Core Viewpoint - Lowe's Companies experienced a decline of 1.6% in stock price, ending at $268.67, after six consecutive sessions of gains [1] Stock Performance - The stock had previously increased nearly 6% over the last six sessions [1] - Year-to-date, Lowe's stock has gained 10.6% [1]

Group 1 - The analyst has over 15 years of experience in investing and has provided research services to mid-sized hedge funds with assets under management between $100 million and $500 million [1] - The focus is on medium-term investing, targeting ideas with catalysts to unlock value or short selling in case of downside catalysts [1] - The analyst has a generalist approach but has higher conviction in the industrial, consumer, and technology sectors due to extensive professional experience in these areas [1]

Group 1 - The retail sector in the US stock market experienced an initial rise, with Amazon increasing by approximately 3.5% [1] - Other retailers such as eBay, Ross Stores, Home Depot, Lowe's, and Target saw an increase of about 1% [1]

Core Insights - Lowe's has launched the "Earn Your Sunday" campaign to encourage NFL fans to complete home projects during the week, allowing Sundays to be dedicated to football and family [1][4] - The campaign features NFL stars including Saquon Barkley, Justin Jefferson, Christian McCaffrey, C.J. Stroud, and Dak Prescott, aiming to connect home improvement with the excitement of NFL games [2][4] - Lowe's will conduct the first-ever "Earn Your Sunday Tour," providing interactive experiences at select Lowe's stores and NFL stadiums, exclusively for MyLowe's Rewards members [3] Company Overview - Lowe's is a FORTUNE® 100 home improvement company, serving approximately 16 million customer transactions weekly in the U.S. [6] - The company reported total fiscal year 2024 sales exceeding $83 billion and operates over 1,700 home improvement stores with around 300,000 employees [6] - Lowe's is committed to community support through initiatives focused on safe housing, community improvement, skilled trade development, and disaster relief [6]

Company Overview - Marvin Ellison serves as the Chairman, President, and CEO of Lowe's, having been appointed in 2018 with over 30 years of experience in the retail and home improvement industry [2][3]. Acquisition Announcement - Lowe's recently announced the acquisition of Foundation Building Materials (FBM), a leading distributor of interior building products, which includes drywall, metal framing, ceiling systems, insulation, and commercial doors and hardware [3][4]. - FBM has a diverse customer base, with approximately 45% of its business coming from residential projects and 55% from commercial projects, which are evenly split between new construction and repair/remodel applications [4]. Engagement with FBM - Lowe's has been in discussions with FBM's leadership since the beginning of the year and has been impressed by their industry expertise and track record of profitable growth [5].

Financial Data and Key Metrics Changes - The company reported a positive comp growth of 4.7% in July, improving from negative comps in May and positive comps in June, indicating a strong exit rate from the second quarter [11] - The management expressed cautious optimism regarding consumer health, noting that homeowners are willing to spend when they perceive value [12][13] Business Line Data and Key Metrics Changes - The acquisition of Foundation Building Materials (FBM) is expected to enhance the company's capabilities in serving large professional customers, which is a segment not significantly served by the company previously [5][6] - FBM's diverse customer base includes approximately 45% residential and 55% commercial, which aligns with the company's strategy to expand its market presence [4] Market Data and Key Metrics Changes - The company identified a total addressable market of $250 billion for large professional customers, which presents new opportunities following the acquisition of FBM [5][30] - The management highlighted a significant need for 18 million new homes by 2033, indicating a strong demand in the housing market that the company aims to capitalize on [7][28] Company Strategy and Development Direction - The company is focused on retail fundamentals and has made significant investments over the past seven years to modernize its strategy for an omnichannel retail environment [10] - The management emphasized the importance of a balanced capital allocation strategy, which includes investments in business growth, dividend increases, and share repurchase plans once leverage targets are met [26][31] Management Comments on Operating Environment and Future Outlook - The management anticipates stable consumer behavior in the second half of the year, with potential tariff-related price increases being the only significant concern [40] - The company is closely monitoring the mortgage rate environment, believing that a sub-6% rate could unlock consumer spending in the housing market [14][15] Other Important Information - The company has shifted its sourcing strategy, with 60% of goods now sourced from the U.S., reducing dependency on China [20][21] - The management is excited about the early results from the new product marketplace initiative, which aims to broaden the product assortment and attract new customers [35][36] Q&A Session Summary Question: Expectations for consumer health in the back half of the year - The management expects consumer health to remain stable, with no significant changes anticipated in behavior [40] Question: Pricing actions taken and elasticity response - The management noted that the first half did not see significant tariff-related pricing adjustments, but they are prepared to leverage their portfolio for competitive pricing in the back half [42][44] Question: Inventory growth expectations and supply chain disruptions - The management expressed confidence in their inventory position, stating that most second-half buys are already completed and there are no concerns about supply chain disruptions [46][48] Question: Non-tariff margin drivers outlook - The management does not foresee any significant expense-related increases and is committed to productivity improvement initiatives [49][52] Question: Market share consolidation outlook - The management believes that while there will be additional consolidation in the market, the pro market will remain fragmented with many regional players [53][54]

