Four Straight Positive Comps, and an Interest Bill That Consumed Every Dollar of Operating Growth

Results vs. Consensus

Lowe's reported fiscal first-quarter results at 6:00 a.m. ET on May 20, 2026, with the call at 9:00 a.m. The quarter cleared the Street on both lines and cleared it in the way Lowe's quarters have cleared it for four straight periods: a small comparable-sales gain executed well, layered on top of a much larger acquired revenue base. The distinction matters more this quarter than it has in any prior one, because for the first time the acquired revenue's financing cost is visible in the reported earnings.

Q1 FY26 Scorecard

Consensus was consistent across providers at $2.97 of adjusted EPS. The revenue consensus spanned roughly $22.88B to $22.98B; the $22,970M used above is the most widely circulated figure and sits within $6M of the number carried on the earnings calendar we track. No published consensus existed on a comparable basis for comparable sales, gross margin, operating margin, or free cash flow, so those lines are scored against the prior-year actual rather than against an invented estimate.

Year-over-Year Income Statement

The effective tax rate was 24.5% against 23.9% a year ago, in line with the 24.5% full-year assumption.

Sequential Comparison

Seasonality dominates the sequential move for a home-improvement retailer: the fourth quarter spans November through January and the first quarter captures spring. The table is included for completeness rather than as a read on trend.

Revenue

Sales grew $2,148M year over year. Comparable sales contributed roughly 0.6 points of the 10.3 points of reported growth; the rest is the FBM and ADG businesses entering the reported base, plus nine net new stores (1,759 at quarter-end against 1,750 a year ago). Management did not size the acquired contribution, and no analyst asked it to. That is the single most important disclosure gap in the print, because until FBM and ADG enter the comparable base later this fiscal year, reported revenue growth carries almost no information about how the underlying business is trending.

What the comparable-sales line does tell us is more encouraging than the headline rate suggests. Comparable transactions fell 0.9% while comparable average ticket rose 1.5% on an average ticket of $107.59. Like-for-like inflation is running about 3%, which means real unit demand is still contracting even as the dollar comp turns positive. Set against that, big-ticket transactions above $500 comped up over 2%, driven by appliances, Pro and services rather than by discretionary remodel projects.

Margins

Gross margin of 32.68% was down 70bps, which the CFO attributed to the dilutive mix effect of FBM and ADG partially offset by favorability in credit revenue. Neither component was quantified. Distribution businesses carry structurally lower gross margins and lower operating expense ratios than retail, so the gross-margin decline and the 17bps of SG&A leverage are two faces of the same mix shift; the net of the two is what matters, and the net is negative.

Depreciation and amortization rose 26.9%, or 32bps of sales, which is where the purchase-price allocation shows up. Operating margin fell 85bps to 11.07%; on the adjusted basis that adds back the $96M of acquisition intangible amortization, it fell 43bps to 11.49%. Even the adjusted figure is down, and it is down against a fiscal 2025 in which full-year operating margin had already fallen from 12.51% to 11.77%. Margin compression is now the base rate for this business, and the acquisitions have changed its character from cyclical to structural.

EPS

This is where the quarter should be judged. Gross profit rose $557M. SG&A absorbed $377M of it and depreciation and amortization another $120M, leaving $60M of incremental operating income. Net interest expense rose $62M. Pre-tax earnings therefore came in at $2,155M against $2,157M, a decline of $2M on $2,148M of additional revenue.

That identity is the fiscal 2026 investment case in one line. The acquisitions are being financed at a cost that currently exceeds what they contribute at the operating line, and the share count is flat at 560M, because the $363M repurchased in the quarter is only about 0.3% of shares outstanding and deleveraging has first call on cash. With no share-count tailwind and no operating leverage, the adjusted line did all the work: adjusted EPS rose $0.11 while GAAP EPS fell $0.02, and the $0.13 after-tax add-back is more than the entire year-over-year gain.

Segment and Category Performance

Lowe's reports as a single segment, so the useful decomposition is by channel, customer and merchandise division. Management restructured the merchandising organization this quarter, reducing merchandise divisions from fourteen to thirteen by combining power tools with outdoor power equipment into a standalone power equipment division. Nine of the thirteen divisions posted positive comparable sales, and eleven of fifteen regions did.

Comparable Sales Composition

Monthly Cadence

The intra-quarter shape is the reason the headline understates the underlying spring performance, and also the reason it is hard to extrapolate.

Assessment: March's +2.1% is the cleanest month in the quarter and it is also the month management most explicitly attributed to event timing. The +0.5% April exit rate, not the +0.6% quarter, is the number to carry into the second quarter, and it is consistent with the roughly +1% second-quarter comp implied by guidance only if Memorial Day, Father's Day and July 4 execute as planned. This is a weather-and-events business at the margin, and the margin is where the entire comp lives.

Pro

Pro delivered another quarter of growth and remains the strategic centerpiece. Management reports taking share in the small-to-medium Pro segment, supported by MyLowe's Pro Rewards, national-brand assortment and in-stock position. Rough plumbing and electrical, the two most Pro-weighted building-products divisions, both comped positive. The newer lever is Pro Extended Aisle, which extends the product and delivery offering without carrying store inventory, and an AI-built Materials List tool that converts a photograph, handwritten note, PDF or spreadsheet into an actionable quote in minutes rather than days.

