Lowe's Companies Inc. 2027 Q2 Earnings Call

Thank you, and good morning. Here with me today are Marvin Ellison, Chairman and Chief Executive Officer, Bill Boltz, our Executive Vice President, Merchandising, Joe McFarland, our Executive Vice President, Stores, and Brandon Sink, our Executive Vice President and Chief Financial Officer. I would like to remind you that our notice regarding forward-looking statements is included in our press release this morning, which can be found on Lowe's Investor Relations website. During this call, we will be making comments that are forward-looking, including our expectations for fiscal 2026. Actual results may differ materially from those expressed or implied as a result of various risks, uncertainties, and important factors, including those discussed in the Risk Factors, MD&A, and other sections of our annual report on Form 10-K and our other SEC filings. Additionally, we will be discussing certain non-GAAP financial measures.

A reconciliation of these items to U.S. GAAP can be found on the quarterly earnings section of our investor relations website. Now I will turn the call over to Marvin.

Thank you, Shelly. Good morning, everyone. In the second quarter, we delivered sales of $26 billion with comparable sales increasing 0.2%. Despite the heightened competitive landscape as competitors used tariff refunds to lower prices later in the quarter, we are encouraged by the continued momentum in our Total Home strategy. Strong performance in Pro, Online, and Home services helped to offset persistent macro pressures, softer DIY discretionary spend, and the challenging weather during Memorial Day weekend. I am pleased with our entire team's ability to effectively manage the business and remain agile in this environment. Our teams executed at a high level throughout the quarter with compelling value, strong in-stock position, and outstanding customer service across stores and digital channels while maintaining a disciplined focus on expense management.

This operational discipline enabled us to deliver better than expected flow-through while absorbing elevated fuel, transportation, energy, and other input costs, even when excluding the impact of tariff refunds. Later in the call, Bill will provide more detail on our category performance and the customer's response to our assortment, value, and seasonal execution. Let me begin with Pro, where we delivered another quarter of growth. Pros continue to respond to our differentiated assortment, strong inventory position, dedicated service levels, fulfillment capabilities, and tailored digital experience. Later in the call, Joe will provide additional perspective on the initiatives that continue to drive this momentum. Additionally, we are pleased with the integration progress of Foundation Building Materials, or FBM, and Artisan Design Group, or ADG. Our teams continue to work closely together to share best practices and build solutions for our customers.

We believe these acquisitions position us to grow share with our larger Pro customers long term while capturing more planned Pro spend. Turning to Online. We delivered online sales growth of 15.7% this quarter, reflecting the continued benefits of our investments in the digital experience. These investments include tailored experiences on lowes.com and our mobile app, as well as expanded visualization capabilities and the ongoing growth of our online marketplace. The improved user experience, along with the compelling value offered by our loyalty programs, are driving increased conversion and enabling us to respond to dynamic customer preferences. Our online AI agent, MyLowe, continues to add value to digitally engaged customers as they ask the tool for help with home improvement projects, product specifications, and solutions to fit their needs.

Since its inception, MyLowe, which also powers our associate AI companion application, has supported over 25 million questions from customers and associates, demonstrating the strong adoption and resonance of the tool. In fact, the conversion rate for online customers who use MyLowe is triple that of customers who do not use the tool, reinforcing that a well-designed agentic AI experience can be a clear driver in the purchasing decision. Now to Home services. We delivered another quarter of growth as do it for me customers continue to engage with the simpler and more convenient experience we've created, especially in replacement projects. The enhancements have improved conversion, cycle time, and customer satisfaction, giving us confidence in our position to capture more of these larger projects when homeowners are ready to take them on. Now let me transition to the macro environment.

While the long-term fundamentals supporting home improvement remain intact, the near-term environment continues to be dynamic. Elevated fuel prices, combined with broader economic uncertainty, have influenced household budgets. Customers continue to tell us that they're being cautious about their spending and prioritizing where and when they invest in their homes. As a result, discretionary DIY demand remains under pressure. Despite this, we continue to see solid performance from our Pro customers and our do it for me businesses, reflecting the success of our Total Home strategy. Given Lowe's customer mix, the pace and health of DIY demand remains an important driver of our overall performance. While these external conditions remain uncertain, we remain committed to being a workplace of choice for our associates, providing our customers with a great shopping experience, and advancing our strategic investments.