Financial Data and Key Metrics Changes - The company reported a positive comp growth of 4.7% in July, improving from negative comps in May and positive comps in June, indicating a strong exit rate from the second quarter [12] - The management expressed cautious optimism regarding consumer health, noting that homeowners are willing to spend, especially when they perceive value [13][14] Business Line Data and Key Metrics Changes - The acquisition of Foundation Building Materials (FBM) is expected to enhance Lowe's capabilities in serving the large pro customer segment, which is currently a $250 billion total addressable market [5][19] - FBM's strong track record of organic and inorganic growth, along with its national footprint, complements Lowe's existing store base [4][5] Market Data and Key Metrics Changes - The management highlighted that approximately 90% of customers either own their homes outright or have a mortgage rate below 4%, creating a "lock-in effect" that may delay housing turnover [15][16] - The company identified a significant opportunity in the housing market, with an estimated 18 million new homes needed by 2033, particularly in single-family and multifamily construction [30][32] Company Strategy and Development Direction - The company is focused on a total home strategy, aiming to provide comprehensive interior solutions for homebuilders through the integration of FBM and ADG [7][32] - The management emphasized the importance of a dynamic pricing strategy to remain competitive while offering value to customers [24][43] Management's Comments on Operating Environment and Future Outlook - The management anticipates stable consumer behavior in the second half of the year, with no significant macro changes expected, although tariff-related price increases may occur [40][41] - The company is committed to maintaining a strong balance sheet and capital allocation strategy, focusing on investments in the business while also planning to resume share repurchases once leverage targets are met [28][33] Other Important Information - The company has made significant progress in diversifying its sourcing strategy, with 60% of goods sourced from the U.S. and a reduced dependency on China [21][22] - The management is excited about the early results of their new product marketplace initiative, which aims to broaden product assortment and attract new customers [34][36] Q&A Session Summary Question: What is the outlook for consumer health in the second half of the year? - The management expects consumer health to remain stable, with no material changes anticipated in behavior, aside from potential tariff-related price increases [40] Question: What pricing actions have been taken, and what is the elasticity response? - The first half did not see significant tariff-related pricing adjustments, but the company plans to leverage its portfolio for competitive pricing in the second half [41][42] Question: What are the expectations for inventory growth and supply chain disruptions? - The management does not foresee supply chain disruptions and is confident in their inventory commitments for the second half [46][48] Question: What is the view on non-tariff margin drivers like freight and wages? - The company does not anticipate significant expense-related increases and is focused on maintaining productivity while improving customer service [49][50] Question: Will market share consolidation speed up or slow down in 2026? - The management believes that while consolidation will continue, the pro market remains fragmented with significant opportunities still available [52][53]

Core Insights - Lowe's Companies, Inc. (LOW) reported a comparable sales growth of 1.1% in Q2 fiscal 2025, with a strong focus on the Pro customer segment, which continues to show growth and confidence in demand supported by stable backlogs [1][8] Group 1: Company Performance - The Pro segment at Lowe's has shown mid-single-digit growth, indicating a robust performance compared to the DIY segment [1] - The recent acquisition of Artisan Design Group (ADG) and the pending buyout of Foundation Building Materials (FBM) are strategic moves to enhance Lowe's presence in the Pro market, particularly in large projects [2] - DIY sales have improved, but many homeowners are postponing larger discretionary projects due to high mortgage rates and low housing turnover, making Pro spending a more resilient growth driver [3] Group 2: Strategic Initiatives - Lowe's plans to utilize FBM's job-site delivery network and AI-powered estimating tools to strengthen relationships with professional customers and enhance cross-selling opportunities [3][4] - The combination of capabilities from ADG and FBM is expected to accelerate Lowe's penetration in the Pro market, which offers higher ticket sizes and recurring demand [4][8] Group 3: Market Context - Competitors like Home Depot and Floor & Decor are also focusing on Pro customers, with Home Depot reporting growth in both Pro and DIY segments and Floor & Decor expanding its offerings to capture high-ticket projects [5][6] - The overall market for Pro customers is becoming increasingly competitive, with various companies enhancing their product mix and delivery networks to engage professional contractors [5][6] Group 4: Financial Metrics - Lowe's shares have increased by 5.4% over the past year, while the industry has grown by 8% [7] - The Zacks Consensus Estimate indicates a year-over-year sales growth of 1.6% and earnings growth of 2.8% for Lowe's [10] - Current financial estimates suggest sales of $20.86 billion for the current quarter and $84.99 billion for the current year, with expected growth rates of 3.43% and 1.57% respectively [13]

