Lowe's Companies, Inc. Price & Performance (LOW)

You save. Lowe's knows how to help pros save. That's why the new Lowe’s Pro Rewards program lets you unlock exclusive member deals on the things you need every day on the job. Plus, Milo's Pro Rewards members can get volume discounts on eligible orders through a quote of $2,000 or more. Join for free today. Lowe’s, we help. You save. Lowe's knows that you're dead don't change even when your job does. But with Lowe's Buy Online Pickup in Store, we'll help you adjust on the fly. When you absolutely can't leave the project, we can deliver to your job site as soon as same day. Lowe’s knows pros. We help you save. Lowe’s knows that warmer days are coming soon, so we're bringing spring early. Our exclusive Stay Green Grass Assortment gives your lawn the nutrients it needs to grow faster and stronger. Plus, with Stay Green Performance Max fertilizer, you can keep your lawn healthy all season long. Stock up on Lawn Essentials today you can save time later. And enjoy your spring. Lowe’s, we help you save. Lowe's knows how to help you get the most out of your store run. That's why members save more with Lowe’s Rewards.

Earn points towards Milo's money on eligible purchases, get access to member only deals and free member gifts, plus unlock free standard shipping when you reach silver key status. So what are you waiting for? Join for free today. Lowe’s. We help. You save. Lowe's knows how to help pros save. That's why the new MyLowe's Pro Rewards program lets you unlock exclusive member deals on the things you need every day on the job. Plus, Lowe’s Pro Rewards members can get volume discount on eligible orders through a quote of $2,000 or more. Join for free today. Lowe’s, we help. You save. Lowe's knows that your deadlines don't don't change even when your job does. But with Lowe's Buy online pickup in store, we'll help you adjust on the fly. When you absolutely can't leave the project, we can deliver to your job site as soon as same Lowe’s knows pros. We help you save. Lowe's knows that warmer days are coming soon, so we're bringing spring early. Our exclusive Stay Green Grass Seed assortment gives your lawn the nutrients it needs to grow faster and stronger. Plus, with Stay Green Performance Max fertilizer, you can keep your lawn healthy all season Lowe’s.

Stock up on Lawn Essentials today you can save time later. And enjoy your spring. Lowe’s, we help you save. Lowe's knows how to help you get the most out of your store run. That's why members save more with Lowe’s Rewards. Earn points towards MyLow's money on eligible purchases, get access to member only deals, and free member gifts, plus unlock free standard shipping when you reach silver key status. So what are you waiting for? Join for free today. Lowe’s. We help. You save. Lowe's knows how to help pros save. That's why the new MyLowe's Pro Rewards program lets you unlock exclusive member deals on the things you need every day on the job. Plus, Lowe’s Pro Rewards members can get volume discounts on eligible orders through a quote of $2,000 or more, Join for free today. Lowe’s, we help. You save. Lowe's knows that your dead Online Pickup in Store, we'll help you adjust on the fly. When you absolutely can't leave the project, we can deliver to your site as soon as same day. Lowe’s knows pros. We help you save. [indiscernible] Lowe's knows that warmer days are coming soon, so we're bringing spring early.

Our exclusive Stay Green Grass Seed assortment gives your lawn the nutrients it needs to grow faster and stronger. Plus, with Stay Green Performance Max fertilizer, you can keep your lawn healthy all season long. Stock up on Lawn Essentials today. So you can save time later. And enjoy your spring. Lowe’s, we help you save. Lowe's knows how to help you get the most out of your store run. That's why members save more with Lowe’s rewards. Earn points towards MyLowe's on eligible purchases, get access to member only deals and free member gifts, plus unlock free standard shipping when you reach silver key status. So what are you waiting for? Join for free today. Lowe’s. We help. You save. Lowe's knows how to help pros save. That's why the new Lowe’s Pro Rewards program lets you unlock exclusive member deals on the things you need every day on the job. Plus, Milo's Pro Rewards members can get volume discounts on eligible orders through a quote of $2,000 or more Join for free today. [indiscernible] You save. Lowe's knows that your dead up in store, we'll help you adjust on the fly. When you absolutely can't leave the project, we can deliver to your job site as soon as same day.