"We are in the process of continuing to add suppliers and capabilities, but we believe the Pro Extended Aisle success is a direct correlation to the fact that we had another strong quarter in Pro sales. And we're forecasting that Pro will continue to outperform DIY not only in the second half but for the balance of the year." — Marvin Ellison, Chairman, President and CEO

Assessment: Pro is working and is the most credible part of the growth algorithm, but it is never sized. Four consecutive quarters of "positive Pro comps" with no growth rate, no penetration figure and no dollar disclosure means an outside analyst cannot verify the share-gain claim or model the mix shift. Pro is roughly a third of the business by the company's own repair-and-maintenance framing, and it is the third that is growing.

Online

Online sales grew 15.5%, an acceleration from the 11.4% reported in the third quarter of fiscal 2025, and the clearest genuine growth vector in the quarter. Management credits user-experience work, online-exclusive offers, same-day delivery and a loyalty change that made same-day delivery free on purchases over $25 for MyLowe's Rewards and MyLowe's Pro Rewards members. Mylow, the AI shopping assistant launched a year ago, now handles over a million customer inquiries a month.

"Importantly, the conversion rate for online customers who use Mylow is triple that of customers who do not use the tool, suggesting a well-designed agentic AI experience can be a clear driver in the purchasing decision." — Marvin Ellison, Chairman, President and CEO

Assessment: A tripled conversion rate is a striking claim, and it is the sort of claim that is impossible to audit from outside: users who engage a shopping assistant are self-selected toward purchase intent. What is verifiable is the 15.5% growth rate against a flat store business, and the free same-day delivery threshold of $25, which is an aggressive customer-acquisition cost that will show up in the cost line before it shows up in the comp.

Home Decor and Hardlines

Hardlines delivered positive comparable sales across every merchandise division, including lawn and garden, seasonal and cleaning, tools and hardware, and the newly consolidated power equipment division. Live goods, landscape products, hardscapes, patio furniture and riding lawn mowers were called out as standouts during SpringFest. In home decor, appliances and paint both comped positive; management notes that roughly 70% of appliance transactions are duress purchases, where a customer needs a refrigerator or washing machine replaced quickly, and argues Lowe's next-day delivery and installation reach in virtually every U.S. ZIP code is the structural advantage in that occasion.

The four negative divisions were not named. From what was described, the omission points at the big-ticket discretionary categories: flooring, kitchens and bath, and the project categories that require a homeowner to commit to a multi-week remodel.

"The categories that are related to big ticket discretionary are those categories and merchant divisions that sort of continue to lag. And that's what we're dealing with, that's what we're managing through, and that's where we're trying to lean in and provide additional value where we can." — Brandon Sink, EVP and CFO

Assessment: The composition is exactly what a frozen-turnover housing market produces. Repair, maintenance and replacement hold up because they are non-discretionary; project spend does not, because it requires either a move or a home-equity draw. Roughly two-thirds of Lowe's revenue sits in the first bucket and one-third in the second, and the third that is soft has been soft for years.

Home Services

Home services grew again, in a category management describes as highly fragmented and therefore share-takeable. The new product is HomeCare+, a subscription service for routine home maintenance staffed by trained store associates and available exclusively to MyLowe's Rewards members.

Assessment: Strategically sensible and financially immaterial for now. Management used the word "early" four times in a single answer about it. The interesting part is not the revenue but the mechanism: a subscription attaches the DIY customer to the loyalty program, and the DIY customer is 60% to 65% of revenue and the part of the business that is under the most pressure.

Key KPIs

Key Topics & Management Commentary

Overall Management Tone: Steady and rehearsed, with the confidence concentrated on execution and the hedging concentrated on cost. Management answered every question about the consumer with a version of the same sentence, that the year is playing out as forecast, and answered every question about the guide's back-half weighting by pointing to initiatives rather than to a macro inflection they explicitly declined to predict. The one place the posture visibly shifted was on input costs, where a first-quarter impact described as "pretty manageable" became second-quarter pressure the company is still working to mitigate.

1. The Revenue Wedge: 10.3% Reported, 0.6% Comparable

The gap between reported and comparable growth is the largest in recent Lowe's history, and it is entirely acquisition-driven. FBM closed in October 2025 for $8.8B in cash, bringing over 370 locations, 40,000 Pro customers and roughly $6.5B of 2024 pro-forma revenue; ADG closed in June 2025 for $1.3B. Both are now in reported sales and neither is in the comparable base.

The balance sheet carries the evidence more plainly than the income statement does. Goodwill went from $311M a year ago to $3,945M. Intangible assets went from $274M to $5,807M. Receivables, a line that barely existed for a cash-and-card retailer, went from $96M to $1,151M, because distribution businesses extend trade credit.

Assessment: Reported revenue growth is uninformative for the next two quarters. Management will begin anniversarying the acquisitions in the second half, at which point the reported line converges back toward the comp and the growth rate falls sharply by construction. Anyone underwriting the 7% to 9% full-year sales guide should understand it as a mechanical consequence of deal timing, not as a demand signal.