Group 1 - Lowe's Companies, Inc. has declared a quarterly cash dividend of $1.20 per share, payable on November 5, 2025, to shareholders of record as of October 22, 2025 [1] - The company serves approximately 16 million customer transactions weekly in the United States [2] - For fiscal year 2024, Lowe's reported total sales exceeding $83 billion [2] Group 2 - Lowe's operates over 1,700 home improvement stores and employs around 300,000 associates [2] - The company is based in Mooresville, North Carolina, and engages in community support programs focused on safe housing, community space improvement, skilled trade development, and disaster relief [2]

```markdown [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section outlines the nature of forward-looking statements, their inherent risks, and where investors can find more detailed information - Statements including words such as "believe", "expect", "anticipate", "plan", "desire", "project", "estimate", "intend", "will", "should", "could", "would", "may", "strategy", "potential", "opportunity", "outlook", "scenario", "guidance", and similar expressions are forward-looking statements[8](index=8&type=chunk) - Forward-looking statements involve expectations, projections, and assumptions about future financial and operating results, objectives (including environmental and social matters), business outlook, priorities, sales growth, shareholder value, capital expenditures, cash flows, the housing market, the home improvement industry, demand for products and services, macroeconomic conditions, consumer spending, share repurchases, and Lowe's strategic initiatives, including acquisitions and dispositions[8](index=8&type=chunk) - Actual results may differ materially due to a wide variety of potential risks, uncertainties, and other factors, including acquisition-related issues (FBM), changes in general economic conditions (volatility, liquidity, borrowing costs, disposable income, inflation), labor supply disruptions, interest rate and currency fluctuations, housing market changes, consumer credit availability, trade policy, pandemics, fuel and energy costs, commodity prices, natural disasters, geopolitical conflicts, and terrorism[9](index=9&type=chunk) - Investors should carefully consider factors described in "Item 1A - Risk Factors" and "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" in the most recent Annual Report on Form 10-K and subsequent SEC filings[10](index=10&type=chunk) [PART I - Financial Information](index=4&type=section&id=PART%20I%20-%20Financial%20Information) This part presents the company's unaudited condensed consolidated financial statements and related disclosures [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Lowe's Companies, Inc., including statements of earnings, comprehensive income, balance sheets, shareholders' deficit, and cash flows, along with accompanying notes detailing significant accounting policies, acquisitions, revenue recognition, investments, debt, derivatives, equity, earnings per share, supplemental disclosures, segment information, and a subsequent event [Consolidated Statements of Earnings](index=4&type=section&id=Consolidated%20Statements%20of%20Earnings) This statement provides a detailed overview of the company's revenues, costs, and net earnings over specific reporting periods Three Months Ended August 1, 2025 vs. August 2, 2024 | Metric | August 1, 2025 (Amount) | August 2, 2024 (Amount) | Change (Amount) | Change (%) | | :--------------------------- | :---------------------- | :---------------------- | :-------------- | :--------- | | Net sales | $23,959 million | $23,586 million | $373 million | 1.6% | | Cost of sales | $15,858 million | $15,691 million | $167 million | 1.1% | | Gross margin | $8,101 million | $7,895 million | $206 million | 2.6% | | Operating income | $3,469 million | $3,447 million | $22 million | 0.6% | | Net earnings | $2,398 million | $2,383 million | $15 million | 0.6% | | Basic EPS | $4.28 | $4.18 | $0.10 | 2.4% | | Diluted EPS | $4.27 | $4.17 | $0.10 | 2.4% | Six Months Ended August 1, 2025 vs. August 2, 2024 | Metric | August 1, 2025 (Amount) | August 2, 2024 (Amount) | Change (Amount) | Change (%) | | :--------------------------- | :---------------------- | :---------------------- | :-------------- | :--------- | | Net sales | $44,888 million | $44,950 million | $(62) million | (0.1)% | | Cost of sales | $29,800 million | $29,965 million | $(165) million | (0.6)% | | Gross margin | $15,088 million | $14,985 million | $103 million | 0.7% | | Operating income | $5,964 million | $6,100 million | $(136) million | (2.2)% | | Net earnings | $4,038 million | $4,137 million | $(99) million | (2.4)% | | Basic EPS | $7.21 | $7.24 | $(0.03) | (0.4)% | | Diluted EPS | $7.19 | $7.23 | $(0.04) | (0.6)% | [Consolidated Statements of Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This statement presents the company's net earnings alongside other comprehensive income or loss components for the reporting periods Three Months Ended August 1, 2025 vs. August 2, 2024 | Metric | August 1, 2025 (Amount) | August 2, 2024 (Amount) | Change (Amount) | Change (%) | | :--------------------- | :---------------------- | :---------------------- | :-------------- | :--------- | | Net earnings | $2,398 million | $2,383 million | $15 million | 0.6% | | Other comprehensive loss | $(5) million | $(1) million | $(4) million | 400.0% | | Comprehensive income | $2,393 million | $2,382 million | $11 million | 0.5% | Six Months Ended August 1, 2025 vs. August 2, 2024 | Metric | August 1, 2025 (Amount) | August 2, 2024 (Amount) | Change (Amount) | Change (%) | | :--------------------- | :---------------------- | :---------------------- | :-------------- | :--------- | | Net earnings | $4,038 million | $4,137 million | $(99) million | (2.4)% | | Other comprehensive loss | $(7) million | $(5) million | $(2) million | 40.0% | | Comprehensive income | $4,031 million | $4,132 million | $(101) million | (2.4)% | [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) This statement details the company's assets, liabilities, and shareholders' deficit at specific points in time As of August 1, 2025 vs. August 2, 2024 | Metric | August 1, 2025 (Amount) | August 2, 2024 (Amount) | Change (Amount) | Change (%) | | :-------------------------------- | :---------------------- | :---------------------- | :-------------- | :--------- | | Total