Lowe’s knows pros. We help you save. Lowe’s knows that warmer days are coming soon, so we're bringing spring early. Our exclusive Stay Green Grass Seed Assortment gives your lawn the nutrients it needs to grow faster and stronger. Plus, with Stay Green Performance Max fertilizer, you can keep your lawn healthy all season long. Stock up on Lawn Essentials today so you can save time later. And enjoy your spring. Lowe’s, we help you save. Lowe's knows how to help you get the most out of your store run. That's why members save more with MyLowe's Rewards. Earn points towards MyLow's money on eligible purchases. Get to member only deals and free member gifts, plus unlock free standard shipping when you reach silver key status. So what are you waiting for? Join for free today. Lowe’s. We help You save. Lowe's knows how to help pros save. That's why new MyLowe's Pro Rewards program lets you unlock exclusive member deals on the things you need every day on the job. Plus, Lowe’s Pro Rewards members can get volume discounts on eligible orders through a quote of $2,000 or more, Join for free today. Lowe’s, we help. You save. Lowe's knows that your dead Pickup in Store, we'll help you adjust on the fly.

When you absolutely can't leave the project, we can deliver to your job site as soon as same day. Lowe’s knows pros. We help Good morning, everyone, and welcome to Lowe’s Company's Fourth Quarter twenty twenty four Earnings Conference Call. Name is Rob, and I'll be your operator for today's call. As a reminder, this conference is being recorded. I'll now turn the call over to Kate Perlman, Vice President of Investor Relations. And Treasurer.

Thank you, and good morning.

Here with me today are Marvin Ellison, Chairman and Chief Executive Officer Bill Boltz, our Executive Vice President, Merchandising Joe McFarland, our Executive Vice President, Stores and Brandon Sink, our Executive Vice President and Chief Financial Officer. [indiscernible] I would like to remind you that our notice regarding forward looking statements is included in our press release morning, which can be found on Lowe’s Investor Relations website. [indiscernible] During this call, we will be making comments that are forward looking, including our expectations for fiscal twenty twenty five. Actual results may differ materially from those expressed or implied as a result of various risks, uncertainties and important factors. Including those discussed in the Risk Factors MD and A and other sections of our annual report on Form 10 ks and our other SEC filings. Additionally, we'll be discussing certain non GAAP financial measures. A reconciliation of these items to U. S. GAAP can be found on quarterly earnings section of our Investor Relations website. Now, turn the call over to Marvin.

Thank you, Kate, and good morning, everyone, and thank you for joining us today.

In the fourth quarter, we delivered sales of $18,600,000,000 positive comparable sales of 0.2%. Looking at the full fiscal year 2024, we delivered sales of $83,700,000,000 adjusted operating margin of 12.3% and adjusted earnings per share of $11.99 We are very pleased with our performance in 2024 in a very difficult home improvement macro environment. And we're also pleased to deliver positive comparable sales this quarter with results that exceeded our expectations and were driven by continued momentum in pro and online strong seasonal DIY performance, rebuilding efforts in the wake of recent hurricanes. [indiscernible] Despite these better than expected fourth quarter results, we're still seeing a cautious consumer leading to continued near term pressure on DIY discretionary spending, particularly in bigger ticket projects. And with this challenging backdrop, we remain focused on delivering strong operating performance, while continuing to make the right long term investment Turning to our pro results in the fourth quarter where we delivered high single digit comps for the second consecutive quarter. We're gaining momentum with our Pro customer, through a flywheel effect that we've created with a Transform Pro offering with the right brands and products greater inventory depth, improved job site delivery dedicated service levels and a best in class digital experience.