2. Pre-Tax Earnings Went Backwards

Operating income rose $60M year over year. Net interest expense rose $62M. Pre-tax earnings fell $2M. Full-year net interest expense is guided at approximately $1.6B against $1,406M in fiscal 2025 and $1,313M in fiscal 2024, so the carrying cost still has roughly $200M of year-over-year growth left to absorb.

Management framed the acquisition rationale entirely in terms of a market that has not yet arrived.

"We estimate that there's going to be roughly 12 million new homes needed by the year 2033. And historically, Lowe's has generated 0 revenue in the new home or multifamily construction projects, and we estimate that's roughly a $250 billion total addressable market." — Marvin Ellison, Chairman, President and CEO

Assessment: The strategic logic is defensible and the timing is expensive. Lowe's bought a residential-construction-levered distribution platform at 13.4 times adjusted EBITDA, net of expected tax benefits, at the bottom of a residential construction cycle, using debt priced in a high-rate environment. That can still work: buying cyclicals at the trough is how it is supposed to be done. But the interim P&L cost is real, it is running at roughly $200M a year of incremental interest plus $96M a quarter of intangible amortization, and it is why a 10.3% revenue quarter produced a GAAP earnings decline.

3. The DIY Consumer and the K-Shaped Economy

DIY is 60% to 65% of Lowe's revenue by the CEO's own figure and it is the part that is under pressure. Management characterizes the consumer environment as bifurcated: higher-income households spending on innovation and home modernization, lower-income households cautious.

"I think overall, this has been the most difficult housing market that I have faced in this business since the financial crisis. And as Brandon mentioned, it's almost exclusively or disproportionately on the DIY customer." — Marvin Ellison, Chairman, President and CEO

On the tax-refund question, the CFO gave the most specific consumer datapoint on the call: roughly 20% of refunds have been spent, about 50% is sitting in savings, and the remainder has offset higher fuel prices, with just under $50B of refunds still to be distributed over the following three to four months based on IRS data.

Assessment: The refund arithmetic cuts against the bulls. If half the stimulus is being saved and a chunk of the rest is going to the gas pump, the marginal propensity to spend it on a $1,200 flooring project is low. Management has contemplated a second-quarter benefit in the guide, which means the guide already spends money the consumer may not.

4. Weather, SpringFest and What the Quarter Would Have Been

February winter storms cost the quarter measurably: management quantified the first weekend of February alone at a 30bp drag on the full quarter's comp. March and April normalized. SpringFest, now in its third year, was the quarter's largest traffic event, leaning on MyLowe's Rewards member offers and free same-day delivery on high-volume items like mulch.

"I would say overall for weather, the theme for Q1 was roughly mix for the quarter. I think February results definitely impacted by the winter storms early in the year. If you look at just the first weekend of February, it had a 30 basis point drag on the entire quarter just from the storms rolling through." — Brandon Sink, EVP and CFO

Assessment: Adjusting for the storm drag would have put the quarter near 0.9%, still inside the flat-to-2% full-year frame and still short of what a comp needs to be for this business to grow earnings without acquisitions. Weather explains the shortfall against a better quarter; it does not explain the shortfall against a growth algorithm.

5. Deleveraging and the Missing Buyback

The company repaid $2,376M of bond maturities in the quarter and ended at 3.1 times adjusted debt to EBITDAR, against a commitment to return to 2.75 times by mid-2027. The cash flow statement shows $363M of common-stock repurchases against $112M a year ago, but the accumulated-deficit statement shows nothing charged to share repurchases in the quarter, which means this is not the kind of open-market buyback that shrinks the share count. Diluted shares were flat at 560M.

The scale of the change is best seen at the fiscal-year level. Lowe's repurchased $4,053M of stock in fiscal 2024 and $211M in fiscal 2025. Weighted average diluted shares fell from 568M to 560M across that year, and are now flat.

Assessment: This is the most under-discussed change to the earnings algorithm. Lowe's compounded EPS for years on a shrinking share count; that lever is running at a pace too small to move a rounded share count while the 2.75x leverage commitment stands to mid-2027. A business whose operating income grows 2.4% and whose share count is flat grows earnings 2.4%, and that is roughly what the full-year guide implies.

6. Tariffs, Fuel and the Second-Half Cost Bridge

The cost conversation was the only place the tone changed between the prepared remarks and the Q&A. Oil prices are pressuring fuel and commodity-based products such as resin and plastics. The first-quarter impact was described as manageable; the second quarter is where the pressure begins to land, with mitigation coming from vendor negotiation, contract adjustment and burden-sharing.

"We are seeing a pretty immediate impact from the oil prices. It's pressuring fuel, commodity-based products like resin and plastics. Q1, that impact, Simeon, has been pretty manageable. Q2, we are starting to see some of that pressure." — Brandon Sink, EVP and CFO

On tariffs, management is navigating the IEEPA ruling, new Section 122 and 232 actions, and expected news on Section 301, with country-of-origin diversification as the standing mitigation. Like-for-like inflation is running about 3%, consistent with the fourth quarter, and management expects that to moderate as last year's tariff-driven price increases anniversary.

Assessment: There is a tension inside the guide that was not resolved on the call. Management expects average ticket to moderate as tariff inflation laps, and expects transactions to accelerate to compensate. If input costs are rising while pricing power moderates, the gross margin assumption embedded in the 11.6% to 11.8% adjusted operating margin guide is doing a lot of work. Home Depot disclosed that it has applied for tariff refunds; Lowe's has not said whether it has.

