Lowe’s at 25th Annual Consumer Growth Conference: Strategic Outlook Amid Challenges

On Wednesday, 11 June 2025, Lowe’s Companies Inc. (NYSE:LOW) participated in the 25th Annual Consumer Growth and E-Commerce Conference. The discussion, led by CEO Marvin Ellison and CFO Brandon Sink, highlighted strategic initiatives amid both optimistic long-term prospects and near-term challenges, such as elevated mortgage rates impacting housing turnover.

Key Takeaways

• Lowe’s remains optimistic about the long-term prospects of the home improvement market despite short-term challenges.
• The company is modernizing its supply chain and enhancing its omnichannel experience to meet future market demands.
• Lowe’s has paused share repurchases this year to finance the acquisition of ADG and maintains a strong financial position.
• Elevated mortgage rates are a significant headwind, but disposable income is growing faster than inflation.
• Lowe’s plans to open 10 new stores this year, with a focus on both DIY and Pro customers.

Financial Results

• Homeowner Health: Strong balance sheets, wage growth, and low unemployment support consumer spending.
• Disposable Income: Growing faster than inflation, providing a positive outlook for Lowe’s target customers.
• Mortgage Rates: Elevated rates are a significant headwind, reducing housing turnover to its lowest since the 1990s.
• Share Repurchases: Paused this year to finance the ADG acquisition.
• Debt Management: Committed to paying off $2.5 billion in debt this year without refinancing, maintaining a BBB+ credit rating and a leverage target of 2.75x.

Operational Updates

• Supply Chain Modernization: Transition to a market delivery system for next-day appliance delivery across most US zip codes.
• Service Initiative: Implementation of an activity-based labor system to boost productivity and customer satisfaction.
• Brand Transformation: Reintroduction of national brands to support the small-to-medium pro initiative.
• Total Home Strategy: Aimed at capturing market share and benefiting from the cyclical recovery of the DIY market.
• Store Growth: Plans to open 10 new stores this year and 10-15 per year subsequently.
• E-commerce Expansion: Revenue from online sales has increased from 4% to 12%, with further growth expected through a marketplace partnership with Miracle.

Future Outlook

• Market Recovery: Anticipating recovery demand from hurricane-affected areas in Florida and the Carolinas.
• Pent-Up Demand: Approximately $50 billion in delayed home improvement projects due to current market conditions.
• Rate Expectations: No significant rate reduction expected, but demand is anticipated to grow as new life stages emerge.
• Planned Pro Spend: The ADG acquisition provides a foothold in the $50 billion residential construction and multifamily market.
• Localization Initiatives: By the end of the year, 500 stores will feature tailored rural sets, and workwear will be available in approximately 1,000 stores.

Q&A Highlights

• Consumer Health: Homeowners are financially healthy, but high mortgage rates remain a challenge.
• Rate Sensitivity: No specific rate level is identified as a turning point, but market adaptation is expected over time.
• Business Improvement: Focus on retail fundamentals, modernized supply chain, and strategic initiatives for future success.
• Geographic Differences: Weather is a key factor influencing business performance.
• Tariff Impact: Managing tariffs through supply chain diversification and vendor negotiation.

Lowe’s strategic positioning aims to capitalize on future market improvements while effectively managing current challenges. For more detailed insights, refer to the full transcript below.

Full transcript - 25th Annual Consumer Growth and E-Commerce Conference:

Brian Nagel, Senior Equity Research Analyst, Oppenheimer: Well, good afternoon. Thank you all for joining us. My name is Brian Nagel. I’m a senior equity research analyst here at Oppenheimer covering consumer growth and ecommerce. So this is day three of our twenty fifth annual Oppenheimer consumer growth and ecommerce conference.

So, again, thank you all for joining us. I am very pleased to have with us our next presenting company, Lowe’s, and three of the company’s executives. That’s CEO, Marvin Ellison CFO, Brandon Sink and investor relations, Kate Pearlman. So thank you very much for joining us.

Brandon Sink, CFO, Lowe’s: Thank you, Brian. So much.