assets | $46,614 million | $44,934 million | $1,680 million | 3.7% | | Cash and cash equivalents | $4,860 million | $4,360 million | $500 million | 11.5% | | Merchandise inventory - net | $16,342 million | $16,841 million | $(499) million | (3.0)% | | Intangibles - net | $976 million | $284 million | $692 million | 243.7% | | Goodwill | $691 million | $311 million | $380 million | 122.2% | | Total liabilities | $58,014 million | $58,697 million | $(683) million | (1.2)% | | Current maturities of long-term debt | $4,175 million | $1,290 million | $2,885 million | 223.6% | | Accounts payable | $9,513 million | $10,336 million | $(823) million | (8.0)% | | Long-term debt, excluding current maturities | $30,548 million | $34,659 million | $(4,111) million | (11.9)% | | Total shareholders' deficit | $(11,400) million | $(13,763) million | $2,363 million | (17.2)% | [Consolidated Statements of Shareholders' Deficit](index=6&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Deficit) This statement outlines the changes in the company's shareholders' deficit over the reporting periods, including net earnings, dividends, and share repurchases Six Months Ended August 1, 2025 | Metric | January 31, 2025 (Amount) | August 1, 2025 (Amount) | Change (Amount) | | :-------------------------------- | :------------------------ | :------------------------ | :-------------- | | Total Shareholders' Deficit | $(14,231) million | $(11,400) million | $2,831 million | | Net earnings | N/A | $4,038 million | N/A | | Cash dividends declared | N/A | $(1,317) million | N/A | | Repurchases of common stock | N/A | $(71) million | N/A | | Common Stock Shares Outstanding | 560 million | 561 million | 1 million | Six Months Ended August 2, 2024 | Metric | February 2, 2024 (Amount) | August 2, 2024 (Amount) | Change (Amount) | | :-------------------------------- | :------------------------ | :------------------------ | :-------------- | | Total Shareholders' Deficit | $(15,050) million | $(13,763) million | $1,287 million | | Net earnings | N/A | $4,137 million | N/A | | Cash dividends declared | N/A | $(1,283) million | N/A | | Repurchases of common stock | N/A | $(1,756) million | N/A | | Common Stock Shares Outstanding | 574 million | 568 million | (6) million | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement categorizes the company's cash inflows and outflows from operating, investing, and financing activities for the reporting periods Six Months Ended August 1, 2025 vs. August 2, 2024 | Metric | August 1, 2025 (Millions) | August 2, 2024 (Millions) | Change (Millions) | Change (%) | | :-------------------------------- | :---------------------- | :---------------------- | :-------------- | :--------- | | Net cash provided by operating activities | $7,610 | $7,415 | $195 | 2.6% | | Net cash used in investing activities | $(2,343) | $(800) | $(1,543) | 192.9% | | Net cash used in financing activities | $(2,168) | $(3,176) | $1,008 | (31.7)% | | Net increase in cash and cash equivalents | $3,099 | $3,439 | $(340) | (9.9)% | | Cash and cash equivalents, end of period | $4,860 | $4,360 | $500 | 11.5% | - Net cash used in investing activities significantly increased due to the acquisition of business - net of **$1,314 million in 2025** (vs. $0 in 2024) and higher capital expenditures of **$1,013 million in 2025** (vs. $808 million in 2024)[16](index=16&type=chunk) - Net cash used in financing activities decreased primarily due to lower repurchases of common stock, which were **$113 million in 2025** compared to **$1,930 million in 2024**[16](index=16&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide essential details and explanations supporting the figures presented in the consolidated financial statements [Note 1: Summary of Significant Accounting Policies](index=9&type=section&id=Note%201%3A%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and methods used in preparing the interim financial statements - The interim condensed consolidated financial statements are unaudited and presented in accordance with SEC rules, not including all disclosures normally required in annual GAAP statements[18](index=18&type=chunk) - Management believes the statements contain all normal recurring adjustments necessary for fair presentation[18](index=18&type=chunk) - There have been no significant changes in accounting pronouncements not yet adopted from those disclosed in the Annual Report[20](index=20&type=chunk) [Note 2: Acquisition](index=9&type=section&id=Note%202%3A%20Acquisition) This note details the acquisition of Artisan Design Group (ADG), including its purchase price and preliminary allocation of assets and liabilities - On June 2, 2025, Lowe's completed the acquisition of Artisan Design Group (ADG), a leading nationwide provider of design, distribution, and installation services for interior surface finishers, for an aggregate cash purchase price of **$1.3 billion**[21](index=21&type=chunk) - The acquisition is expected to expand the Company's Pro customer offering into a new distribution channel within a highly fragmented market[21](index=21&type=chunk) Preliminary Aggregate Purchase Price Allocation (June 2, 2025) | Item | Amount (In millions) | | :-------------------------------- | :------------------- | | Cash acquired | $2 | | Merchandise inventory | $106 | | Property | $31 | | Operating lease right-of-use assets | $137 | | Intangible assets | $714 | | Goodwill | $379 | | Other assets | $270 | | Accounts payable | $(73) | | Accrued compensation and employee benefits | $(34) | | Operating lease liabilities | $(125) | | Deferred revenue | $(22) | | Long-term debt, excluding current maturities | $(4) | | Deferred income taxes, net | $(36) | | **Net assets acquired** | **$1,315** | - Intangible assets acquired totaled **$714 million**, including trademarks (**$130 million**, 15-year useful life), customer relationships (**$550 million**, 20-year useful life), backlog (**$26 million**), and non-compete agreements (**$8 million**, 5-year useful life) Goodwill of **$379 million** is primarily attributable to expected synergies[22](index=22&type=chunk) [Note 3: Revenue](index=10&type=section&id=Note%203%3A%20Revenue) This