7. Perpetual Productivity Improvement and the $1 Billion Target

PPI is the cost-offset program and it is quantified: $1 billion of productivity for the year. The initiatives named span Freight Flow 3.0, full-shelf replenishment, SKU rationalization, and an expanding set of AI applications in demand planning, allocation, replenishment, pricing and promotion, and assortment planning. The technology organization reports double-digit productivity gains from AI code review and development.

"The $1 billion of PPI that we've messaged starting to become more and more apportionment to these efforts and these categories. So we're going to continue to drive that, continue to work through that, and that gives us confidence again to our ability to deliver the $1 billion for this year." — Brandon Sink, EVP and CFO

Assessment: $1 billion against roughly $92B of sales is about 110bps, which is the right order of magnitude to defend the margin guide against the cost pressures described. It is also the same lever being asked to absorb fuel inflation, tariff cost and the sales-driving investments. One billion dollars cannot be spent three times, and the call did not establish which claim has priority.

8. Mylow, Mylow Companion and the Agentic Commerce Framework

Management frames AI across three surfaces: how we sell, how we shop and how we work. Mylow, the customer-facing assistant built on an OpenAI platform, handles over a million customer inquiries per month. Mylow Companion, the associate-facing tool, has fielded more than five million associate questions since launch and has added voice-to-text and Spanish. Store operations report a 200bp improvement in customer satisfaction attributed to the Companion tool.

"What we were so pleased to see is even our most tenured associates are adapting to this tool, which we were not sure if they would because these are associates with high level of technical skill, and we were not sure if they would embrace it, but because the system is so intuitive and is working so well, it's being embraced across all levels of tenure." — Marvin Ellison, Chairman, President and CEO

Assessment: Of the AI disclosures we see across retail this cycle, Lowe's is unusually specific: named tools, monthly query volumes, an adoption observation that runs against the intuitive prior, and a conversion claim. The gap is that none of it is connected to a P&L line. AI is inside the $1 billion PPI figure somewhere, and the company has not said where.

9. FBM and ADG Integration

Integration is described as on track, with cost synergies concentrated in procurement across drywall, steel and insulation, and cross-selling still exploratory. The two businesses are differently exposed: ADG is fully levered to new home construction, single-family and multifamily; FBM runs closer to a 50-50 residential and commercial mix, and the commercial half is winning data center, stadium and municipality contracts that partially offset the residential drag.

"While tough conditions overall right now from a macro standpoint, this has given us the opportunity to win new business and take share in a down market, and we fully expect ADG and FBM both to build on the leadership position and emerge even stronger on the back side of this." — Brandon Sink, EVP and CFO

Assessment: No synergy target, no dollar amount, no timeline. For an $8.8B acquisition closed seven months earlier, that is a conspicuous absence. FBM's commercial exposure to data centers is a genuine and underappreciated positive that partially decouples the asset from the housing cycle, and it is the one part of the acquisition story that is working right now rather than in 2033.

10. Market Share in a Flat Market

Management's framing of the year has been consistent since February: assume the home improvement market is flat, guide to taking share, and refuse to underwrite a macro inflection.

"We try to get out of the prediction business relative to what will happen in the macro specifically around things like rates." — Marvin Ellison, Chairman, President and CEO

The evidence for share gain in the quarter is real if narrow. Home Depot reported total comparable sales of +0.6% and U.S. comparable sales of +0.4% the day before. Lowe's, which operates only in the United States, comped +0.6%. On the closest available like-for-like comparison, Lowe's outgrew its only direct scale competitor by 20bps.

Assessment: Twenty basis points is not a franchise-defining gap and one quarter is not a trend, but it is the first quarter in which Lowe's has led the only competitor of comparable scale. The Total Home strategy is producing measurable relative results. What it has not yet produced is absolute earnings growth.

11. The Skilled Trades Commitment

The Lowe's Foundation announced a $250 million investment to train roughly 250,000 skilled tradespeople. Management ties it directly to the Pro customer's stated problem: backlogs are generally stable but labor costs are rising in a constrained labor market.

Assessment: Good long-cycle industrial logic and good brand positioning with the Pro. It is also $250M of spend against a company defending an eleven-and-a-half percent operating margin, and the call did not say over what period it is recognized or whether it sits inside the fiscal 2026 guide.

Guidance & Outlook

Every element of the fiscal 2026 outlook introduced on February 25 was affirmed unchanged. Nothing was raised, nothing was cut, and the first quarter's beat was absorbed rather than passed through.

The guidance table understates how demanding this year is, because the sales line and the earnings line are not being driven by the same thing. Sales grow 7% to 9% because two acquisitions enter the base. Adjusted EPS at the $12.50 midpoint grows 1.7% against the $12.29 that the four fiscal 2025 quarters summed to, and GAAP diluted EPS at the $12.00 midpoint grows 1.3% against $11.85. Adding roughly $6.5B of revenue and producing under two percent of earnings growth is the arithmetic of a debt-funded acquisition in its first full year.

