LIXIL IMPACT BRIEFING: April 3, 2026 Empowering Change: Scaling Impact in a New Era Copyright © LIXIL Corporation. All rights reserved. Today's Speakers Kinya Seto Director, Representative Executive Officer, President, and Chief Executive Officer Erin McCusker Executive Officer, Executive Vice President, Chief Impact Officer, Communications, External Affairs, and Impact Strategy 1 Outside Director, Chairperson of the Board of Directors and Chairperson of Governance Committee Ryusuke Ohori ––––– Outside Dire ...

Core Insights - Home Depot Inc. (HD) is experiencing pressure in big-ticket discretionary categories, raising concerns about whether the slowdown is cyclical or structural [2] - Fiscal 2025 comparable sales turned slightly positive, but demand for larger projects remains constrained due to weak housing turnover and consumer confidence [2][4] - Big-ticket transactions above $1,000 grew modestly in Q4 of fiscal 2025, primarily driven by repair-and-maintenance categories rather than high-value discretionary remodels, indicating a cautious consumer mindset [3][5] Market Conditions - Macro headwinds such as elevated mortgage rates, high home prices, and low housing turnover are suppressing demand for major home improvement projects [4] - Customers delaying home purchases are also postponing significant investments, leading to a trend of smaller, necessity-driven spending [4][5] Competitive Landscape - Peers like Lowe's and Floor & Decor are also facing a slowdown in big-ticket discretionary demand due to similar macroeconomic pressures [7] - Lowe's is experiencing pressure in big-ticket DIY projects, with management noting persistent weakness in high-value spending despite stable demand in Pro and smaller repair-driven categories [8] - Floor & Decor is seeing a decline in large discretionary flooring projects, with customers opting for smaller jobs and lower-spec products due to tighter budgets [9] Company Performance - Home Depot continues to gain market share through its Pro ecosystem, digital capabilities, and supply chain investments, although the timing of recovery in big-ticket demand remains uncertain [6][11] - HD's shares have lost 11.5% over the past year, compared to the industry's 16.5% decline [10] - The company trades at a forward price-to-earnings ratio of 21.23X, higher than the industry average of 19.17X [12] Earnings Estimates - The Zacks Consensus Estimate for HD's fiscal 2026 and 2027 earnings implies year-over-year growth of 2.3% and 8.8%, respectively, with recent estimates moving down by 0.9% and 0.4% [13] - Current earnings estimates for fiscal 2026 and 2027 are 15.03 and 16.35, respectively, with a year-over-year growth estimate of -3.93% for the current quarter [14]

Core Insights - The Home Depot has appointed Dr. Franziska "Fran" Bell as executive vice president and chief technology officer, effective April 6, 2026, to lead technology strategy and development [1][2]. Group 1: Leadership and Experience - Dr. Bell previously led AI transformation at Ford Motor Company and held senior roles at BP, Uber, and Toyota, showcasing her extensive experience in technology and AI [2]. - The Home Depot's CEO, Ted Decker, emphasized the importance of technology in enhancing customer experience and noted Dr. Bell's expertise in data science and AI as crucial for the company's future [3]. Group 2: Company Overview - The Home Depot is the largest home improvement retailer globally, operating 2,359 retail stores and over 1,250 SRS locations across various regions, employing over 470,000 associates [3]. - The company's stock is traded on the New York Stock Exchange (NYSE: HD) and is part of the Dow Jones Industrial Average and S&P 500 index [3].

Core Viewpoint - The Home Depot, Inc. (NYSE:HD) is viewed positively by analysts following its acquisition of Mingledorff's, which is expected to significantly enhance the company's market position and growth potential in the HVAC distribution sector [2][3]. Group 1: Analyst Insights - Jefferies analysts express confidence in the acquisition of Mingledorff's, projecting an expansion of the combined Total Addressable Market (TAM) by $100 billion [2]. - The acquisition is anticipated to strengthen The Home Depot's long-term earnings power and growth narrative in the HVAC distribution vertical [2]. - BNP Paribas has adjusted its valuation model, lowering the target multiple from 19.5x to 17.5x EV/EBIT due to market conditions, while still supporting the acquisition as a strategic move [3]. Group 2: Ratings and Price Targets - Jefferies maintains a "Buy" rating on The Home Depot stock following the acquisition announcement [2]. - BNP Paribas has a "Neutral" rating on the stock and has reduced its price target from $391 to $348 [4].