note provides a breakdown of revenue sources and deferred revenue, including details on merchandise divisions and protection plans Sources of Revenue (Three Months Ended August 1, 2025 vs. August 2, 2024) | Category | August 1, 2025 (Millions) | August 2, 2024 (Millions) | Change (Millions) | Change (%) | | :------- | :------------------------ | :------------------------ | :---------------- | :--------- | | Products | $22,973 | $22,709 | $264 | 1.2% | | Services | $655 | $548 | $107 | 19.5% | | Other | $331 | $329 | $2 | 0.6% | | Net sales | $23,959 | $23,586 | $373 | 1.6% | Merchandise Division Net Sales (Three Months Ended August 1, 2025 vs. August 2, 2024) | Division | August 1, 2025 (Millions) | % Sales | August 2, 2024 (Millions) | % Sales | | :-------------- | :------------------------ | :------ | :------------------------ | :------ | | Home Décor | $8,359 | 34.9% | $8,181 | 34.7% | | Hardlines | $7,817 | 32.6% | $7,718 | 32.7% | | Building Products | $7,084 | 29.6% | $7,077 | 30.0% | | Other | $699 | 2.9% | $610 | 2.6% | | Total | $23,959 | 100.0% | $23,586 | 100.0% | Deferred Revenue (August 1, 2025 vs. August 2, 2024) | Category | August 1, 2025 (Millions) | August 2, 2024 (Millions) | | :------------------------ | :------------------------ | :------------------------ | | Retail deferred revenue | $1,095 | $922 | | Stored-value cards deferred revenue | $463 | $495 | | Deferred revenue | $1,558 | $1,417 | - Deferred revenue for Lowe's protection plans increased slightly to **$1,283 million** as of August 1, 2025, from **$1,256 million** a year prior Revenue recognized from these plans for the three months ended August 1, 2025, was **$144 million**, with claim expenses of **$61 million**[30](index=30&type=chunk) [Note 4: Restricted Investments](index=12&type=section&id=Note%204%3A%20Restricted%20Investments) This note explains the nature and amounts of restricted investments held as collateral, primarily for protection plans - Short-term and long-term investments include restricted balances pledged as collateral primarily for the Lowe's protection plans program[33](index=33&type=chunk) Total Restricted Investments (In millions) | Date | Amount | | :--------------- | :----- | | August 1, 2025 | $669 | | August 2, 2024 | $622 | | January 31, 2025 | $649 | [Note 5: Fair Value Measurements](index=12&type=section&id=Note%205%3A%20Fair%20Value%20Measurements) This note describes the company's fair value measurement methodologies and provides a breakdown of assets and liabilities measured at fair value - Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, utilizing a three-level hierarchy (Level 1: quoted prices in active markets; Level 2: observable inputs other than quoted prices; Level 3: unobservable inputs)[34](index=34&type=chunk)[36](index=36&type=chunk) Recurring Fair Value Measurements (August 1, 2025, In millions) | Asset/Liability Category | Classification | Measurement Level | Amount | | :----------------------- | :------------- | :---------------- | :----- | | U.S. Treasury securities | Short-term investments | Level 1 | $225 | | Money market funds | Short-term investments | Level 1 | $60 | | Commercial paper | Short-term investments | Level 2 | $48 | | Certificates of deposit | Short-term investments | Level 1 | $37 | | Foreign government debt securities | Short-term investments | Level 2 | $19 | | Corporate debt securities | Short-term investments | Level 2 | $5 | | Municipal obligations | Short-term investments | Level 2 | $2 | | U.S. Treasury securities | Long-term investments | Level 1 | $125 | | Corporate debt securities | Long-term investments | Level 2 | $119 | | Foreign government debt securities | Long-term investments | Level 2 | $22 | | Municipal obligations | Long-term investments | Level 2 | $7 | | Fixed-to-floating interest rate swaps | Other current liabilities | Level 2 | $6 | | Fixed-to-floating interest rate swaps | Other liabilities | Level 2 | $24 | - The performance-based contingent consideration related to the fiscal 2022 sale of the Canadian retail business (Level 3 long-term investment) had an estimated fair value of **zero** as of August 1, 2025, August 2, 2024, and January 31, 2025[38](index=38&type=chunk) - The fair value of the Company's long-term debt (excluding finance lease obligations) was estimated at **$31,199 million** as of August 1, 2025, compared to a carrying amount of **$34,290 million**[42](index=42&type=chunk) [Note 6: Accounts Payable](index=13&type=section&id=Note%206%3A%20Accounts%20Payable) This note details the company's supplier finance program and the associated financed payment obligations - The Company has a supplier finance program that allows participating suppliers to finance payment obligations with designated third-party financial institutions[43](index=43&type=chunk) Financed Payment Obligations (In millions) | Date | Amount | | :--------------- | :----- | | August 1, 2025 | $1,326 | | August 2, 2024 | $1,447 | | January 31, 2025 | $1,511 | [Note 7: Debt](index=14&type=section&id=Note%207%3A%20Debt) This note outlines the company's commercial paper program, credit agreements, and debt repayment activities - The Company's commercial paper program is supported by a **$2.0 billion** five-year unsecured revolving credit agreement (2023 Credit Agreement) and a **$2.0 billion** five-year unsecured third amended and restated credit agreement[45](index=45&type=chunk) - As of August 1, 2025, there were no outstanding borrowings under the commercial paper program or either credit agreement, with total combined availability of **$4.0 billion**[45](index=45&type=chunk) Repayment of Debt (Six Months Ended) | Metric | August 1, 2025 (Millions) | August 2, 2024 (Millions) | | :------------- | :------------------------ | :------------------------ | | Repayment of debt | $(796) | $(47) | [Note 8: Derivative Instruments](index=14&type=section&id=Note%208%3A%20Derivative%20Instruments) This note describes the company's use of interest rate swap agreements for hedging and their accounting treatment - The Company utilizes fixed-to-floating interest rate swap agreements as fair value hedges on certain debt[46](index=46&type=chunk) - The notional