². Net earnings for fiscal 2025 decreased 4.4% to $6.7 billion ¹³. Diluted earnings per common share decreased 3.1% in fiscal 2025 to $11.85 ¹⁴ from $12.23 ¹⁵ in fiscal 2024. Cash flows from operating activities were $9.9 billion ¹⁶ for fiscal 2025, with $2.2 billion ¹⁷ used for capital expenditures. The company paid $2.6 billion ¹⁸ in dividends during the year.

For fiscal 2026, management's guidance for capital expenditures is approximately $2.5 billion ¹⁹.

A key growth vector is the expansion of the Pro customer market. The company completed the acquisitions of FBM and ADG in 2025, which are expected to accelerate the Total Home strategy by enhancing the offering to Pro customers through expanded capabilities, faster fulfillment, improved digital tools, a robust trade credit platform, and significant cross-selling opportunities. The company believes these acquisitions, along with its retail home improvement business, provide the large Pro customer with everything they need for the interior space of the home and position the company to benefit when there is a recovery in the housing industry.

Another growth vector is the continued investment in omnichannel retail capabilities to accelerate the online business through expansion of product offerings, enhanced fulfillment capabilities, and a simplified user experience. The company is also expanding its installation services to create a high value simplified installation solution, and creating a loyalty ecosystem that drives brand preference, including building out the MyLowe's Rewards infrastructure for both Pro and DIY customers. Additionally, the company is increasing space productivity by optimizing assortments and tailoring them to local markets.

The company's gross margin as a percentage of sales for fiscal 2025 increased 16 basis points ²⁰ compared to fiscal 2024, primarily driven by favorability from credit revenue and improvements in inventory shrink, partially offset by the operational cost structure of acquisitions during 2025. SG&A expense for fiscal 2025 deleveraged 72 basis points ²¹ as a percentage of sales compared to fiscal 2024, primarily driven by employee compensation and benefits, along with cycling prior year realized gains on contingent consideration associated with the 2022 sale of the Canadian retail business, partially offset by the operational cost structure of acquisitions during 2025. Heading into 2026, the company continues its focus on its Perpetual Productivity Improvement (PPI) initiatives and managing what is within its control.

The company continues to modernize its supply chain network to unlock omnichannel capabilities. As of fiscal 2025, the company has the ability to deliver major appliances next-day to the majority of zip codes in the United States ²². Most parcel-eligible items fulfilled by Lowe's can be ordered by a customer and delivered within two business days ²³. The company owns and operates more than 120 supply chain facilities ²⁴ in its network, including regional distribution centers, flatbed distribution centers, import distribution centers, bulk distribution centers, cross-dock terminals, and Fulfillment Centers. For fiscal 2026, the company's guidance for capital expenditures is approximately $2.5 billion ²⁵.

Capital expenditures were $2.2 billion ²⁶ in fiscal 2025 and $1.9 billion ²⁷ in fiscal 2024. For fiscal 2026, management's guidance for capital expenditures is approximately $2.5 billion ²⁸. In fiscal 2025, the company paused its share repurchase program ²⁹. As of January 30, 2026, the company had $10.8 billion ³⁰ remaining under its share repurchase program with no expiration date. In the third quarter of fiscal 2025, the company increased its quarterly dividend payment by 4% to $1.20 per share ³¹. Total cash dividend payments were $2,636 million ³² in fiscal 2025, and dividends paid per share were $4.70 ³³.

The company faces headwinds from persistent volatility in the housing macro environment. Management noted that in fiscal 2025, the company continued to operate in an environment with inflationary pressures and affordability concerns, which has adversely impacted consumer discretionary spending. The company also faces risks from dynamic trade policies and tariffs, as it sources a portion of its products from foreign manufacturers, with China and Mexico being the dominant import sources. Increased import tariffs and other changes in trade policy could impact consumer demand for the products the company sells and could have an adverse impact on financial results.

The company's business is subject to risks related to the long-term effects of global climate change, including both physical risks (such as extreme weather conditions or rising sea levels) and transition risks (such as regulatory or technology changes). Government regulations limiting carbon dioxide and other greenhouse gas emissions may increase compliance and merchandise costs. The company also faces risks from uncharacteristic or significant weather conditions, as well as other catastrophic events, which could impact its operations.

The company's sales are dependent upon the health and stability of the general economy, and adverse changes in macroeconomic factors specific to the home improvement industry, such as inflationary pressures and affordability concerns, have adversely impacted consumer discretionary spending. The company sources a portion of its products from foreign manufacturers, with China and Mexico being the dominant import sources, and increased import tariffs and other changes in trade policy could increase the cost of merchandise and impact consumer demand. The company faces significant competition from online and omnichannel retailers, and failure to adapt to changing shopping habits and demands could result in lost market share. The company's strategic transactions, such as the acquisitions of FBM and ADG for an aggregate of approximately $10.1 billion ³⁴, involve risks including integration challenges and the potential failure to realize expected benefits. Cybersecurity threats and incidents, including ransomware and other cyber-attacks, pose a risk to the company's systems and data, and while such incidents have not had a material impact to date, there is no guarantee that a future incident will not have a material adverse impact.

Management's message emphasizes disciplined execution and confidence in making the right investments to deliver long-term sales growth and sustainable shareholder value. Key themes include the continued execution of the Total Home strategy, with a focus on serving the professional customer, accelerating the online business, expanding installation services, improving localization efforts, and elevating product assortment. Management highlighted the strength delivered with Pro customers, online, and home services during fiscal 2025. The company completed the acquisitions of FBM and ADG to expand the Pro customer market. Heading into 2026, management continues its focus on Perpetual Productivity Improvement (PPI) initiatives and managing what is within its control, given persistent volatility in the housing macro environment. For fiscal 2026, management's guidance for capital expenditures is approximately $2.5 billion ³⁵.