Last week, we took the next steps in tailoring our offering for the small to medium pro with the nationwide launch Lowe’s Pro Rewards. Later in the call, Joe will share more detail about how we updated the program to drive greater engagement with our Lowe’s. Shifting to online, we drove strong sales growth of 9.5% in Q4 reflected in broad based improvement across all merchandising divisions which included record breaking sales during the Black Friday and Cyber Monday holiday. Through our new free DIY loyalty program, Lowe’s Rewards, we're generating excitement and driving more traffic to lowes.com. These results give us confidence that our online and omni channel investment are paying off These investments include a more intuitive user experience in the app and online, more same day delivery options combined with enhanced AI user experiences. And our digital enhancements are earning outside of recognition as Forrester just rated Lowe’s mobile app as the overall digital experience leader in U. S. Retail mobile apps highlighting not just the table stake functionalities and omni channel features, but also innovative AI enabled solutions like Style Your Space that helps customers reimagine rooms that they want to refresh through the touch of a button.

Next month in collaboration with OpenAI, will launch the first AI powered home improvement virtual advisor on Lowe’s, leveraging the same technology that our associates are using on their store companion app, to give our customers helpful advice as they tackle their home improvement projects. This new virtual advisor will provide Lowe's customers with both project know how and product recommendations with direct links to Lowe’s Lowe's products for a seamless checkout. This is another example of how we're leaning into emerging technology enhance the customer experience, saving them both time Now allow me to transition to our view of the macro. Even though short term interest rates have started to come down, this remains a challenging home improvement market. Mortgage rates are higher than they've been in more than two decades, creating a significant gap between today's rates for home buyers and the lower rates many homeowners currently enjoy. This has led to a lock in effect and the lowest pace of existing home sales in The U. S. In nearly thirty years. Although it's difficult to predict the timing of when we'll see lower rates in increased home improvement demand, we remain confident in the medium to long term outlook of our business.

As I've stated before, the key drivers of our business are still supportive home price appreciation, disposable personal income growing faster than inflation and the oldest existing housing stock in U. S. History. These drivers will sustain long term demand as homeowners invest in repairs and upgrades. And we anticipate that some homeowners will begin to tap into record levels of equity in their homes to fund larger renovation projects. Beyond these factors, structural trends such as millennial household formation baby boomers aging in place and the persistence of remote work reinforce our confidence in the medium to long term strength of the home improvement industry. In the meantime, we've refined our Toll Home strategy and are making investments that are closely aligned with the long term drivers of home improvement demand. We unveiled our updated strategy at the December Analyst and Investor Conference It includes driving pro penetration, accelerating our online sales expanding our home services, creating a loyalty ecosystem and increasing our space productivity. In addition to the investments we're making in our total home strategy, we're also continuing to take cost out of our operating model through our perpetual productivity initiatives or PPI. Together, our Toll Home strategy coupled with our disciplined on productivity ensured that we are well positioned to capitalize on the home improvement recovery When we look ahead to 2025, we're confident that the three market scenarios that we outlined at our December conference capped the home improvement industry this year.

And we're very confident in our strategic agility and our ability to execute in any economic environment. So we are prepared to outperform the market in each macro scenario Before I close, I'd like to take a minute to thank our teams who stepped up to support our customers across Southern California. Who were impacted by the devastating wildfires. Although this is not an area where we have significant store presence, felt it was important to help these communities recover. As a reflection of this commitment, Lowe's donated $2,000,000 for relief efforts in the impacted areas. And please join me in continuing to keep those impacted by the wildfires and our thoughts and our prayers. I continue to visit stores across for their dedication and to learn how we can remove friction for them and improve the customer experience. Demonstrate our appreciation for our hardworking frontline associates, we awarded year end discretionary bonuses of $80,000,000 including our store managers and assistant managers across the company. Lowe’s bonus reflects our appreciation for their leadership and commitment to customer service. And with that, I'll turn things over to Bill.

Marvin, and good morning, everyone.

As Marvin mentioned, we are pleased with our sales performance in the fourth quarter. We are encouraged by the broad based strength we delivered in Pro with positive pro comps across all merchandising divisions for the fourth quarter and the full year. As well as the continued momentum in our online sales. In addition, it's clear that our seasonal offers for the DIY customer hit the mark in categories like appliances, tools, storage and holiday gifts, as Lowe's was the go to destination for many holiday shoppers. Starting with home decor, we delivered strong positive comps across all our major appliance categories. We're pleased that we took share in a challenging market especially when homeowners continue to exercise caution around spending on big ticket discretionary Our results were driven by our investments in providing a seamless omni channel customer experience including the widest selection of the leading brands that offer innovation and value. Whether consumers choose to shop online in store, or a combination of the two. We have built a best in class market delivery model to deliver big and like appliances, patio furniture and grills. Allowing us to double the number of next day deliveries over the past few years.