This approach has enabled us to deliver five consecutive quarters of positive comps, demonstrating the resilience of our strategy across changing economic conditions. Equally important, our perpetual productivity improvement initiatives, or PPI, continue to advance. This disciplined expense control and focus on optimizing our resources gives us the flexibility to continue investing in our strategic priorities, positioning the company to outperform as market conditions improve. Before I close, I'd like to thank our frontline associates for everything they do to serve our customers every day. Spending time in stores each week remains one of the most rewarding parts of my job, and every visit reinforces the passion, expertise, and commitment that our associates bring to Lowe's. Their insights continue to help us improve the customer experience, and their dedication remains one of our greatest competitive advantages. With that, I'll turn the call over to Bill.

Thanks, Marvin, and good morning, everyone. This quarter, we've delivered positive comp sales in nine of our 13 merchandise divisions, demonstrating continued strong execution, a commitment to value, and disciplined approach to managing through the current challenging environment. In building products, we generated broad-based growth with positive comps in rough plumbing, millwork, electrical, and lumber. These results reflect our strategic investments in pro and ongoing strength in repair and maintenance projects. Within rough plumbing, we drove sales in HVAC, water heaters, and air circulation, supported by trusted brands like A. O. Smith and SharkBite, whose solutions make installation fast and simple. We also delivered positive comps in lumber, specifically in treated lumber, siding, and composite decking with leading brands like Trex, TimberTech, and Deckorators. In electrical, we delivered growth in electrical cable, landscape lighting, and fire safety.

This quarter, we completed the rollout of Cree within our light bulb assortment, bringing this innovative brand exclusively to Lowe's in the home center channel. One standout product is Cree's new six-way bulb, which lets customers easily adjust the color temperature either on the bulb or from the wall switch. Turning to home decor, we delivered strong performance across our interior categories, including positive comps in appliances, paint, and kitchen and bath. Starting with appliances, where we delivered our seventh consecutive quarter of positive comp sales growth as we continue to reinforce our leadership position as the destination for both planned purchases and urgent replacement needs through a best-in-class omni-channel experience, fast, reliable fulfillment, and the broadest assortment of leading brands, including LG, GE, Bosch, and Whirlpool.

We're also bringing consumers the latest innovations to make life easier, like the new GE Profile Refrigerator with Kitchen Assistant that features the first of its kind built-in barcode scanning technology. This refrigerator can scan everyday grocery items and automatically add them to a shared digital shopping list that then can be synced to Instacart for quick delivery. Because speed of appliance delivery is so important during a duress occasion, Lowe's can deliver and install the broadest selection of major appliances next day in virtually every U.S. ZIP Code. This is truly the fastest fulfillment in home improvement. Beyond appliances, we saw demand for repair and refresh projects in kitchen and bath across categories like vanities, bathing, and toilets. Paint also remained a bright spot, with growth in interior paint, sundries, and buckets.

Now let's shift to hard lines, where we grew comp sales in lawn and garden and tools and hardware. Our spring seasonal categories performed well throughout the first half of the year as customers responded to compelling value in live goods, hardscapes, and landscape products. Our attractive credit offers help support demand in outdoor power equipment as our broad assortment and key brands like John Deere, Toro, Ariens, and EGO remain key points of differentiation. Tools and hardware also performed well, particularly in metal storage and fastening, where we have one of the strongest brand lineups in home improvement, offering customers both trusted national brands and our own private brands. CRAFTSMAN continued to deliver value and innovation with products made in the U.S.A., including a limited edition workbench with a magnetic flag designed to celebrate America's 250th birthday.

Customers responded to Kobalt's wide range of colors in metal storage, helping them personalize their workspace. Looking ahead, while discretionary DIY spending remains under pressure and the K-shaped economy continues to shape consumer spending, we are encouraged by the plans that we have in place to drive demand for both our price-conscious and premium customers in the second half of the year. For example, we are expanding our assortment of premium appliances on lowes.com, giving customers more choices across a wider range of price points and allowing us to unlock additional sales in our largest category. We are bringing that same approach to patio by expanding our assortment of premium outdoor furniture, both online and in our year-round markets. Together, these expanded assortments position us well to capture more demand from more customers by offering luxury design and innovation to serve customers across a broad range of price points.

We are also continuing to strengthen our brand assortment and maintain strong in-stock positions across key destination categories. We are expanding our selection of power tools, hand tools, and storage with hundreds of new products that will appeal to both DIY and pro customers, including over 150 new DEWALT items, the number one pro preferred brand. In Bosch and Kobalt, we are adding new 4-volt lifestyle products that help our DIY customers complete household tasks more efficiently. To help customers with landscape projects this fall, we are leaning into our outdoor strengths by offering compelling values and a great assortment to support lawn restoration, fall planning, and seasonal cleanup projects, particularly in markets affected by droughts this summer. We are also pleased to welcome Traeger to our already strong grilling lineup.