Implied Quarter-over-Quarter Ramp

Management gave two second-quarter markers: comparable sales roughly in line with the midpoint of the full-year range, so about +1%, and adjusted diluted EPS approximately 2% below the prior-year figure. Applied to last year's $4.33, that implies roughly $4.24. The rest follows arithmetically.

Street at: the full-year revenue guide sits close to where consensus already was, while the $12.50 adjusted EPS midpoint sat slightly below it. That is the more informative half of the reaction: the Street's model needed the beat to flow through, and it did not.

Guidance style: conservative, with a fiscal 2025 track record to prove it. Lowe's opened fiscal 2025 guiding $83.5B to $84.5B of sales and delivered $86,286M, but the beat came from acquisitions rather than from the base business, and the earnings line moved the other way: the year opened guiding $12.15 to $12.40 of diluted EPS and closed at $11.85 on a GAAP basis. This is a management team that has been reliable on sales and has missed on its own initial earnings frame once already in the acquisition era.

Management also named the three pressures on second-quarter adjusted operating margin explicitly: the acquisitions, which begin to anniversary only in the second half; sales-driving investments weighted to the second quarter because of the spring and holiday calendar; and higher transportation costs that the company intends to offset with back-half productivity. The first two were in the plan. The third was not.

Analyst Q&A Highlights

Whether the tax-refund stimulus is actually reaching the register

The opening line of questioning went straight at the consumer, and produced the most specific and most useful datapoint of the call. Management has done real work on the refund cycle and was willing to show the arithmetic rather than assert a direction.

Q: "And then just stepping back because obviously, tax stimulus has helped the consumer broadly, and you could see that as all of retail is reporting earnings right now. As you think about how much maybe that helps your business, do you think it's helped so far this year?"
— Christopher Horvers, JPMorgan

A: "But we looked at Q1, the tax refund impact was more limited on our business, more significant drivers were the weather that I mentioned earlier. At this point, we estimate about 20% of the refunds have been spent. About 50% of that sitting in savings with consumers just given the uncertainty and the remainder of that has offset some of the higher fuel prices of recent."
— Brandon Sink, EVP and CFO

Assessment: This answer is honest and it is bearish. Half the refund money is being saved and much of the spent half is going to the pump; management then says it expects a second-quarter benefit anyway, from higher-income consumers, and has embedded that in the outlook. Roughly $50B of refunds remain to be distributed over the following three to four months, which is a real number, but the propensity to convert it into home-improvement projects is exactly what the first quarter says is weak.

Nine of thirteen categories positive against a sixty-basis-point comp

The sharpest question of the call asked what the breadth statistic actually means. If most divisions are growing, either the growth is trivially small everywhere or something large is dragging. Management chose the second explanation and named the drag without naming the divisions.

Q: "You had positive comps in 70% of your product categories, but the total comp for the quarter was 60 basis points. I guess my question is like, how should we read that? Is it that most or all of your categories are kind of slightly positive, I guess, most slightly positive and a few slightly negative, or are there some outsized upside performers offset by some sizable drags?"
— Scot Ciccarelli, Truist Securities

A: "I think the pressure that you're continuing to see is really around the DIY. Marvin mentioned ongoing strength we've seen with the Pro consumer, our services business, online. DIY still very much engaging, but it continues to be in the repair, maintenance, replacement-related categories."
— Brandon Sink, EVP and CFO

Assessment: The follow-up produced the most useful structural disclosure in the transcript: roughly two-thirds of the business is repair and maintenance, one-third discretionary, and that split has not changed. It reframes the whole comp discussion. Lowe's is not waiting for a consumer recovery in general; it is waiting for the discretionary third, which is the part gated on housing turnover and home-equity access.

Whether the category can grow at all without faster housing turnover

The most fundamental question asked of the sector, and the one management is least able to answer with data. Transactions remain below pre-pandemic levels, the housing stock keeps aging, and the maintenance demand that theory says should be building is not showing up in the register.

Q: "But if you think about the age of the housing stock, which we talk about, the maintenance/repair, which you just mentioned, how big of a piece of the business that is, you would think that the sector could show some more life. So I want to question how you think about that and if you think the sector can really grow without faster turning homes."
— Simeon Gutman, Morgan Stanley

A: "We've delivered 4 quarters of positive comps in an environment where the DIY has faced more economic pressure than I've ever seen before. And so we're really confident that as we start to see some type of moderation or normalcy in the home improvement and the housing market, we think that we're positioned really well for long-term gains just because we've structured this business to win in any economic environment."
— Marvin Ellison, Chairman, President and CEO

Assessment: The question was whether the sector can grow without turnover and the answer was that Lowe's is positioned for when turnover returns. That is not a dodge so much as an admission: the operating leverage in this business is dormant until housing unfreezes, and management has said elsewhere on the call that the unlock it is watching for is a sustained sub-6% mortgage rate. Everything between here and there is share gain, and share gain at this magnitude does not move earnings.

How much cushion is left after the cost environment moved

A direct challenge on whether the margin guide still holds now that oil has moved since February, and whether the productivity program has enough left in it to absorb the difference. The answer conceded the pressure and leaned on track record rather than on a quantified bridge.

