Lowe's Q2 2025 slides: Positive comp sales return as Pro strategy advances

Introduction & Market Context

Lowe’s Companies Inc (NYSE:LOW) presented its second quarter 2025 results on August 20, 2025, revealing a return to positive comparable sales growth and announcing a major acquisition to strengthen its professional customer business. The home improvement retailer’s stock responded positively, rising 3.25% to $264.69 in pre-market trading following the presentation.

The company’s Q2 performance marks a significant improvement from the first quarter, when Lowe’s reported a 1.7% decline in comparable sales and missed revenue expectations. This turnaround comes as the company continues to execute its "Total Home Strategy" with a particular focus on expanding its professional customer segment.

Quarterly Performance Highlights

Lowe’s reported a 1.1% increase in comparable sales for Q2 2025, driven by improvements in both Pro and DIY customer segments despite challenging weather conditions. The company saw monthly comp sales progressively strengthen throughout the quarter, moving from -1.0% in May to +0.3% in June and +4.7% in July.

As shown in the following financial highlights slide:

The company delivered diluted earnings per share of $4.27, representing a 2.4% increase year-over-year, while adjusted diluted EPS grew 5.6% to $4.33. Gross margin improved to 33.8%, up 34 basis points compared to the previous year, and adjusted operating margin increased to 14.7%, up 23 basis points from the adjusted figure last year.

Online sales continued to show strong momentum with 7.5% growth, supporting the company’s omnichannel strategy. Higher-ticket items (over $500) performed particularly well with a 3.6% increase, while smaller purchases under $100 declined by 1.4%.

Lowe’s Chairman and CEO Marvin R. Ellison noted in the presentation that the company "delivered positive comp sales driven by both Pro and DIY performance, despite challenging weather," and highlighted improved profitability and customer satisfaction scores.

Strategic Initiatives

The centerpiece of Lowe’s strategic presentation was the announcement of its acquisition of Foundation Building Materials (NYSE:FBM), a leading North American multi-trade interior building products distributor, for $8.8 billion. This acquisition represents a significant step in the company’s Pro customer growth initiative.

The following slide provides an overview of FBM’s business:

FBM brings $6.5 billion in pro forma revenue and $635 million in adjusted EBITDA for fiscal year 2024. The company serves both commercial (55%) and residential (45%) customers with a diverse product mix including drywall, metal framing, suspended ceiling systems, insulation, and doors.

This acquisition follows Lowe’s earlier purchase of Artisan Design Group (ADG) and aligns with the company’s goal to increase Pro penetration from approximately 19% in 2019 to 30% by 2025. The company’s transformed Pro offering is illustrated in this comprehensive slide:

Lowe’s "Total Home Strategy" continues to guide the company’s overall direction, with five key pillars: driving Pro penetration, accelerating online sales, expanding home services, creating a loyalty ecosystem, and increasing space productivity.

The company also announced a partnership with MrBeast to launch the first home improvement Creator Network, signaling Lowe’s efforts to connect with younger consumers and leverage social media influence.

Detailed Financial Analysis

The FBM acquisition transaction details reveal Lowe’s commitment to expanding its Pro business, even at the cost of temporarily pausing share repurchases and increasing leverage:

The $8.8 billion purchase price reflects a multiple of 13.4x FBM’s adjusted EBITDA. Lowe’s expects the acquisition to be accretive to adjusted diluted EPS in the first full year post-closing, excluding synergies. The company plans to finance the deal with a combination of short-term and long-term debt, resulting in a leverage ratio of 3.4x-3.5x at closing.

While maintaining its investment-grade credit ratings of BBB+ and Baa1, Lowe’s intends to reduce leverage to 2.75x by the end of Q2 2027. To achieve this, the company will pause share repurchases, though dividend payments will continue, as evidenced by the $645 million returned to shareholders through dividends in Q2.

The strategic rationale for the acquisition centers on strengthening Lowe’s competitive position in the Pro segment:

The combined capabilities of Lowe’s, ADG, and FBM are expected to create a comprehensive interior solutions platform for Pro customers:

Forward-Looking Statements

Lowe’s acquisition of FBM is expected to close in the fourth quarter of 2025, with FBM’s senior leadership team committed to remaining with the company. The acquisition positions Lowe’s to address what it estimates as a $250 billion Large Pro total addressable market.

FBM brings significant capabilities to Lowe’s, including a fully integrated platform with a consolidated ERP system, a strong financial track record with approximately 25% revenue and 30% EBITDA compound annual growth rates from 2019 to 2024, and an extensive distribution network with over 370 locations.

The company’s performance in Q2 represents a significant improvement from Q1 2025, when Lowe’s reported declining comparable sales and operating margins. The positive trajectory in monthly sales throughout Q2, particularly the strong 4.7% growth in July, suggests momentum heading into the second half of the year.

With these strategic acquisitions and improving sales trends, Lowe’s appears positioned to continue its transformation into a more comprehensive home improvement provider with a stronger focus on professional customers, though investors will be watching closely to see how the increased leverage and paused share repurchases affect financial performance in coming quarters.

Full presentation:

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