Earnings Call Insights: Lowe’s Companies, Inc. (LOW) Q2 2025
Management View
- Marvin R. Ellison, President, CEO & Chairman, announced the acquisition of Foundation Building Materials (FBM), describing it as a “transformational move when it comes to advancing our Total Home strategy and enhancing long-term shareholder value.” He emphasized that “the acquisition of FBM strengthens our portfolio, diversifies our revenue streams and allow us to capture a larger portion of Pro sales, all of which is expected to deliver significant long-term value to our shareholders.”
- Ellison reported Q2 sales of $24 billion with comparable sales up 1.1% and highlighted solid performance in both Pro and DIY segments. He pointed out a 7.5% increase in online sales and introduced new initiatives, including a creator network with MrBeast and ongoing partnerships with Lionel Messi and the NFL.
- The CEO noted, “With the acquisition of FBM, we are strategically expanding our Pro offering to serve the large Pro, especially their planned spend.” He also welcomed the recently closed acquisition of Artisan Design Group (ADG), stating, “the future combination of ADG and FBM under the same umbrella will position Lowe’s to offer large Pro customers a full complement of interior finishes.”
- William P. Boltz, EVP of Merchandising, cited positive comps in 9 of 14 merchandise divisions and highlighted the addition of Daltile as “the best-selling tile brand in the country and the pro preferred choice for tile across residential and commercial projects.”
- Joseph Michael McFarland, EVP of Stores, highlighted adoption of the AI-powered Mylow Companion app and the opening of three new stores in key growth markets.
- Brandon J. Sink, EVP & CFO, stated, “In Q2, we generated GAAP diluted earnings per share of $4.27… Excluding these impacts, we delivered adjusted diluted earnings per share of $4.33, an increase of 5.6% compared to adjusted diluted earnings per share in the prior year quarter.” Sink reported $3.7 billion in free cash flow and a return on invested capital of 29.5%.
Outlook
- Lowe’s updated its full-year 2025 outlook to include ADG, forecasting sales in the range of $84.5 billion to $85.5 billion with comparable sales in a range of flat to up 1%. The company expects adjusted operating margin of 12.2% to 12.3% and adjusted diluted earnings per share of approximately $12.20 to $12.45.
- Sink clarified, “this outlook does not include any potential impacts related to the acquisition of FBM.” The company expects ADG to negatively impact consolidated adjusted operating margin by approximately 15 basis points on an annualized basis.
- Third quarter comparable sales are expected to be approximately 125 basis points above the bottom end of the full year guide, and adjusted operating margin rate is expected to be down about 20 basis points from the prior year, reflecting the ADG operating mix.
Financial Results
- Sales for Q2 reached $24 billion with comparable sales up 1.1%. Adjusted diluted earnings per share came in at $4.33, up 5.6% from the prior year. Adjusted gross margin improved to 33.8%, up 37 basis points year-over-year.
- Adjusted SG&A was 17.3% of sales and adjusted operating margin rate reached 14.7%. Inventory ended Q2 at $16.3 billion, down $499 million versus prior year.
- Free cash flow for the quarter was $3.7 billion, and capital expenditures totaled $495 million. The company announced a $0.05 per share dividend increase to $1.20 per share.
Q&A
- Steven Paul Forbes, Guggenheim Securities, asked about FBM’s year-to-date performance and product offerings. Ellison responded that details would be shared post-close but highlighted “significant opportunities to get their products, their fulfillment capabilities connected to our customers.” Sink added that “we do believe meaningful synergy opportunities here” through expanded cross-selling.
- Forbes also inquired about FBM’s order management and digital tools. Ellison praised FBM’s company-wide ERP and AI-driven blueprint takeoff technology, saying “we think we can immediately plug that in to every Pro Desk in our 1,750-plus stores.”
- Peter Sloan Benedict, Baird, focused on Pro customer sentiment and labor availability. Ellison replied, “Over 75% of the Pros stated they were confident in their job prospects,” though he cited rising labor costs as a concern.
- David Leonard Bellinger, Mizuho Securities, questioned customer mix and guidance assumptions. Sink explained FBM’s 40,000 customers had “little to no concentration risk” and described a balanced business mix. Regarding guidance, Sink said, “our outlook really is unchanged since the beginning of the year.”
- Christopher Michael Horvers, JPMorgan, asked if weather-related demand shifted as forecast. Sink confirmed, “we realized the large majority of that $400 million,” noting strong seasonal performance.
- Michael Lasser, UBS, pressed on Pro plan purchase market consolidation and returns. Ellison emphasized differentiation from combining FBM and ADG, aiming to serve a $250 billion total addressable market.
- Steven Emanuel Zaccone, Citi, asked about margin impacts of FBM and capital allocation. Sink stated, “we expect the FBM acquisition to help us deliver more sustainable long-term sales growth,” and confirmed share repurchases would pause until at least 2027 while leverage targets are restored.
Sentiment Analysis
- Analysts maintained a neutral to slightly positive tone, with repeated questions about integration, margin impacts, and capital allocation, but no aggressive skepticism. Concerns centered on execution and guidance clarity.
- Management’s tone was confident during prepared remarks and responses, frequently using phrases such as “we are confident” and “we think this acquisition gives us the ability to start to build from there,” though Ellison occasionally deferred on specifics until after transaction close.
- Compared to Q1, analyst tone showed continued focus on macro headwinds and large-scale strategic moves, while management’s confidence appeared bolstered by deal announcements and improving comps.
Quarter-over-Quarter Comparison
- Q2 featured a major strategic shift with the $8.8 billion FBM acquisition, compared to Q1’s focus on the ADG transaction.
- Guidance for full-year sales and earnings per share was updated to include ADG, while Q1 guidance excluded it. Operating margin guidance was adjusted downward by 10 basis points at the midpoint.
- Management’s confidence in the Total Home strategy and Pro market expansion was more pronounced in Q2, with a stronger emphasis on technology-driven productivity and digital integration.
- Analysts in Q2 maintained their focus on integration risks and capital discipline, similar to Q1’s concerns about macro environment and consumer trends.
Risks and Concerns
- Management cited integration execution as a priority, with separate teams dedicated to ADG and FBM to avoid distraction from core operations.
- Rising labor costs and skilled trades shortages were flagged by Ellison as challenges reported by Pro customers.
- Analysts pressed on capital allocation risks, margin dilution from acquisitions, and the temporary suspension of share repurchases.
Final Takeaway
Lowe’s management highlighted the transformational $8.8 billion acquisition of FBM as central to advancing its Total Home strategy and deepening penetration in the Pro segment. With sales and earnings guidance updated to reflect the ADG deal, leadership expressed confidence in sustainable long-term growth driven by cross-selling, digital innovation, and expanded fulfillment capabilities. The company plans to pause share repurchases until leverage targets are met in 2027, emphasizing disciplined capital allocation amid evolving macro and industry conditions.