Core Insights - The retail landscape for home improvement in the U.S. is being significantly influenced by the adoption of artificial intelligence (AI) by major players, Home Depot and Lowe's, making AI a competitive necessity rather than an experimental tool [1][2] Home Depot's Strategy - Home Depot is focusing on a disciplined execution model, embedding AI into core operations to enhance customer interactions, supply chain efficiency, and professional services [2][3] - The company has launched a generative AI suite called Magic Apron, which acts as a digital store associate, enhancing customer engagement and conversion rates [4] - AI is also optimizing operations through machine-learning systems that improve fulfillment and inventory management across over 2,300 stores [5] - The Pro ecosystem is being enhanced with AI-powered Blueprint Takeoffs, automating material lists and cost estimates, thus providing a scalable advantage for contractors [6] Lowe's Strategy - Lowe's is positioning AI as foundational infrastructure, integrating it into customer guidance, associate empowerment, and overall business operations [7][8] - The MyLowe tool provides tailored recommendations and step-by-step advice, enhancing customer confidence and increasing project completion rates [8][10] - Internally, Lowe's is using AI to support human expertise, equipping associates with real-time product intelligence and improving service across more than 1,700 stores [10] - The company is pursuing ambitious partnerships with tech giants to advance into spatial commerce and simulation-driven retail design, strengthening its competitive position [11] Comparative Performance - Home Depot's fiscal 2025 sales are projected to increase by 3.2%, but EPS is expected to decline by 4.5%, with a consensus estimate of $14.51 [12] - Lowe's fiscal 2025 sales and EPS are expected to grow by 2.9% and 2.2%, respectively, with a consensus estimate of $12.26 [14] - Over the past six months, Home Depot's shares have decreased by 3.9%, while Lowe's shares have increased by 10% [16] Valuation Metrics - Home Depot is trading at a forward P/E ratio of 23.03X, below its one-year median of 24.00X, while Lowe's has a forward P/E ratio of 18.72X, above its median of 18.62X [16] Conclusion - The contrasting strategies of Home Depot and Lowe's highlight different paths in leveraging AI for competitive advantage, with Home Depot focusing on operational integration and Lowe's on a unified intelligence-driven framework [17]

Financial Data and Key Metrics Changes - In 2024, the company reported total sales of $83.7 billion, a decrease of 2.7% on a comparable basis [14] - Adjusted operating margin was 12.3%, and adjusted diluted earnings per share were $11.99 [14] - The company returned $6.5 billion to shareholders through dividends and share repurchases [15] - A 4% increase in quarterly dividend was approved, raising it from $1.15 to $1.20 per share [15] Business Line Data and Key Metrics Changes - Pro penetration increased to approximately 30% in 2024, up from 19% in 2019, with mid-single-digit comparable sales growth for Pro [16][17] - The redesigned Pro loyalty program, My Lowe's Pro Rewards, was launched to incentivize repeat purchases among small to medium Pros [17] - The first online product marketplace in home improvement was launched in December 2024, expanding product offerings without carrying inventory [19] Market Data and Key Metrics Changes - The acquisition of Artisan Design Group (ADG) aims to serve a larger pro customer base in a $50 billion market, addressing the need for 18 million homes in the U.S. by 2033 [22][23] Company Strategy and Development Direction - The company refined its total home strategy in 2025 to align with home improvement demand drivers [15] - Key pillars of the strategy include driving pro penetration, accelerating online sales, expanding home services, creating a loyalty ecosystem, and increasing space productivity [15] - The company is leveraging generative AI to enhance customer and associate experiences, improve forecasting, sourcing, and inventory planning [21][35] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging macroeconomic environment due to inflation and higher interest rates but expressed confidence in navigating market uncertainties [14][15] - The leadership team emphasized the importance of diversity and inclusion as a core value, contributing to the company's success [24][29] Other Important Information - The company has made strategic investments totaling over $4 billion in wages and benefits for frontline associates since 2018 [30] - The company sources approximately 60% of its purchases from within the U.S., equating to $30 billion in annual spend [33][34] Q&A Session Summary Question: Why did you scale back DEI because of pressure from conservative activists? - The company stated that no changes were made to its diversity approach due to activist pressure, emphasizing its commitment to diversity as core to its values [28][29] Question: Will you be increasing wages to be more competitive? - The company frequently monitors and adjusts wages to remain competitive, having invested over $4 billion in wages and benefits since 2018 [30] Question: What are you doing to improve your management of inventory? - The company is pleased with its inventory management, leveraging technology and AI-driven solutions for better replenishment and demand planning [31] Question: How do you plan to control your cost of goods given increased tariffs? - The company has diversified its global sourcing and currently sources products from over 100 countries, with 60% of purchases made in the U.S. [33][34] Question: What is the board's plan for downstream profits from AI? - The company aims to enhance customer and associate experiences through AI, which is expected to deliver improved profits [35] Question: What do you intend to do to help stores run more efficiently? - The company is committed to investing in technology and process improvements to enhance store operations and customer service [36][38]