amount for fixed-to-floating interest rate swap agreements was **$850 million** as of August 1, 2025, August 2, 2024, and January 31, 2025[46](index=46&type=chunk) - These hedges are accounted for using the shortcut method, assuming perfect effectiveness, resulting in no net impact on the consolidated statements of earnings from the fair value of the derivatives[47](index=47&type=chunk) [Note 9: Shareholders' Deficit](index=14&type=section&id=Note%209%3A%20Shareholders%27%20Deficit) This note provides information on the company's share repurchase program and related activities affecting shareholders' deficit - The Company has an ongoing share repurchase program, but it was paused in fiscal 2025[48](index=48&type=chunk) - As of August 1, 2025, the Company had **$10.8 billion** remaining in its share repurchase program, with no expiration date[48](index=48&type=chunk)[103](index=103&type=chunk) Total Share Repurchases (Six Months Ended) | Metric | August 1, 2025 (Millions) | August 2, 2024 (Millions) | Change (Millions) | Change (%) | | :-------------------------- | :------------------------ | :------------------------ | :---------------- | :--------- | | Shares Repurchased | 0.3 | 7.5 | (7.2) | (96.0)% | | Cost of Repurchases | $69 | $1,756 | $(1,687) | (96.1)% | [Note 10: Earnings Per Share](index=15&type=section&id=Note%2010%3A%20Earnings%20Per%20Share) This note details the calculation of basic and diluted earnings per common share using the two-class method - The Company calculates basic and diluted earnings per common share using the two-class method[51](index=51&type=chunk) Diluted EPS (Three Months Ended) | Metric | August 1, 2025 | August 2, 2024 | Change | Change (%) | | :------------- | :------------- | :------------- | :----- | :--------- | | Diluted EPS | $4.27 | $4.17 | $0.10 | 2.4% | Diluted EPS (Six Months Ended) | Metric | August 1, 2025 | August 2, 2024 | Change | Change (%) | | :------------- | :------------- | :------------- | :----- | :--------- | | Diluted EPS | $7.19 | $7.23 | $(0.04) | (0.6)% | [Note 11: Supplemental Disclosure](index=15&type=section&id=Note%2011%3A%20Supplemental%20Disclosure) This note provides additional financial details, including net interest expense, cash paid for interest and taxes, and non-cash investing and financing activities Net Interest Expense (Six Months Ended) | Metric | August 1, 2025 (Millions) | August 2, 2024 (Millions) | Change (Millions) | Change (%) | | :---------------- | :------------------------ | :------------------------ | :---------------- | :--------- | | Long-term debt | $709 | $729 | $(20) | (2.7)% | | Lease obligations | $10 | $12 | $(2) | (16.7)% | | Interest income | $(67) | $(74) | $7 | (9.5)% | | Interest – net | $650 | $669 | $(19) | (2.8)% | - Cash paid for interest, net of amount capitalized, was **$721 million** for the six months ended August 1, 2025, down from **$735 million** in the prior year[53](index=53&type=chunk) - Cash paid for income taxes – net was **$657 million** for the six months ended August 1, 2025, down from **$1,004 million** in the prior year[53](index=53&type=chunk) - Non-cash investing and financing activities included **$293 million** in leased assets obtained in exchange for new operating lease liabilities for the six months ended August 1, 2025, compared to **$353 million** in the prior year[53](index=53&type=chunk) [Note 12: Segment Information](index=16&type=section&id=Note%2012%3A%20Segment%20Information) This note clarifies that the company operates as a single home improvement segment and provides a breakdown of its operating results - The Company's home improvement operations represent a single operating segment[54](index=54&type=chunk) - The Chief Operating Decision Maker (CODM), the Chairman, President, and Chief Executive Officer, regularly reviews consolidated net earnings and significant segment expenses to evaluate operating performance and make strategic decisions[54](index=54&type=chunk) Operating Results (Six Months Ended August 1, 2025 vs. August 2, 2024) | Metric | August 1, 2025 (Millions) | % Sales | August 2, 2024 (Millions) | % Sales | | :------------------------------------ | :------------------------ | :------ | :------------------------ | :------ | | Net sales | $44,888 | 100.00% | $44,950 | 100.00% | | Cost of sales | $29,800 | 66.39% | $29,965 | 66.66% | | Employee compensation and benefits | $5,648 | 12.58% | $5,564 | 12.40% | | Occupancy and facility costs | $940 | 2.10% | $930 | 2.07% | | Advertising | $448 | 1.00% | $438 | 0.98% | | Other SG&A items | $1,186 | 2.63% | $1,102 | 2.43% | | Depreciation and amortization | $902 | 2.01% | $851 | 1.89% | | Interest – net | $650 | 1.45% | $669 | 1.49% | | Income tax provision | $1,276 | 2.84% | $1,294 | 2.88% | | Net earnings | $4,038 | 9.00% | $4,137 | 9.20% | [Note 13: Subsequent Event](index=16&type=section&id=Note%2013%3A%20Subsequent%20Event) This note discloses the company's definitive agreement to acquire Foundation Building Materials (FBM) and its strategic implications - On August 20, 2025, the Company announced a definitive agreement to acquire Foundation Building Materials (FBM) for approximately **$8.8 billion**[57](index=57&type=chunk) - The acquisition is expected to accelerate the Company's Total Home strategy by enhancing its offering to Pro customers through expanded capabilities, faster fulfillment, improved digital tools, a robust trade credit platform, and significant cross-selling opportunities[57](index=57&type=chunk) - The Company intends to fund the acquisition through a combination of short-term and long-term debt, with the transaction expected to close in the fourth quarter of fiscal 2025, subject to customary closing conditions, including regulatory approval[58](index=58&type=chunk) [Report of Independent Registered Public Accounting Firm](index=18&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) This report presents the independent auditor's review and conclusion on the conformity of the interim financial statements with GAAP - Deloitte & Touche LLP reviewed the accompanying condensed consolidated financial statements for the three and six months ended August 1, 2025, and August 2, 