PresentationI am going to turn the podium over to Marvin for some prepared comments. We're doing this one a little bit differently as my questions are going to be non-deal-related topics. And with that, I will turn it over to Marvin.Good afternoon, everyone. Thank you. It's my pleasure to introduce the management for Lowe's. Today, we have with us Marvin Ellison, Chairman, President and Chief Executive Officer. Marvin was appointed in his current role in 2018 and has more than 30 years of leadership and ope ...

Lowe’s (LOW) FY 2025 Conference September 03, 2025 01:10 PM ET Company ParticipantsKate McShane - Managing DirectorMarvin Ellison - President, CEO & ChairmanKate McShaneGood afternoon, everyone. Thank you. It's my pleasure to introduce the management for Lowe's. Today, we have with us Marvin Ellison, Chairman, President and Chief Executive Officer. Marvin was appointed in his current role in 2018 and has more than thirty years of leadership and operational experience in the retail and home improvement indus ...

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]

Financial Data and Key Metrics Changes - In Q2 2025, the company reported sales of $24 billion, with comparable sales increasing by 1.1% [7][26] - Adjusted diluted earnings per share reached $4.33, marking a 5.6% increase compared to the previous year [7][25] - Adjusted gross margin improved to 33.8%, up 37 basis points from the prior year [26] - Inventory at the end of Q2 was $16.3 billion, down $499 million year-over-year [27] Business Line Data and Key Metrics Changes - Positive comparable sales were reported in nine out of fourteen merchandise divisions, particularly in pro and online segments [12] - Strong performance was noted in seasonal categories, especially in lawn and garden, tools, and building products [12][14] - The flooring category showed strength across carpet, tile, and adhesives, with the introduction of Dal Tile expected to enhance offerings [65] Market Data and Key Metrics Changes - The macro environment remains supportive for homeowners, with strong balance sheets and low unemployment contributing to a positive outlook for the home improvement industry [10] - Analysts estimate approximately $50 billion in deferred project demand due to delayed discretionary projects over recent years [10] - The need for an estimated 18 million new homes by 2033 indicates a healthy pipeline for home improvement and new construction [11] Company Strategy and Development Direction - The acquisition of Foundation Building Materials (FBM) is seen as a transformational move to enhance the company's pro offerings and diversify revenue streams [5][6] - The company aims to leverage FBM's capabilities to serve larger professional customers within a $250 billion total addressable market [5][42] - The strategy focuses on integrating acquisitions to create a comprehensive interior solutions platform for large pro customers [41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the uncertain environment while providing value to customers [28] - The outlook for the home improvement market remains flat, with expectations for gradual improvements in the underlying business [29][77] - Management highlighted the importance of continuous improvement initiatives and the positive sentiment among professional customers regarding their job prospects [21][64] Other Important Information - The company generated $3.7 billion in free cash flow during Q2, with $1.3 billion allocated for the acquisition of ADG [28] - The acquisition of FBM is expected to close in 2025, with a purchase price of $8.8 billion [44] - The company plans to maintain its investment-grade credit ratings while focusing on growth and shareholder returns [45] Q&A Session Summary Question: Can you expand on Foundation's year-to-date performance in 2025? - Management refrained from providing specific details until after the transaction closes but expressed excitement about FBM's historical performance [50] Question: What percentage of the 33,000 SKUs will be net new to Lowe's offering? - Management indicated it is too early to provide specifics but sees significant opportunities for complementary products [51] Question: Can you provide insights from the pro sentiment survey? - Pros reported stable backlogs and confidence in job prospects, although labor costs are rising [63][64] Question: What is happening in the flooring category? - Strength was noted in both DIY and pro segments, with the introduction of Dal Tile expected to enhance offerings [65] Question: Can you provide customer numbers or makeup for FBM? - FBM has about 40,000 customers, with a balanced mix of residential and commercial clients [72] Question: How much of the guidance for the back half is due to pricing? - Management indicated that pricing strategies are dynamic and will continue to be competitive [78] Question: Is there a secondary investment cycle emerging in the core Lowe's supply chain? - Management acknowledged the need for continuous investment in the platform but does not foresee another large acquisition soon [86]

Core Viewpoint - Lowe's Companies, Inc. has announced a definitive agreement to acquire Foundation Building Materials for approximately $8.8 billion, aiming to enhance its offerings for professional customers and position the company for long-term sustainable sales growth and profit expansion [1][4]. Company Overview - Lowe's is a leading home improvement company in North America, serving around 16 million customer transactions weekly, with total fiscal year 2024 sales exceeding $83 billion and operating over 1,700 stores [9]. - Foundation Building Materials is a prominent distributor of interior building products in North America, with over 370 locations and a revenue of approximately $6.5 billion in 2024 [2][10]. Acquisition Details - The acquisition price of $8.8 billion reflects an adjusted EBITDA multiple of 13.4x, and Lowe's has secured $9.0 billion in bridge financing from Bank of America and Goldman Sachs [5][6]. - The transaction is expected to close in the fourth quarter of 2025, subject to regulatory approval, and is anticipated to be accretive to adjusted diluted earnings per share in the first full year post-closing [6]. Strategic Implications - The acquisition is expected to accelerate Lowe's Total Home strategy by enhancing its offerings to professional customers through improved capabilities, faster fulfillment, and better digital tools [3][4]. - The combined strengths of Lowe's and FBM are projected to create a premier platform for serving professional customers in a $250 billion total addressable market [4]. Financial Performance - FBM has demonstrated significant growth, achieving a compound annual growth rate (CAGR) of approximately 25% for revenue and 30% for adjusted EBITDA from 2019 to 2024 [2].

Company Overview - TopBuild Corp. is a leading installer and specialty distributor of insulation and related building material products in the United States and Canada [3] - The company operates approximately 250 branches for insulation installation services and around 190 branches for specialty distribution across the two countries [3] Acquisition Announcement - TopBuild has entered into an agreement to acquire Seal-Rite Insulation, which is based in Omaha, Nebraska [1] - Seal-Rite generates approximately $15 million in annual revenue and has been in operation for over 25 years, focusing on fiberglass and spray foam installation for residential and commercial markets [1][4] - The transaction is expected to close in the second quarter of 2025 [1] Strategic Intent - The acquisition aims to strengthen TopBuild's installation presence in Nebraska, leveraging Seal-Rite's proven track record and strong reputation in the area [2] - Both companies express enthusiasm about the merger, with a focus on driving growth and profitability while providing superior customer experiences [2]