Brian Nagel, Senior Equity Research Analyst, Oppenheimer: We appreciate it. So we’re gonna discuss we’re gonna structure this as a an informal fireside chat with me asking questions and Lowe’s answering those questions. To the extent there are questions from the audience, send them through the chat. I’ll be happy to work them into our conversation. But with that, I’d love to start, Marvin and Brandon, just before we dive into kind of Lowe’s specific question for Lowe’s, just given your unique position within the consumer landscape, your thoughts on the overall health of the consumer, you know, what you’re seeing from kind of a consumer demand perspective and how that may be may have been shifting lately.

Marvin Ellison, CEO, Lowe’s: Great. So so, Brian, always great to be with you. I’ll take the part and Brandon can add any additional comments. I would say, overall, the homeowner is really healthy. They have a strong balance sheet, strong wage growth, low unemployment, record equity.

And, you know, for the time in a while, you have personal disposable income growing faster than inflation. So we we feel really good about the homeowner, which is in in the general customer that we are targeting in in the DIY market. But specific to home improvement, I mean, we still are seeing a bit of headwind, and that headwind is driven almost exclusively by elevated mortgage rates. And as you know, I think housing turnover is at its lowest level since the nineteen nineties, and that’s almost exclusively driven by these elevated rates. Also, short term borrowing rates are up, and that’s putting a little bit of a damper on discretionary big ticket DIY projects.

So we look at those combination of things, and and and it gives us a little bit of a of a mixed view. But when we take a step back and we look at the medium to long term view of the historic demand drivers in home improvement, we we actually remain optimistic. With things like the age of housing stock, which, as you know, is the oldest, you know, since record keeping was maintained. You look at things like equity and the amount of equity available and the, you know, home price appreciation has occurred, you know, post pandemic. And then you look at, you know, things like personal disposable income, as I mentioned, growing faster than inflation.

So we we look at all of those things, and it gives us a degree of confidence that the medium to long term view for home improvement, you know, has positive aspects that we remain confident that our strategy and our focus will allow us to take advantage of as moment as we start to get a bit of a tailwind that that we’re hoping for. And and and we hope that that will occur at some point this year, but, man, we’re not in the prediction business. I don’t know if Brandon has anything else to add.

Brandon Sink, CFO, Lowe’s: Yeah. Sure, Brian. I I would just add, as Marvin said, you know, consumer overall continues to be healthy, but definitely some near term, you know, affordability challenges just as we look at at sentiment, rates, inflation and so And then, you know, the lock in effect, you know, for us continues to be real, right? We’re looking at overall three quarters of mortgages are at fixed rate below 5%, I think over 50%, you know, below 4%. So when you look at the state of housing and housing turnover, we’re roughly we’re still bumping along the trough roughly 4,000,000 units, you know, turning annually, which if you look back, that’s kind of a three decades low.

New home starts continue to be sluggish. So a number of things just in the soup here short term, we’ve worked through for the most part, anything COVID reversion related, your share of wallet shifts from from goods to services. A lot of that has effectively sort of run its course over the last couple of years and we’re dealing with more of these kind of near term trends and a lot happening just uncertainty around policy and so So a number of challenges, a number of medium to longer term green shoots and still committed to making investments in the business and we’re all about preparing when we get on the backside of this, preparing for the transition so we can get back in growth mode.

Brian Nagel, Senior Equity Research Analyst, Oppenheimer: That’s very helpful. So if I hear you correctly, I mean, really the biggest from a macro standpoint, the biggest hindrance at this point is rates, both on the longer term and then maybe the shorter term side affecting both mortgage rates and then I guess HELOC rates. That’s correct?

Brandon Sink, CFO, Lowe’s: Yes. I’d say that’s fair.

Marvin Ellison, CEO, Lowe’s: Yes, Brian. Correct.

Brian Nagel, Senior Equity Research Analyst, Oppenheimer: So I mean I know no one has a crystal ball to know when rates would go lower, but I would love to get your perspectives on are there levels that rates got you, you would see an unlock in your business? Then the question I have is, we have seen this looking back at your most recent quarterly report, you know, there were some bright spots, you know, with respect to seasonal products and such. How how how much better can the from a top line perspective, can the Lowe’s business get if rates were not to move or to stay here?

Marvin Ellison, CEO, Lowe’s: I’ll take the raise piece.