2024[61](index=61&type=chunk) - Based on their reviews, they are not aware of any material modifications that should be made to the interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America[61](index=61&type=chunk) - The condensed consolidated balance sheet as of January 31, 2025, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived[62](index=62&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, liquidity, and capital resources for the three and six months ended August 1, 2025 It highlights key financial results, operational achievements, and strategic initiatives, including the ADG acquisition and ongoing productivity efforts [Executive Overview](index=19&type=section&id=Executive%20Overview) This overview summarizes the company's financial highlights, sales performance, and strategic initiatives for the reporting period Financial Highlights (Three Months Ended August 1, 2025 vs. August 2, 2024) | Metric | August 1, 2025 | August 2, 2024 | | :------------------------ | :------------- | :------------- | | Net sales | $23,959M | $23,586M | | Net earnings | $2,398M | $2,383M | | Diluted earnings per share | $4.27 | $4.17 | - Net sales in the second quarter of fiscal 2025 improved **1.6% to $24.0 billion**, with comparable sales increasing **1.1%**, driven by a **2.9% increase** in comparable average ticket, partially offset by a **1.8% decrease** in comparable customer transactions[68](index=68&type=chunk) - Adjusted diluted earnings per common share was **$4.33** in the second quarter of 2025, excluding **$43 million** in pre-tax expenses related to the acquisition of Artisan Design Group (ADG)[68](index=68&type=chunk)[82](index=82&type=chunk) - Strategic initiatives include continued Pro growth, online sales growth due to a more immersive shopping experience, the launch of the first Home Improvement Creator Network, and Perpetual Productivity Initiatives (PPI) focusing on SKU rationalizations, enhanced assortment planning, and streamlined Freight Flow processes[70](index=70&type=chunk)[71](index=71&type=chunk)[73](index=73&type=chunk) [Operations](index=20&type=section&id=Operations) This section analyzes the company's operational performance, including gross margin, SG&A expenses, and key sales metrics Performance as Percentage of Net Sales (Three Months Ended August 1, 2025 vs. August 2, 2024) | Metric | August 1, 2025 | August 2, 2024 | Basis Point Change | | :-------------------------- | :------------- | :------------- | :----------------- | | Gross margin | 33.81% | 33.47% | +34 | | Selling, general and administrative | 17.42% | 17.07% | +35 | | Depreciation and amortization | 1.91% | 1.79% | +12 | | Operating income | 14.48% | 14.61% | (13) | | Net earnings | 10.01% | 10.10% | (9) | - Gross margin improvement was driven by ongoing productivity initiatives, along with improvements in inventory shrink and credit revenue[89](index=89&type=chunk) - SG&A expense deleveraged primarily due to cycling the prior year gain on contingent consideration associated with the fiscal 2022 sale of the Canadian retail business, expenses associated with the acquisition of ADG, and employee compensation and benefits[90](index=90&type=chunk) Key Metrics (Three Months Ended August 1, 2025 vs. August 2, 2024) | Metric | August 1, 2025 | August 2, 2024 | | :-------------------------------- | :------------- | :------------- | | Comparable sales increase/(decrease) | 1.1% | (5.1)% | | Total customer transactions (in millions) | 225 | 229 | | Average ticket | $106.45 | $103.04 | | Return on invested capital | 29.5% | 30.9% | [Financial Condition, Liquidity and Capital Resources](index=23&type=section&id=Financial%20Condition%2C%20Liquidity%20and%20Capital%20Resources) This section discusses the company's financial position, sources of liquidity, capital expenditures, and debt ratings - The Company's liquidity is primarily provided by cash flows from operations and continued access to capital markets[96](index=96&type=chunk) - As of August 1, 2025, the Company held **$4.9 billion** of cash and cash equivalents and had **$4.0 billion** in undrawn capacity on its revolving credit facilities[96](index=96&type=chunk) Cash Flows (Six Months Ended August 1, 2025 vs. August 2, 2024) | Metric | August 1, 2025 (Millions) | August 2, 2024 (Millions) | Change (Millions) | Change (%) | | :-------------------------------- | :------------------------ | :------------------------ | :---------------- | :--------- | | Net cash provided by operating activities | $7,610 | $7,415 | $195 | 2.6% | | Net cash used in investing activities | $(2,343) | $(800) | $(1,543) | 192.9% | | Net cash used in financing activities | $(2,168) | $(3,176) | $1,008 | (31.7)% | - Capital expenditures totaled **$1.013 billion** for the first six months of 2025, with guidance for fiscal 2025 at approximately **$2.5 billion**[98](index=98&type=chunk) - Share repurchases significantly decreased to **$113 million** for the six months ended August 1, 2025, compared to **$1,930 million** in the prior year, as the program was paused in fiscal 2025[103](index=103&type=chunk) - Dividends paid per share increased from **$2.20** for the six months ended August 2, 2024, to **$2.30** for the six months ended August 1, 2025[104](index=104&type=chunk) Debt Ratings (as of August 28, 2025) | Debt Ratings | S&P | Moody's | | :----------- | :-- | :------ | | Commercial Paper | A-2 | P-2 | | Senior Debt | BBB+ | Baa1 | | Senior Debt Outlook | Stable | Stable | [Critical Accounting Policies and Estimates](index=25&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section outlines the company's significant accounting policies and estimates, particularly those related to business combinations and fair value determinations - The Company's significant and critical accounting policies and estimates have not changed significantly since the filing of the Annual Report, except as noted[108](index=108&type=chunk) - Business combinations are accounted for using the acquisition method, requiring assets acquired and liabilities assumed to be recorded at their respective fair values at the acquisition date[109](index=109&type=chunk) - The determination of fair values, especially for intangible