And as a reminder, instead of going through our stores, these products now flow from our supply chain directly to a customer's home or job site. In fact, we are the only retailer that can now deliver and install a major appliance the next day in almost every zip code.

This is critical for customers who need to replace a broken appliance immediately as this type of purchase accounts for more than 70% of the industry's appliance sales.

Our enhanced customer experience along with the expanded capacity for rapid delivery, helps further strengthen our leadership position in appliances. We also continue to innovate and enhance our private brand lineup, as consumers continue to look for more value across categories. For example, we're expanding our selection of large format, stained mass giving customers the on trend look they want and the performance that they need. We're excited to have the Stainmaster brand within our portfolio to now bring the most trusted brand in carpet to new flooring categories like luxury vinyl, and tile. We recently launched our Lowe's Essentials brand which promises low prices on a range of home basics for value conscious We're starting with a handful of products priced at $10 and below, and special launch items under $5 including clothes hangers, gardening tools and water cans, positioned in the cart start area at the front of the store.

And because our private brands typically have higher margins than their national brand counterpart, these products will help increase our private brand sales in Turning now to Building Products, where we delivered positive comps in Building Materials and Lumber, driven by the continued strength in Pro as well as storm recovery and rebuilding across the Southeast. We were pleased with the continued growth in outdoor categories like roofing, siding and decking driven by our investment in pro inventory, our improved in stocks. Hardlines, we saw a strong trim and tree sell through and an improved margin performance in the fourth quarter.

These results were supported by great execution from our merchandising services team or MST. Our seasonal offering including live holiday nursery, tools and pre lit trees resonated with consumers during the holidays.

We also saw customers get excited about our 10 foot tall animatronic yeti named Bumble. [indiscernible] which we sold through almost as fast as we could get them in stock.

In addition, we delivered solid growth in apparel, where our expanded workwear lineup including the extension of our Carharta assortment to more than 1,000 stores was popular amongst our holiday shoppers. And once again, customers couldn't get enough of the more unique and Mini Cobalt toolboxes, which drove engaging viral moments on social media. Looking ahead, we're excited for spring. Our biggest season of the year, We are ready with a strong in stock position and the best product and brand lineup in home improvement. Like an outdoor power equipment, where we are the only home center with both Toro the leading gas powered brand and EGO, the leading battery powered brand truly an unmatched offering in retail. And in our garden centers, we're inspiring our with vignettes that showcase all the products they need for vertical gardens, mailbox displays, tree rings and more. As they shop, customers can rely on interactive signage to help them select the right plants for their space and local growing zone. Ensuring they get everything they need to complete their outdoor projects. We've also expanded our assortment of Stay Green products, our own lawn and garden brand.

The updated packaging and product make the extra performance and value easy for our This year, we're in an even stronger position to meet the customers' backyard needs and we're seeing some early momentum in patio and grills in areas where the weather has already started to turn. Our patio assortments are localized for the market and we have a great lineup of grills across Weber, Charboro, Blackstone and Pit Boss.

Including new Lowe's exclusive products like the Weber Stealth family of grills. Overall, we're pleased that where the weather has cooperated, spring is already off to a good start.

Finally, we're excited to build on the great progress that we've made with our DIY loyalty program since we launched it last year. We have built a base of 30,000,000 members, who are now outspending nonmembers by nearly 50%. It's clear that these customers see the value in this free program, which now gives them even more incentive to choose Lowe's. This spring, we'll lean into loyalty by offering exclusive member deals and doorbusters featuring some of our best selling products. And will support these offers with tech enabled marketing designed to drive traffic and sales during this important season. We took the learnings from the successful launch of Lowe’s Rewards and we've applied them as we redesigned our Pro Loyalty program which Joe will discuss in detail in just a few minutes. In closing, I'd like to thank our vendor partners, our merchants, and our inventory and supply chain teams for all their effort and hard work to continue to serve our customers provide innovation and value and drive results. With that, Joe, I'll now turn the call over to you.