Brandon Sink, CFO, Lowe’s: Yeah. I mean, Brian, as it relates to, you know, where we would see unlocks, I don’t know that, you know, there’s sort of an absolute level that we would see. I think coming into the year and if you were to ask us this kind of this time last year, you know, we would have said, hey, anything kind of closer to to six was really where we saw some engagement, where we saw things change. But I think the longer that we sit six and a half, 7%, I think you’re gonna start to get into, you know, new life stages even if rates don’t meaningfully move down. You know, folks are gonna have to, you know, get married, buy a house, transition, add more space.

I think it’s just gonna take longer and you’re gonna work through that, you know, over time. So I don’t I don’t know that we’re planning for any meaningful step down, you know, in rates. I think the thing that gives us a lot of optimism, Marvin said it, there’s $35,000,000,000,000 of of pent up equity and a of that roughly tappable. And I think when we look at some of these big ticket discretionary categories, which for us we’ve seen a lot of challenge over the last two or three years, a lot of not just reversion, over reversion to the extent when we look at home improvement in the industry as a whole. There there’s about $50,000,000,000 now of pent up demand because as you know, home improvement, these projects don’t get canceled, they just get delayed.

And I I think we’re now officially in that delay phase where you have this pent up demand that’s happening. You have equities that are there and we just really need that that catalyst in that inflection point. And that’s kinda what we’re waiting wait waiting to see within the business.

Marvin Ellison, CEO, Lowe’s: And look, on the question of about how much better can the business be up, I mean, it’s it’s really it’s a difficult one to answer, but I’ll give you some perspective. So I’ll be celebrating my year anniversary here in July, and and and just comparing where we are today versus just back then on on what I call just the fundamentals of retail. Things like being in stock, having the brands that customers desire and that are they are attracted to, having robust loyalty programs for both pro and d and y, having seamless omnichannel experiences so a customer can easily pivot between online store, you know, mobile app, some of the recognition we receive nationally on some of the things we’ve done from service to IT infrastructure to our digital platform to the major investments we’ve made in supply chain and our supply chain transformation. So there’s there’s no element of our business that we haven’t been working on and investing capital then for the last five plus years. And so we are positioned to really respond well when we see just any moderation in the market.

I mean, we’re not looking for, you know, the great days of housing or the historic days of home improvement demand. Just getting to a normal, you know, market specifically for the DIY customer, the homeowner, we think our business is set up to perform really well, and that really drives our confidence.

Brian Nagel, Senior Equity Research Analyst, Oppenheimer: Got it. Are you seeing any from the demand perspective, the the overall health of your business, are you seeing any noticeable geographic differences across The United States?

Marvin Ellison, CEO, Lowe’s: Not really. What I will tell you, at this time of the year, particularly, the greatest correlating factor to our business performance is weather. And and as we look geographically, that is almost always the driver of good performance and performance that’s under expectation. So other than that, there’s nothing really material that we can put our finger on relative to any other factor that’s driving overall performance.

Brandon Sink, CFO, Lowe’s: Yeah. Brian, I would add, you know, Helene and Milton, you know, late late summer, late early fall, late summer last year, you know, drove demand q three, q four, and that’s turning into the year. There’s expectation we’re gonna send continue to see some hurricane recovery demand. So that is creating some regional benefits as we look Florida and The Carolinas. But outside of that and just normal weather challenges ongoing, nothing really from a macro standpoint to Marvin’s point that we’re seeing influence the business.

Brian Nagel, Senior Equity Research Analyst, Oppenheimer: And so on that on the seasonal side, when you put it aside the impact as we’ve discussed, these these persistently elevated rates, when the when the weather is cooperating, the market by market and markets where weather is generally better, your that seasonal demand is meeting your expectations?

Marvin Ellison, CEO, Lowe’s: Yeah. It it it has been for really q one and q two. And and again, Brian, that that to me supports the fact that we feel good about our business strategy. You know, when I think about the pressure that we’ve experienced really for the last three plus years with the DIY customer, you know, I feel pretty confident that that is almost exclusively macro driven. That’s that lock in effect that Brandon talked about with these elevated rates, customers choosing to just stay put while they monitor the rate environment.