assets (e.g., Customer Relationships, Tradenames for the ADG acquisition), requires significant management judgment and estimates based on forecasted revenues and expenses, growth rates, royalty rates, attrition rates, and discount rates[110](index=110&type=chunk) - Adjustments to preliminary fair values and residual goodwill may be recorded within a one-year measurement period from the acquisition date[109](index=109&type=chunk)[23](index=23&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to market risks, primarily related to changes in interest rates and commodity prices These market risks have not materially changed from those disclosed in the previous Annual Report - The Company is exposed to certain market risks, including changes in interest rates and commodity prices[112](index=112&type=chunk) - The Company's market risks have not changed materially from those disclosed in the Annual Report for the fiscal year ended January 31, 2025[112](index=112&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of August 1, 2025 The company is undergoing a multi-year technology transformation, but no material changes to internal control over financial reporting occurred during the quarter - The Company's management, with the participation of the Chief Executive Officer and the Chief Financial Officer, concluded that the Company's disclosure controls and procedures were effective as of August 1, 2025[113](index=113&type=chunk) - The Company is undergoing a multi-year technology transformation, including updating and modernizing its merchandise selling system and certain accounting and finance systems[114](index=114&type=chunk) - No change in the Company's internal control over financial reporting occurred during the quarter ended August 1, 2025, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting[114](index=114&type=chunk) [PART II - Other Information](index=27&type=section&id=PART%20II%20-%20Other%20Information) This part provides additional required disclosures, including legal proceedings, risk factors, equity security sales, and exhibits [Item 1. Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various lawsuits and claims in the ordinary course of business It records reserves when a liability is probable and estimable Management does not believe that any of these proceedings, individually or in aggregate, would have a material adverse effect on its financial results - The Company is from time to time a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business[116](index=116&type=chunk) - The Company records reserves when it is probable a liability has been incurred, and the amount of loss can be reasonably estimated[116](index=116&type=chunk) - The Company does not believe that any of these proceedings, individually or in the aggregate, would be expected to have a material adverse effect on its results of operations, financial position or cash flows[116](index=116&type=chunk) [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the company's risk factors from those previously disclosed in its Annual Report on Form 10-K filed on March 24, 2025 - There have been no material changes in the Company's risk factors from those disclosed in Part I, "Item 1A. Risk Factors" in our Annual Report filed with the SEC on March 24, 2025[117](index=117&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased a minimal number of shares during the three months ended August 1, 2025, primarily for employee tax withholding, as its publicly announced share repurchase program was paused Approximately $10.8 billion remains authorized under the program Issuer Purchases of Equity Securities (Three Months Ended August 1, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :-------------------------- | :------------------------------- | :--------------------------- | | May 3, 2025 - May 30, 2025 | 105 | $225.95 | | May 31, 2025 - July 4, 2025 | 7,352 | $217.32 | | July 5, 2025 - August 1, 2025 | 77 | $225.88 | | **As of August 1, 2025** | **7,534** | **$217.53** | - No shares were purchased as part of publicly announced plans or programs during the three months ended August 1, 2025[118](index=118&type=chunk) - As of August 1, 2025, approximately **$10.8 billion** remained available under the share repurchase program, which has no expiration date[118](index=118&type=chunk) [Item 5. Other Information](index=27&type=section&id=Item%205.%20Other%20Information) During the three months ended August 1, 2025, no directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements for company securities - During the three months ended August 1, 2025, none of the Company's directors or executive officers adopted or terminated any contract, instruction, or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement"[119](index=119&type=chunk) [Item 6. Exhibits](index=28&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including the restated charter, bylaws, change in control agreement, auditor's letter, certifications from executive officers (Sarbanes-Oxley Act), and Inline XBRL documents - Exhibits include the Restated Charter, Bylaws, and Form of Lowe's Companies, Inc. Change in Control Agreement for Tier 1 Senior Officers[120](index=120&type=chunk) - The report includes a Deloitte & Touche LLP Letter regarding Unaudited Interim Financial Information[120](index=120&type=chunk) - Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) (Section 302) and 18 U.S.C. Section 1350 (Section 906) of the Sarbanes-Oxley Act of 2002 are included[120](index=120&type=chunk) - Inline XBRL documents (Instance Document, Schema, Calculation, Definition, Label, Presentation Linkbase Documents) and the Cover Page Interactive Data File are also listed[120](index=120&type=chunk) [Signature](index=29&type=section&id=Signature) This section provides the official signature confirming the report's compliance with the Securities Exchange Act of 1934 - The report was signed on August 28, 2025, by Dan C. Griggs, Jr., Senior Vice President, Tax and Chief Accounting Officer, on behalf of Lowe's Companies, Inc[124](index=124&type=chunk) - The signature confirms compliance with the requirements of the Securities Exchange Act of 1934[124](index=124&type=chunk) ```