Core Viewpoint - The Home Depot, Inc. (NYSE:HD) is viewed positively by analysts following its acquisition of Mingledorff's, which is expected to significantly enhance the company's market position and growth potential in the HVAC distribution sector [2][3]. Group 1: Analyst Insights - Jefferies analysts express confidence in the acquisition of Mingledorff's, projecting an expansion of the combined Total Addressable Market (TAM) by $100 billion [2]. - The acquisition is anticipated to strengthen The Home Depot's long-term earnings power and growth narrative in the HVAC distribution vertical [2]. - BNP Paribas has adjusted its valuation model, lowering the target multiple from 19.5x to 17.5x EV/EBIT due to market conditions, while still supporting the acquisition as a strategic move [3][4]. Group 2: Ratings and Price Targets - Jefferies maintains a "Buy" rating on The Home Depot stock following the acquisition announcement [2]. - BNP Paribas has a "Neutral" rating on the stock and has reduced its price target from $391 to $348 [4].

Group 1: Housing Market Overview - The median existing home sold for $398,000 in February, marking the 32nd consecutive month of year-over-year price gains [1] - High home prices and mortgage rates have made it difficult for new buyers to enter the market, with mortgage rates recently increasing due to geopolitical events [1][2] Group 2: Lowe's Financial Performance - Lowe's operating income fell during its most recent quarter despite beating earnings expectations [2] - For the full year 2026, Lowe's expects comparable sales to range from flat to up 2% compared to the previous year [2] Group 3: Lowe's Strategic Initiatives - Lowe's is implementing strategies focused on value, convenience, and loyalty to attract customers during the critical spring season [4][8] - The retailer has introduced free same-day delivery on eligible orders over $25 for MyLowe's Rewards and MyLowe's Pro Rewards members [5][10] - Lowe's SpringFest campaign includes promotions on key categories such as lawn and garden, outdoor living, and tools, aimed at energizing shoppers [6][7]

Company Overview - Kingfisher is a home improvement retailer operating in the UK, Ireland, France, Poland, and other regions, catering to both DIY and trade businesses [1] - The company owns several well-known brands, including B&Q, Screwfix, Castorama, and Brico Dépôt [1] Analyst Background - The Stock Orchard is a former buy-side equity analyst and portfolio manager with over 15 years of experience in the US stock market [1] - The investment strategy typically focuses on long-only positions without a specific style bias, with interests in 'value with a catalyst', steady compounders, and potential multi-baggers [1]

Core Insights - The article emphasizes the importance of thorough due diligence in investment research, highlighting the need for investors to understand market psychology and human behavior to identify valuable opportunities [1]. Group 1 - The author has over 20 years of experience in the freight forwarding industry, which provides a strong foundation for insights into market dynamics [1]. - The approach to investing is described as contrarian, suggesting a strategy that goes against prevailing market trends [1]. - The focus is on making money work effectively for investors, rather than against them, indicating a proactive investment philosophy [1].

Acquisition Activity - Home Depot's subsidiary SRS Distribution is set to acquire HVAC distributor Mingledorff's for an undisclosed amount, with the deal expected to close in Q2, subject to customary closing conditions [2] - Mingledorff's operates 42 locations in the southeastern U.S. and serves both residential and commercial customers, with Home Depot highlighting the company's business as "highly complementary" to SRS [3] - The HVAC distribution market has a total addressable market of $100 billion, indicating significant growth potential for SRS following the acquisition [3] Leadership Changes - Discount retailer Gabe's is in search of a permanent CEO and CFO after restructuring last fall, with Steven Becker currently serving as interim CEO [4] - Gabe's has replaced its CFO, Dave Bushland, with Brian Cashman from advisory firm BRG, who will serve in an interim capacity until a permanent replacement is found [5] - The new ownership consortium of Gabe's has set unspecified targets that could unlock funds for the company's turnaround, with indications that these targets are being met [6] Strategic Focus - Gabe's is in the process of closing Old Town Pottery locations or converting them to Gabe's stores, indicating a strategic shift in operations [7] - The company plans to focus on potential expansion in the West next year, signaling a growth strategy post-restructuring [7]

Core Insights - The Home Depot is expanding its offerings for Pro customers through acquisitions and digital enhancements [2][3][8] Group 1: Acquisition Details - The Home Depot's subsidiary SRS Distribution has agreed to acquire Mingledorff's, a wholesale distributor of HVAC equipment, which operates 42 locations across five southeastern states [2] - The acquisition is expected to close in the second quarter, pending customary closing conditions [2] - This acquisition will enhance The Home Depot's specialty trade distribution by adding HVAC products to its existing offerings [3] Group 2: Digital Enhancements - On March 18, The Home Depot announced the addition of new project management and AI tools to its Pro digital experience, aimed at assisting professional renovators and builders [8] - The updated Pro site includes features for project planning, real-time delivery tracking, complex order scheduling, and collaborative access for teams [8][10] - These tools are designed to integrate project management into the mobile workspace of professionals, allowing them to oversee entire jobs [9][10] Group 3: Strategic Vision - The Home Depot views SRS as a growth engine, driving synergies that enhance innovation and value for Pro customers [7] - The company has been building a wholesale-style ecosystem for professional customers, with a focus on expanding its Pro segment by 2025 [10]