Earnings Call Insights: Lowe’s Companies, Inc. (LOW) Q3 2025
Management View
- Marvin Ellison, President, CEO & Chairman, reported “third quarter sales were $20.8 billion with comparable sales increasing 0.4% year-over-year, despite a roughly 100 basis point headwind related to Hurricanes Helene and Milton.” He highlighted adjusted operating margin expansion and an adjusted diluted earnings per share of $3.06, up 6% versus last year. Ellison emphasized continued progress with the Total Home Strategy, notably with “growth this quarter” in the small to medium Pro segment, online sales growth of 11.4%, and double-digit comps in home services.
- The CEO detailed the strategic importance of generative AI, noting virtual assistants answer nearly 1 million customer questions per month, and stated that “when our customers engage with Mylow online, the conversion rate more than doubles.” AI adoption earned Lowe’s the OpenAI 100 billion token milestone award.
- Ellison announced the completed acquisition of Foundation Building Materials (FBM) in October, describing it as giving Lowe’s “a more comprehensive product portfolio, expands our revenue streams and further enhances our offering to our Pro customers.” He stated that FBM’s 370 locations will strengthen fulfillment, especially in high-density urban markets, and efforts are underway to quickly connect FBM’s product catalog to Lowe’s Pro extended aisle.
- William Boltz, Executive Vice President of Merchandising, noted “positive comps in 10 of our 14 merchandise divisions” and highlighted performance in appliances, flooring, paint, kitchens and bath, and building products. Boltz announced the launch of Sherwin-Williams ProBlock Quick Dry primers, exclusive to Lowe’s and Sherwin-Williams, and described the rollout of the rural format to nearly 500 stores and the introduction of the Heart & Herd private pet brand.
- Joseph McFarland, Executive Vice President of Stores, stated that new training programs and AI-powered tools are “boosting their knowledge, confidence and effectiveness at driving sales.” He also reported double-digit growth in Home Services and ongoing improvements in inventory shrink.
- Brandon Sink, Executive VP & CFO, said, “we generated GAAP diluted earnings per share of $2.88.” Sink reported $105 million in pretax transaction costs for the FBM acquisition and $24 million in non-GAAP adjustments for ADG. He highlighted a comparable average ticket increase of 3.4% and a comparable transaction decline of 3%. Sink concluded, “excluding these impacts, we delivered adjusted diluted earnings per share of $3.06, exceeding our expectations.”
Outlook
- The company updated its outlook to expect “comp sales to be roughly flat for the year, which is at the bottom end of our previous guidance.” Including FBM, Lowe’s expects full-year sales of approximately $86 billion and an adjusted operating margin of approximately 12.1%, including 20 basis points of dilution from FBM and ADG. Adjusted diluted earnings per share are expected to be approximately $12.25. Capital expenditures are projected at up to $2.5 billion for the year.
- FBM and ADG are expected to negatively impact the consolidated adjusted operating margin by approximately 50 basis points on an annualized basis.
Financial Results
- Third quarter sales were $20.8 billion, with comparable sales up 0.4%. Gross margin was 34.2% in the quarter, up 50 basis points. Adjusted SG&A was 19.6% of sales, and adjusted operating margin rate was 12.4%, up 10 basis points versus prior year. Inventory ended Q3 at $17.2 billion, down approximately $400 million versus prior year, including $600 million from recent acquisitions. Operating cash flow for Q3 was $687 million; capital expenditures were $597 million; dividends paid were $673 million. Return on invested capital was 26.1%.
- The company financed the FBM transaction using $5 billion of bonds, a $2 billion term loan, and $1.8 billion in cash.
Q&A
- Christopher Horvers, JPMorgan: Asked about business trends and guidance for Q4 and 2026. Marvin Ellison responded that “we’re very pleased with the positive comp performance to start the quarter in spite of storm overlaps from last year” and sees “acceleration on 1-year comps when you exclude storm-related activity.” William Boltz highlighted broad-based early strength in Q4, especially in seasonal categories and appliances.
- Horvers asked about kitchen and bath trends. Ellison said, “this is more about lowest taking share in this space,” citing technology improvements and central selling. Boltz noted “broad-based strength, toilets, bathing, faucets, disposable kitchen sinks, bath repair.”
- Zachary Fadem, Wells Fargo: Asked about improving Pro sentiment. Ellison reported “roughly 75% of our Pro’s are very confident in their job prospects.” McFarland discussed the “flywheel effect” from Pro loyalty programs and digital investments. Sink addressed FBM and ADG margin impact.
- Simeon Gutman, Morgan Stanley: Inquired about macro scenario and housing affordability. Ellison emphasized the “lock-in effect” and strong homeowner equity, noting “we think HELOCs are going to become the next opportunity for us to drive discretionary remodel big-ticket projects.” Sink added that “HELOC rates go from neighborhood of 10% to 12% down to 8% to 10%.”
- Katharine McShane, Goldman Sachs: Asked about marketplace performance. Ellison stated, “it’s really early… exceeding expectations relative to financial performance, exceeding expectations, relative to the number of sellers and the quality of sellers.”
- Seth Sigman, Barclays: Asked about operating margin sustainability. Sink said “very focused at this point on delivering that the 12.1% operating margin that we communicated as part of our guide.”
- Gregory Melich, Evercore ISI: Inquired about traffic and ticket breakdown. Sink explained “strength in our Pro business, also appliances,” and “modest price increases.”
Sentiment Analysis
- Analysts’ tone was neutral to slightly positive, focusing on strategic execution and integration risks, while raising questions about margins, consumer trends, and the impact of acquisitions.
- Management presented a confident and optimistic sentiment in prepared remarks, with Ellison stating, “we remain confident that the continued execution of our Total Home Strategy will position Lowe’s to win in the short and in the long term.” During Q&A, management remained constructive but cautious on macro uncertainties, especially regarding housing and consumer demand.
- Compared to the previous quarter, management’s tone remains confident but with increased attention to integration and macro headwinds. Analysts in both quarters focused on margin sustainability and strategic direction, but Q3 featured more questions about acquisition impacts and marketplace scaling.
Quarter-over-Quarter Comparison
- Guidance shifted from a range to the “bottom end” for comp sales, now expected to be flat for the year, versus prior quarter’s flat to up 1% range.
- The previous quarter emphasized the upcoming FBM acquisition; this quarter discussed the completed integration and its financial impacts.
- FBM and ADG margin dilution was quantified more explicitly this quarter, with an annualized 50 basis points impact articulated.
- Management’s confidence in AI, Pro strategy, and marketplace expansion has grown, with new performance data shared.
- Analysts continued to focus on Pro trends, macro risks, and integration, but questions shifted toward operational execution and platform scalability.
Risks and Concerns
- Macroeconomic uncertainty, consumer confidence, and high borrowing costs were cited as ongoing challenges.
- Integration of FBM and ADG poses operational and margin risks; management is “already working collaboratively… on cross-selling opportunities” and “cost synergies.”
- Tariff impacts are expected to continue ramping into Q4 and the first half of next year.
- Management highlighted cautious consumer behavior and the potential delay in housing recovery.
Final Takeaway
Lowe’s management highlighted progress in its Total Home Strategy, growth in Pro and online segments, and the strategic integration of FBM and ADG, which are expected to expand product offerings and enhance fulfillment capabilities. The company updated its sales target to $86 billion for the year, with a flat comp sales outlook and projected adjusted diluted EPS of $12.25. While macroeconomic and integration risks remain, management expressed confidence in long-term growth, supported by AI adoption, operational discipline, and continued investment in customer experience and productivity initiatives.