Q: "The cost environment, Brandon, looks like it's gotten a little bit more challenging since when you guided. Can you talk about the amount of cushion or, I guess, flexibility you have versus having to pivot either more PPI to be able to get to your margin goals given the cost?"
— Simeon Gutman, Morgan Stanley

A: "And last thing I'll say is just while challenging, I think this team has proven the ability to effectively manage through that here in the past multiple inflationary cycles, to be specific, 3, that this team has lived through in the last 6-plus years, and we have a proven playbook here to remain competitive and manage profitability. So challenging, but confident that we can work our way through it here."
— Brandon Sink, EVP and CFO

Assessment: No number was given for the cushion, which tells you there isn't much of one. The response acknowledged pressure on fuel, resin and plastics, described pulling productivity initiatives forward to offset, and closed on experience. Experience is a reasonable thing to underwrite from a team with this record, but the guide was affirmed rather than trimmed, so the entire cost move since February is now absorbed inside a range that was set before it happened.

Why ticket growth moderated and what inning the tariff cycle is in

Ticket has carried the comp for several quarters, and it decelerated. The question separated mix from inflation, and the answer produced the quarter's most useful category datapoint.

Q: "If you look back over the last few quarters, your growth has really been driven by ticket, and that got you to positive growth. It was still positive in Q1, but it has moderated. So I am curious if you're seeing a shift in mix? Or is that just less inflation in Q1, something specific in Q1 that would have led to that moderation in ticket?"
— Seth Sigman, Barclays

A: "That really is a function of mix here with Q1 as we lean into smaller ticket spring seasonal projects like lawn and garden versus a slowdown in what I'll call larger projects. Our big ticket performance still positive over 2% in Q1, and that continues to be driven by appliances, Pro and then the services, repair, maintenance projects."
— Brandon Sink, EVP and CFO

Assessment: Big-ticket transactions above $500 comping over 2% is better than the sector narrative implies, and it is composed almost entirely of non-discretionary spend: appliances bought under duress, Pro materials, and repair projects. The discretionary big-ticket remodel, which is the highest-margin and most cyclical piece, is still absent. Management also expects ticket to moderate further as last year's tariff pricing anniversaries, with transactions expected to compensate. That handoff is the central operational assumption of the second half and it has not started yet.

What the acquisitions are actually doing in a down residential market

The only question that pressed on the underlying performance of FBM and ADG rather than the strategic rationale. The answer was candid about the residential exposure and surfaced a commercial offset that has not been widely appreciated.

Q: "And then on FBM and ADG, I believe those will come into the comp base at some point later this year, Q3, Q4. Maybe just talk about underlying performance in Q1 and then how are you planning those businesses for the rest of the year?"
— Seth Sigman, Barclays

A: "ADG, their business is fully exposed to new home construction, and that's single-family, multifamily, FBM more of a 50-50 mix, both feeling the pressure on the residential side. I think for FBM, we have been really pleased with what we're seeing on the commercial side. They continue to win data center, stadium, municipality contracts, which does reflect some of the benefits of their diverse customer base."
— Brandon Sink, EVP and CFO

Assessment: The question asked for underlying performance and got a qualitative characterization. No growth rate, no revenue figure, no margin, no synergy number. What did emerge is genuinely useful: FBM's commercial half is winning data center work, which partially decouples an asset bought as a housing-recovery call option from the housing cycle itself. That is the most interesting unmodeled item in the story, and it came out only because one analyst asked twice.

What gets the comp to the high end of the full-year range

With the second quarter guided to roughly the midpoint, the second half has to carry any move toward the top of the range. The answer listed initiatives and two macro unlocks, one of which is a very large number attached to a very uncertain trigger.

Q: "I wanted to ask about same-store sales for the full year. With your commentary about 2Q in the plus 1 level, how do we think about the second half? What are some of the drivers to see some improvement in the second half of the year to get to that high end of the range since it's still there?"
— Steven Zaccone, Citi

A: "I mentioned also earlier some stimulus potentially from the tax refunds and then any potential HELOC activity that's unlocked. I think there continues to be $35 trillion that's out there, an average of $400,000 per household, about 1/3 of that tappable. So continue to look at that as a potential opportunity to be unlocked."
— Brandon Sink, EVP and CFO

Assessment: Tappable home equity is the perennial bull argument for this sector and it has been available and untapped for three years, because the same rate environment that froze turnover also made drawing against a home expensive. Citing it as a path to the high end of the range is citing a condition, not a driver. The controllable half of the answer, meaning Pro Extended Aisle, loyalty, online, expanded fulfillment, and the workwear and pet rollout completing by year end, is the part worth underwriting.

Whether current trends support the implied second-quarter comp

A blunt attempt to get management to confirm the quarter is running at guidance. The answer declined to confirm and redirected to the calendar.

Q: "You've guided to about 1% same-store sales growth in the second quarter. Should we assume you're running at that level today? And as April progressed and we moved into the early Q2 period, have you noticed anything within consumer spending patterns, whether that's DIY, Pro, anything across income cohorts that's breaking the consistency of the consumer and the resiliency of the consumer narrative in any way?"
— David Bellinger, Mizuho

A: "Relative to what we're currently seeing, the best way to answer that is where the weather is seasonal, the business is performing well. This time of year, this is an incredibly weather-dependent business. But having said that, the biggest sales weeks are ahead of us with Memorial Day selling period, Father's Day and the 4th of July that Bill mentioned."
— Marvin Ellison, Chairman, President and CEO

Assessment: A non-answer, and an entirely conventional one three weeks into a quarter. The substance came in the follow-on: nothing has changed versus the first quarter, the K-shaped pattern persists, and the biggest weeks are still ahead. The takeaway is that the second-quarter comp is undetermined and weather-dependent as of the call, which is precisely why the affirmed guide carries more risk than an affirmed guide normally does.