And these short term rates, again, is, you know, is delaying their decision to do some larger discretionary projects. But but from an execution, strategic positioning, you know, we feel really good about where we are.

Brian Nagel, Senior Equity Research Analyst, Oppenheimer: Another big topic, another topic that’s very much on the mind of investors I’d love to get your perspectives on is tariffs and and and global trade policy. Obviously, it’s, you know, it’s fluid, shifting by the day, if not by the hour. So where does Lowe stand on what you’re seeing from a, you know, a tariff perspective? Maybe you can discuss, you know, your your your your the mitigation efforts you’ve started to put in place.

Brandon Sink, CFO, Lowe’s: Yeah. Yeah. Brian, I’ll I’ll start just with the fact that the team over the last several years has done a tremendous job merchandising, global merchandising specifically, just as we’ve looked at exposure, supply chain, diversification, really working across the globe to develop new opportunities, new efforts, to diversify in particular out of China. As we sit here today and probably the biggest risk that we’re working around continues to be China. We have about 20% of our cost of goods sold or of our purchases are exposed to China.

One point of clarification there, that is both direct. So where we have private brands and we’re importing directly as well as purchases from our domestic suppliers that are importing from China. So it’s a combination of both of those. Know, six, eight weeks ago when the tariffs were escalated at a 145%, we had essentially shut any and all activity out of China, complete pause. We got the ninety day reprieve and really have spent the better part of the last several weeks reengaging and reevaluating what we flow, how we manage the business.

So I would say multi pronged efforts across a number of different functions. How can we for for the categories that we want to stay committed to, how can we continue to diversify and see how quickly we can move to other countries of origin in the back half of twenty five and into ’26. I would say there’s other categories, maybe slower moving or where we have longer tail, you know, inventories. Maybe that’s a that’s a category that we rationalize altogether. So we’re going through those efforts.

I would tell you negotiation of where we can share, where we can split, and how we can allocate the cost of the tariffs across our supply chain with our vendor base. And then lastly, as it relates to price, as we always do, we’re taking a portfolio approach. We’re going to continue to be competitive. We’re going to ensure that we’re not losing, you know, market share as we’re, you know, continuing to lean into these categories. So, a lot of efforts, a lot of engagement across the organization.

I would say we’ve proven in the past that we can manage through this. We’ve, you know, been through tariffs. We’ve been through other inflationary environments and we believe we have best in class tools, teams, capabilities to manage through this. You know, it’s reflected in our expectations for our guidance, you know, over the balance of the year and we expect to

Marvin Ellison, CEO, Lowe’s: be able to manage through it successful. Look, and Brian, also, I know there’s been a lot of conversation about competitive positioning and taking market share because certain retailers may be in a more advantageous position. That’s just not gonna happen in home improvement. There there is no special formula for managing this regardless of who you are. If you’re a large retailer, we we are pretty much dealing with the same set of circumstances.

And we feel incredibly pleased with the team that Brandon just outlined from finance, global sourcing, supply chain, merchandising, price management systems, all the work we’ve done, you know, really the last six plus years has positioned us to manage this as well as any large retailer in the world. And so, we’re going to be competitive. There is no way we’re going to sit back and lose market share because there is somebody out there that’s going to manage this better than us or going to find a way to have lower prices vis a vis us. That’s just not a realistic assumption. So we’re prepared to manage this.

And our objective is to give our customers innovation and give them value. And to Brandon’s point, we’ll manage the entire portfolio to make that happen, and and and we’re gonna just work, and and we’ll make sure that we continue to have this collaboration cross functionally that has really served us well in the past.

Brian Nagel, Senior Equity Research Analyst, Oppenheimer: So with regard to to China, you know, that’s that’s probably where we see most headlines stay on, you know, the the the trade the trade discussions between The United States and China. And we’ve got some, I guess, maybe some big announcements today. But what’s a manageable level? I mean, Brian, you mentioned it was $1.45, you know, that that that’s kind of a no go. But is there is there a is there a tariff level that you that you view as manageable?

