Lowe's Companies, Inc. Q4 FY2025 earnings call

• Perpetual Productivity Improvement (PPI) initiatives: discipline product cost management, improve inventory productivity, disciplined pricing and promotions, expand Lowe's Media Network; completed front end transformation across store portfolio, enhanced freight flow; 2026 PPI initiatives include Freight Flow 3.0 and full-shelf replenishment. - Pro: expanding pro sales force, new AI-enabled pro companion, exclusive National Home Improvement Partner to NAHB. - Online: enhanced user experience and fulfillment options. - Home services: improved customer satisfaction, flexible fulfillment options. - Awards: $125 million discretionary bonus to frontline associates.

Fourth quarter sales were $20.6 billion, with comparable sales increasing 1.3%. For fiscal year 2025, sales were $86.3 billion, comparable sales were positive 0.2%, and adjusted operating margin was 12.1%. Pro results: delivered growth with pro customers responding to brand, product assortment, inventory, job site delivery, service levels, and digital experience; online: delivered 10.5% growth with new sales records on Black Friday and Cyber Monday; home services: delivered high single-digit growth with overhauled customer experience through digital tools and enhanced service.

• Forecast home improvement market to be roughly flat in 2026 range of down 1% to up 1%. - 2026 sales range $92 - $94 billion, comparable sales flat to up 2%, ADG and FBM to contribute ~$8 billion to sales. - Operating margin range 11.2 - 11.4%, adjusted operating margin 11.6 - 11.8% (includes 30 basis points dilution from FBM and ADG wrap in 2026). - Expect $1 billion of productivity again in 2026. - Expected full-year diluted earnings per share $11.75 - $12.25, adjusted diluted earnings per share ~$12.25 - $12.75. - Capital expenditures ~$2.5 billion in 2026. - Q1 comp sales expected below midpoint of full-year guidance, adjusted operating margin rate ~20 basis points below bottom end of full-year guide due to acquisitions' dilutive impact.

• Question from Peter Benedict on pro extended aisle efforts: Marvin said it's exceeding expectations, adding new suppliers and markets, helping pro spin. Follow-up on incremental margins: Brandon said FBM and ADG create dilution, but productivity initiatives and sales driving initiatives are reflected in 2026 expectations. - Question from Chris Horvath on demand: Brandon said Q4 had weather benefits, Q1 expected consistent demand, Bill mentioned strength in pro-related categories. Follow-up on post-storm recovery: Marvin said optimistic but cautiously optimistic, confident to outperform macro. - Question from Kate McShane on sales driving initiatives for cautious customer: Marvin said no major change in price/promotion strategy, Bill mentioned spring plans, Brandon said growth weighted towards ticket in first half of 2026. - Question from Simeon Gutman on wholesale distribution business and FBM/ADG integration: Marvin said excited about integration, objective to provide home builders with interior solutions, Brandon said ADG and FBM to contribute $8 billion to sales in 2026, making early progress on synergies. Follow-up on core-on-core EBIT margin: Brandon said reflection of top line. - Question from Michael Lasser on guidance range and KPI: Marvin said forecast home improvement macro flat, expect to outperform, key KPI is sustained discretionary big ticket purchases from DIY. Follow-up on AI impact: Marvin said AI helps sell, shop, work, examples like Milo Companion and pro companion tool. - Question from Jonathan Manduszewski on housing market and rates: Marvin said too early to see definitive benefit from rates moving lower, Brandon said sub-6% rates potentially stimulating demand, but delay in impact. Follow-up on tariffs: Marvin said tariff policy fluid, continue to execute global sourcing playbook.