What They're NOT Saying

1. The acquired revenue is never sized: reported sales grew 10.3% and comparable sales grew 0.6%, and the company did not disclose what FBM and ADG contributed in dollars, in growth, or in margin. It is the largest single unexplained number in the release, and no analyst asked for the split.
2. No synergy target and no timeline: seven months after closing an $8.8B acquisition, management described being "pleased with what we're seeing on the synergy side" in procurement categories like drywall, steel and insulation, and attached no dollar figure, no run-rate and no date.
3. The buyback was not mentioned once: the cash flow statement shows $363M of stock repurchases while the accumulated-deficit statement charges nothing to share repurchases in the quarter. Nobody asked what the gap is, and nobody asked when open-market repurchase resumes relative to the mid-2027 leverage target.
4. Gross margin's two moving parts are both unquantified: the 70bp decline was attributed to acquisition mix dilution partly offset by credit-revenue favorability, with no size given for either, which makes it impossible to tell whether underlying merchandise margin improved or deteriorated.
5. Second-quarter margin was framed but not quantified: adjusted EPS was guided to roughly 2% below the prior year with three named pressures, but no gross-margin or operating-margin figure was given for the quarter, so the guided decline cannot be attributed between price investment, mix and freight.
6. Pro and home services are never sized: both have been described as growing for four consecutive quarters without a growth rate, a penetration figure or a dollar disclosure. Pro penetration is the central metric of the Total Home strategy and it is not reported.
7. The $250 million skilled-trades commitment has no P&L treatment: announced on the call with no statement of the period over which it is recognized, whether it sits inside the affirmed guide, or whether it runs through the foundation rather than the operating company.
8. February's corporate reduction did not come up: roughly 600 corporate and support roles were cut in February, inside the reported quarter, and the call contained no reference to it or to the associated savings or charges.
9. Tariff refunds were not addressed: Home Depot disclosed the day before that it had applied for tariff refunds as a potential offset to rising fuel costs. Lowe's did not say on the call whether it has done the same.

Market Reaction

• Pre-print setup: the shares closed at $218.37 on May 19, down 9.5% year to date, down 5.6% over the trailing twelve months and down 13.8% over the trailing thirty days. That close sat 3.6% above the bottom of the trailing 52-week closing range of $210.83 to $287.39. The stock went into the print near a one-year low after a sharp month.
• Reaction session (May 20, a before-the-open report): the stock gapped open at $213.98, down 2.0%, traded down as far as $208.00, or 4.7% below the prior close, then reversed to close at $221.05, up 1.2% or $2.68. The close was 6.3% above the intraday low.
• Volume: 6.1 million shares against a 30-day average of 2.6 million, roughly 2.4 times normal.
• Relative move: the S&P 500 rose 1.1% on the session, so the stock finished essentially in line with the index after a full-percentage-point round trip through the day.
• Peer: Home Depot, which reported before the open on May 19, closed up 2.7% on the same May 20 session, having itself gapped down 2.6% and closed up 0.9% on its own print day.

The interesting artifact is the shape, not the magnitude. A stock that opens down 2%, trades down 4.7%, and closes up 1.2% on 2.4 times normal volume has not been re-rated; it has been reallocated. The morning sellers were reacting to what the release said, which is that earnings did not grow. The afternoon buyers were reacting to what it did not say, which is that anything got worse.

What positioning had already discounted. Down 13.8% in thirty days into a print, three and a half percent off a one-year closing low, is a setup where the bar has been lowered by the tape rather than by the company. Affirming a guide is a low bar in absolute terms and a meaningful one against that entry point. The reversal is best read as short covering and value-buyer engagement rather than as a vote of confidence in the second-half ramp.

The group traded as one. Both home-improvement majors gapped down on their prints in the same week and both closed green, and Home Depot then added 2.7% on the day Lowe's reported. That is a sector being accumulated on prints, not a stock being singled out. It also means very little of the move is attributable to anything specific in the Lowe's release.

What did not happen. No re-rating. The stock closed at $221.05, still 23.1% below its 52-week closing high, still down 8.3% year to date after the move, and on a multiple that expanded from 17.5 to 17.7 times the guide midpoint. The market did not decide the earnings algorithm was fixed; it decided the price had already accounted for it being broken.

Street Perspective

Debate: Is 10.3% revenue growth an earnings story or a balance-sheet story?

Bull view: The bull case on the Street is that Lowe's bought a $6.5B-revenue distribution platform and a new-construction installer at the trough of a residential cycle, at a defensible multiple, using debt that will amortize over the next two years, and that the intangible amortization and interest drag are transitional accounting and financing costs against an asset that will earn its return when housing normalizes. Free cash flow of $2,829M in a single quarter is the proof the balance sheet can carry it.