Brandon Sink, CFO, Lowe’s: Yeah. I don’t know that I would put a number on it, Brian. I guess I would say at thirty, it’s obviously opened, you know, things back up. But I would say, you know, still creating challenges at the end of the day even at that level. So we’re, you know, we’re working across as Marvin said, within all of this, we’re continuing to ensure that we’re providing, you know, value to our customers in all directions, innovation, you know, competitiveness, that’s through our private brands, through credit, through a number of different avenues, through our loyalty program.

So, you know, undoubtedly a challenge for us even at 30%. You know, we do have the benefit from FIFO accounting standpoint. I mentioned this on our earnings call. There’s a roughly a one quarter delay. So just as we’re looking across managing this for what we are staying committed and what’s continuing to flow over from China with the 30%, we’re dealing with the majority of that as we get into Q3 and Q4.

So that has given us some visibility to just how we approach again negotiations with our suppliers, our portfolio approach and the timing in which we can kind of pull and manage these levers.

Brian Nagel, Senior Equity Research Analyst, Oppenheimer: So Marvin, I want to talk about you mentioned just a moment ago, you’re approaching your seven year anniversary. Congratulations. Under your leadership, we’ve seen the Lowe’s model improve significantly. You’re a very successful repositioning over the past several years. So the question I want and I know we’ve had this discussion before, but kinda where are we on that repositioning?

And maybe talk about some of the big wins you’ve had, you know, in in driving better results of the company and then kinda where we go from here.

Marvin Ellison, CEO, Lowe’s: Yeah. Well, I appreciate the question, and and it’s really indicative of just a a really great team effort. Some of the great transformation initiatives have been driven by individuals that either join me, you know, around that seven year mark or or who came in after the fact. You know, Brandon has probably been in five different roles in that seven year, you know, time span. And then all of them have delivered significant value in different parts of the finance organization.

I think I think it’s appropriate to just kinda go back in time and and just talk about what 2018 looked like. And you had a company that had an outstanding balance sheet, had great frontline associates in our stores, but really had no modern strategy to grow in in a retail landscape that forces you to be your omni channel, that forces you to have seamless interaction between digital and physical. And just as a reminder for some of the people who may be watching, that is reflective in having a thirty year old green screen operating system that literally hardwired everything to the store, supply chain, receiving systems, point of sale, e commerce, everything. And it literally took us over five years to retire that system because the risk of some big ERP taking the company physically down to its knees. We did it in phases in a very methodical approach.

And now we, for all intents and purposes, we’ve totally retired that thirty year operating system, which has opened up lots of opportunities for us to do innovative things from an IT standpoint that we literally just couldn’t do, you know, as as recent as two years ago. You know, modernizing our supply chain. I mean, we were selling appliances from our stock rooms of our stores and from storage containers behind our stores. And we transformed our supply chain into a market delivery system where we are best in class, not only in having appliances delivered next day, two day, in virtually every zip code in The US, but best in class in shipping and delivering big and bulky. You know, things like our our service initiative, where our labor system was was literally manual and driven by revenue of sales.

Now, can drive it activity based by day, by hour, by department. And and we’re pleased that we can drive great reduction in expense and great productivity, at the same time be recognized from someone like J. D. Power for being, you know, best in customer satisfaction and home improvement. Doing those two things conversely is very difficult, but we’re doing it because we’re driving productivity the right way.

And some of the great work that we’ve done in merchandising, where in 02/2018, the previous management had made a decision to go all in on private brands to chase the margin rate and disenfranchising a significant percent of our pro customers who are very brand loyal, as you know. And so we work really hard, you know, under Bill Bosa’s leadership to get a lot of those national brands back into our assortment. And and and now that’s been one of the reasons why we’ve had such success with our small to medium pro initiative. And so that entire transformation started with just looking at those retail fundamentals, those things again that every retailer has to be good at to just get get that foundation showed up. Now, our total home strategy is designed to allow us to take market share.

And as Brandon mentioned, I mean, we understand that we’re in this really difficult growth environment today in home improvement, but we also understand that this is cyclical. And when we cycle out of this, specifically for the DIY customer, we believe that we are going to be really well positioned just based on what our total home strategy has allowed us to do. You know, areas like home installation that we know that when the customers start tapping into that $33,000,000,000,000 of equity, we know exactly what projects are gonna be in their list, and we wanna be best in class at that. You know, we we wanna look at, you know, things like e commerce and how we continue to serve our customers really well in that regard. You know, our merchandising strategy, you know, our our operational excellence in PPI.

And so all of these things give us confidence, as I’ve said, that that we’ve taken the transformation from foundational to now the building blocks to taking market share. So we are positioned really well for growth. But as as the old saying goes, you know, there is no finish line. And and so the transformation is not completed because as the market continues to evolve, as the competitive landscape continues to change, as the consumer gives us different demands on how they desire to shop and what they want to buy, then we evolve and marketplace is a great example of that evolution on on e commerce. So, again, I could go on and on and on, but but we feel like that that we have put ourselves in a great position that when we see recovery in this DIY market, that we are we are very well placed to take advantage of that.

Brian Nagel, Senior Equity Research Analyst, Oppenheimer: So on the specifically on the on the I guess, I’m on the DIY side. You know, a topic that you we’ve discussed a lot, but I think it’s still one the more interesting aspects, which is the segmentation. You know, this you’ve been able to look at your different groups of stores and really decipher, you know, what what are the key the key productivity initiatives for those specific stores? Maybe you can just talk about that and kind of where we are in that effort.

Marvin Ellison, CEO, Lowe’s: Yeah. I’ll give you some thoughts. I’ll let Brandon jump in if he has anything to add. Yeah. I I think for us, you know, again, if you go back in in time, the only segmentation we had was every store looked like it was in North Carolina Because we designed everything based on the local market, because our systems were so rigid that we couldn’t have any localization.

We couldn’t have, you know, any differentiation from an assortment standpoint, from a store layout, from a pricing perspective. And so now that that we’ve modernized our assortment planning, our pricing, etcetera, we’re able to take a step back and and focus on rural customers in a more specific way, to focus on urban customers in a more specific way, and then be very specific in those categories. And one of the big successes that we’ve had with the rural customer is the introduction of workwear. I mean, that’s a that’s a growth category for us that’s performing exceptionally well to the point to where it started in in in rural America, and now we’re expanding it to other markets. And as I’ve said before, one of our best performing workforce stores in the company is Brooklyn, New York.

And and we never would have known that if not for the continued iteration of the strategy. You know, another one is is pet that that kind of was born out of this segmentation strategy and listening to what the customers are saying that they wish they could buy in one trip from Lowe’s versus having to go to multiple locations. And we continue to learn and iterate that as well, as well as many other categories that fall under that that rule initiative we continue to expand. And on the urban side, I mean, I’ll never forget, you know, walking into, you know, my story in Philadelphia with Joe McFarlane and Bill Boats and seeing, you know, a patio set with 12 chairs and riding lawn mowers. And we we can imagine what happened to that product in Brook I mean, in in Philadelphia, it got marked down.

And and, basically, you know, clearanced out because we had no ability to sort our urban stores in a way that served those customers. So we spent a lot of time working on getting those stores sorted the right way, making sure that we have the right staffing levels. And so it’s been an iterative learning process, but we we have gained lots of benefit. And again, it we’re so well positioned for the market to turn. And and and the lessons we’ve learned over the last, you know, five years in this segmentation has given us a lot of confidence.

And our loyalty program with the DIY customer, you know, having roughly 30,000,000 members gives us a whole different level of customer data and and and customer shopping patterns and and customer information that allows us to serve those customers even better beyond just the segmentation in our stores.

Brandon Sink, CFO, Lowe’s: And Brian, on the on the localization initiatives, in particular, we’ve been very methodical and disciplined over time as you know as we’ve rolled these out, but excited to say by the end of this year, roughly 500 stores in total have the rural set. Marvin mentioned workwear, not just limited to the rural initiative, but going to be in roughly a thousand stores. So just financially, as we look at space productivity, sales per store, sales per square foot, Gimroy, some of those things, really pleased with the results and what we’ve seen and excited to be able to get these at scale by the end of the year.

Brian Nagel, Senior Equity Research Analyst, Oppenheimer: So Brandon, on that point, I mean, you know, maybe using the baseball analogy, what inning are we in here as far as seeing the benefits from segmentation?