Bear view: The bear camp points at the identity in the income statement. Operating income grew $60M and interest grew $62M, so the entire first year of the largest acquisition in company history has produced negative pre-tax contribution. The buyback that used to deliver two to three points of EPS growth a year is gone until mid-2027. Goodwill and intangibles went from $585M to $9,752M, and none of that has been tested against a residential recovery that management itself declines to forecast.

Our take: The bear has the better of the near term and the bull may have the better of 2028. Both can be true, and the position that follows from both being true is Hold. What settles it for us is that the bull case requires a macro event, a sustained sub-6% mortgage rate, that management explicitly refuses to predict and that has not begun. Underwriting an outcome the company will not underwrite is not analysis, it is hope with a spreadsheet attached.

Debate: Can the back-half-loaded guide survive the cost environment?

Bull view: The optimistic argument is that the $1 billion productivity program is real, quantified and already delivering, that Lowe's has managed three inflationary cycles in six years, that tariff comparisons get easier as last year's increases anniversary, and that the second-half initiative stack, meaning the workwear and pet rollout completing, Daltile entering flooring, Pro Extended Aisle scaling, is the most concrete it has been in several years.

Bear view: The skeptical read is that the guide was set in February and oil has moved since, and rather than trim the range management affirmed it and pushed the offset into the second half. The productivity program is now being asked to fund three things at once: fuel and freight inflation, competitive price investment, and the margin guide itself. The company gave no quantified cushion when asked directly for one.

Our take: The bear is right that affirming a range set before a cost shock is a decision, not a neutral act, and that no cushion was quantified. The bull is right that this is a management team with a demonstrated cost playbook. We land closer to the low half of the adjusted EPS range for that reason, at $12.40, and we would treat the $12.75 high end as requiring a comp materially better than the April exit rate.

Debate: Does 17.7 times already discount the housing freeze?

Bull view: The argument for the multiple is that a franchise with 26.8% return on invested capital, $7.65B of free cash flow in the prior fiscal year, an unbroken dividend that just rose 4.3%, and a genuine share-gain record is trading 23% below its 52-week closing high on trough earnings power. When housing turns, the operating leverage in a 1,759-store fixed-cost base is violent, and no one gets to buy that optionality at a distressed multiple.

Bear view: The bear case is that 17.7 times is not cheap for a company guiding roughly 2% earnings growth, carrying 3.1 times leverage, running negative transaction comps, and with its buyback too small to move the share count. On flat earnings, the multiple is the only thing holding the stock, and the multiple has already fallen from the high twenties without producing a bottom.

Our take: Neither the discount nor the premium is large enough to be the thesis. A stock at 17.7 times, yielding 2.2%, on earnings that grow low single digits, produces a total return close to the index if nothing changes, which is the definition of our Hold rating. The asymmetry is real but it is contingent on rates, and the option is not free at this price. We would rather own the recovery when it is visible in transactions than pay for it while transactions are still negative.

Model Update Needed

This is an initiation, so the table sets our starting fiscal 2026 estimates against the company's affirmed guidance rather than against a prior model.

Valuation

At the May 20 close of $221.05 on 561 million shares outstanding, Lowe's carries a market capitalization near $124.0 billion. Adding $37,941M of total debt and deducting $786M of cash and $458M of short-term investments gives net debt of $36,697M and an enterprise value near $160.7 billion. That is 17.8 times our fiscal 2026 adjusted EPS estimate of $12.40, 17.7 times the company's own guide midpoint, and 1.73 times our fiscal 2026 sales estimate. The dividend of $1.20 per quarter yields 2.2% annualized, and our free cash flow estimate implies a 5.5% yield on the equity.

Our fiscal 2027 estimate builds from that base, and the build is deliberately modest because it assumes no housing recovery:

Valuation impact: we set a twelve-month target of $236, which applies 18.0 times to our fiscal 2027 adjusted EPS estimate of $13.10. That multiple is essentially where the shares closed on the print relative to our fiscal 2026 estimate, so the target assumes no re-rating and gets its return from earnings alone. From $221.05 it implies 6.8% price appreciation and roughly 9.0% total return including the dividend. That is a market-like return, which is what a Hold rating means.

The asymmetry is roughly two to one in favor of the upside at the extremes, which is better than the rating implies but not enough to change it. The bull case is a single-variable bet on the path of mortgage rates, and the base case clears the index by too little to be worth the balance-sheet risk carried alongside it.

Thesis Scorecard Post-Earnings

This is our first published view on Lowe's, so the pillars below are established here rather than carried forward. Each is stated in the form we will score it against in subsequent quarters.

Overall: Thesis established. The operating half of this business is performing better than the sector backdrop deserves, and the financial half is absorbing the cost of a decision made eight months ago. Those two facts point in opposite directions and roughly cancel, which is why the rating is Hold rather than a conviction call in either direction.

Action: Initiate at Hold. We would not chase the reversal off the $208.00 intraday low, and we would not short a franchise generating $2.8 billion of quarterly free cash flow at 17.8 times. The next checkpoint is the August quarter, where three commitments made on this call become gradeable: adjusted EPS roughly 2% below the prior year's $4.33, a comparable-sales figure near the midpoint of the full-year range, and whether the fuel and freight pressure management flagged for the second quarter is in fact offset by productivity in the second half. A fourth item is not a commitment but is the one we most want: the first quantification of what FBM and ADG actually contributed.