Brandon Sink, CFO, Lowe’s: Yeah. I would say, you know, just as we assume the rollout is going to be largely complete by the end of the year just based on what we saw through, you know, the early test stores. I mean, it takes twelve to twenty four months, I would say, from rollout, you know, to really so the customer sees, they understand you have a different set, they understand you have a different shopping experience. So I think just as we look beyond in the ’26 and ’27, I still think there’s a decent amount of upside in these new stores where we continue to roll these initiatives out.

Brian Nagel, Senior Equity Research Analyst, Oppenheimer: So I want to jump over to Pro. Marvin, you mentioned a moment ago this the refocus, if you will, upon having branded products and stores and to the extent that’s you to connect much better with your professional customers. So kind of where are we in Pro right now? What are the other big unlocks? Then maybe you can discuss the the acquisition you recently the acquisition you recently announced.

Marvin Ellison, CEO, Lowe’s: Yeah. I I mean, we’re we we’ve been really focused on the small to medium customer. That’s been our our core pro customer for a couple reasons. Number one, we we believe that we had the capacity to serve that customer really well, and we believe that customer was was being ignored in the marketplace. And so, that was our focal point.

And and the the brand transformation that I talked about bringing some of those national brands back, you know, an example be Klein Tools back into the the assortment. And and and those initiatives really started to give us credibility back with the customer. The work we’ve done on fulfillment and job site delivery has been, you know, significant. The work we’ve done, you know, on our loyalty program and the relaunch of it to simplify and give that small to medium customer a way to earn points faster so that we can take advantage of the fact that their spend level may be different from a larger customer and give them the incentive to shop us more frequently. And also this this whole endless aisle initiative that we rolled out that now gives us the ability to have a seamless digital catalog for some of these really large pro suppliers.

And and in many cases, not only do they give us great volume pricing that we have access to seven days a week, but they also can deliver directly to the job site of our customers. So so that small to medium pro remains our focal point. And and we believe that within that $500,000,000,000 target market that that pro represents, that we still have significant share that we can gain. But then we took a step back and asked a question, how do we more diversify our portfolio? And how do we find a way to to start to build a presence in the plan pro spend?

And that led us to the ADG acquisition. The analysis we did was pretty straightforward, and and that is the real estate market is a little depressed now. I think we’ve all shared the data. But the question is, when this recovery happens, where will it happen? And we believe, based on the data that tells us that you’re gonna need roughly 18,000,000 homes by 02/1933, we want to be positioned in this this this plan pro spin area that we virtually today do $0 in revenue.

And that’s a $50,000,000,000 target market, you know, in in residential construction and multifamily. And ADG gives us a a really nice foothold in that space. And and we were very diligent in deciding who we would would target. We felt like that that their best in class brand position, they’re one of the market share leaders as well, gives us a great entry into this this plan pro spend space. Now, I’ll let Brandon add any more.

Brandon Sink, CFO, Lowe’s: Yeah. Yeah, Brian. Really excited about the the transaction. Just closed on it last week. So just now welcoming, you know, ADG and and the Lowe’s family.

As Marvin said, I mean, we’re looking at this as a broader comprehensive interior solutions platform for us to go after the homebuilder. So I think as we look a number of synergies there today in roughly 18 states, 60 individual markets, a lot of parts of the Sunbelt that are high growth areas and geographies. But I think our opportunity is additional fill in as we look more nationally to take the platform. We bring a number of relationships and expertise in other categories as we look to add that potentially to the interior solutions platform. And then just as we leverage vendor relationships and as we introduce potentially, you know, private brands.

So new type of customer, $50,000,000,000 TAM, you know, able to diversify and potentially get into a larger plan pro spend and really excited about what this brings, what we can learn, and and how we can grow it going forward.

Brian Nagel, Senior Equity Research Analyst, Oppenheimer: So what I know we’re trying to start to wind down here, but two other a couple of the comments I want to address. We’ve one store growth. I mean, how do you think about growth in The United States and elsewhere? And then also maybe I’ll tag another question on that. You’d mentioned the e commerce strategy and the improvements Lowe’s has made there.

So how do you how do we think about growth in terms of stores, growing stores and then that e commerce background to serve customers?

Brandon Sink, CFO, Lowe’s: Brian, I’ll speak to new stores, really excited. We mentioned space productivity initiatives, getting pro penetration now to 30%. I think that gives us renewed focus around just the ability to drive additional market share, customer base, sales, ROI through new stores. We’ve essentially been out of that business for the last five, I think we’ve opened less than 10 stores in the last five years. So, we’ve looked at population shifts, geography shifts, demographic changes over the last five years and there’s a number of strategic markets where we believe we can add a presence.

There’s also markets where we want to continue to protect and defend. So, we’re looking at that as continued opportunity. We have that in our capital plans. Over the next several years, we expect to open 10 stores this year and then we’re on a run rate of 10 to 15 over the next several years. So excited to see, you know, what we can do in some of these new geographies and Martin speak to the online piece.

Marvin Ellison, CEO, Lowe’s: So, look, online has has been another growth opportunity for us. When I arrived, you know, almost seven years ago, it was about 4% of our revenue. Now, we’re around 12%. And and it’s been an effort. I mean, just to give you a perspective, one of the requests I made in 2018 was the need for e receipts, because we couldn’t even do e receipts seven years ago, if you can imagine that.

And now, I mean, we have one of the highest regarded online sites, mobile apps, not only in retail, but but just in the industry wide due to great work by our digital and our IT team. As we as we analyze how do you grow online and what are some of the correlating factors just around the globe for retailers that have had exponential online growth, we found the presence of a marketplace was was almost exclusively combined to the to the traditional e commerce site of a retail company. And so we felt like that we are now in a position with great performance of our of our app, great performance of our site, you know, much improved UX, much improved search, you know, functionality that that the marketplace would be now the key area to have, you know, you know, accelerated growth. And so our recent partnership with with Miracle, you know, the best, you know, online integration system for marketplace sellers. We felt like that this would be a great opportunity for us to create, you know, you know, accelerated growth online.

And so we’re eager and happy with where we are. This partnership with Miracle was was just announced and we’re in the early stages of it, we have high hopes for what our online business will continue to do and how we believe it’s gonna continue to be a growth vehicle for us in the foreseeable future.

Brandon Sink, CFO, Lowe’s: Yeah, Brian. I would also add just heavy investments on the fulfillment side of the house on the online experience as well. Marvin mentioned market delivery appliances is our biggest online category. The ability now to have that nationwide and what that’s been able to do for that category as well as you know, big and bulky categories. We’ve enabled, you know, our gig network to offer same day delivery, Uber, Instacart.

We have our own integrated platform through OneRail. And then, you know, over 50% of our online orders are fulfilled through our stores. So we’ve had our front end transformation, you know, our ability to offer a unique customer experience, the pace and speed in which we can, you know, pull, pick and stage and enable that experience. So that’s been a big investment and a big contributor, I think, the online success, and we continue to be excited about that looking forward as well.

Brian Nagel, Senior Equity Research Analyst, Oppenheimer: So last topic I want to know, another I think is really one of the big key positives among many of the Lowe’s stories is the capital, you know, capital capital generation, capital allocation. So any kind of update or you want to get there?

Brandon Sink, CFO, Lowe’s: Yes, sure. Brian, really no change to the priorities. They’ve been consistent through the last several years. We’re going to continue to invest in the business organic and inorganic. We’re going to continue to target 35% dividend payout ratio and we’re going to funnel remaining excess cash through share repurchases.

I think a couple of nuances. We have paused on share repo for this year to finance through cash the ADG transaction. So digesting that, we continue to be focused on our 2.75 times leverage target. We’re committed to our BBB plus credit rating, and we’re going to continue to manage the business through that. We have about $2,500,000,000 of debt that we’re going to pay off and is going to come due this year.

And we’re not going to be issuing or refinancing any of that. So, again, those are those are our priorities and they continue to remain unchanged.

Brian Nagel, Senior Equity Research Analyst, Oppenheimer: Well, once again, I very much appreciate the time. Thank you for the participation here. Congrats on the ongoing success.

Brandon Sink, CFO, Lowe’s: Awesome. Thanks, Brian. Thanks so much, Brian.

Marvin Ellison, CEO, Lowe’s: Thank you. Thank you.

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