Thanks, Bill, and good morning, everyone. As Marvin mentioned, we're continuing to support communities impacted by the wildfires in California as they begin the rebuilding process. Our teams deliver truckloads of water provided supplies like N95 masks, air purifiers and ash shifters to firefighters evacuation centers, and local communities in need. I'd like to recognize our store and supply chain associates in these areas who help customers and routed supplies. While tending to their own families, homes and communities. We're grateful for their dedication and commitment to assist with the recovery over the long haul. Turning to our Q4 performance. Pleased that we continue to deliver strong customer satisfaction scores including improved satisfaction with our BOPUS or buy online pickup in store process, which we enhanced through our front end transformation.

Now it's easier than ever for customers to get in and out quickly while they're picking up their online orders. We've earned these strong customer satisfaction scores while we set Black Friday and Cyber Monday sales records, which you heard about from Marvin. And since roughly half of our online orders are picked up in the store, the strong customer endorsement is particularly meaningful. Tells us that the investments we've been making in our front end transformation are paying off. [indiscernible] our Analyst Investor Conference in December, we discussed a number of ways we're driving productivity, through our perpetual productivity improvement or PPI initiatives. Let me give you some more insight into our efforts in this area as we continue to improve the freight flow process.

Driven by new technology, as well as redesigned labels and carts, we dramatically streamlined the process removed friction for our associates and improved our speed to shelf.

The trucks to bring products to our stores now organized in a way that makes unloading easier. The labels include the aisle and bay Lowe’s. [indiscernible] This reduces the number of touches by associates so products can go straight from the truck to a cart to the specific bay any unnecessary reloading. And to make the process even more efficient, these improvements give associates more detailed visibility to what's coming before it arrives.

We are very pleased the overall enhancements we continue to make in the operational performance of our stores. Transitioning now to our pro performance. We continue to see broad based growth across our geographies driven by our pro focused investments resulting in high single digit again this quarter. In our recent survey, we PROS indicated they are confident in their near term prospects with stable backlogs.

Now let me give you an update on our revamped Pro Lowe’s program, Lowe’s Pro Rewards. Which we launched nationwide just last week. With our new program, we've tailored our offerings specifically for our target customer.

Can start earning rewards immediately and can achieve higher rewards with lower levels of spending compared to the program offered by our largest competitor. This program is easier than ever to use, offering an intuitive customer experience, and prioritizing features and functions Lowe’s use most. As members, pros have access to exclusive perks in store and in the Lowe's app, and online. Including member only deals, volume discounts and a suite of business solutions. All this is designed to help Lowe’s save time and money. Both our DIY and pro loyalty programs run on the same tech platform use the same currency. [indiscernible] This not only simplifies the customer experience, it's already making easier for associates to explain and support the program. This should drive greater engagement with our pro customers and incentivize repeat purchases and more trips to Lowe's.

With both loyalty programs now in platform, our marketing team is able to better leverage the unique data the programs generate to tailor offers for our pro, and DIY customers.

This is an exciting time for Lowe's we continue to evolve our loyalty ecosystem and enhance the technology that powers it. We're making our programs stronger every day and more valuable to our customers. And we're now the only home improvement retailer to offer distinct programs for both DIY and Pro customers.

These programs are an important way we're bringing our value commitment to life for our customers, by helping them save time, and money. And as we look ahead to spring, we ready to serve customers with improved staffing levels and strong cross functional coordination across the organization. From store operations to merchandising to marketing, we're working together to provide our customers with unparalleled shopping experience. Right on time to capture demand, during our biggest selling season of the year. Before I close, I'd like to thank our hardworking frontline teams for their contribution to our results this year. Their expertise and commitment excellent service are what differentiates Lowe's.

In particular, want to recognize our store managers and assistant managers who hold some of the most critical frontline leadership roles in the company. For their efforts we're awarding them discretionary year end bonus dollars 10,000 for our store managers and $5,000 for our assistant managers. We're grateful for their incredible support and guidance they provide to their teams. In Now, let me turn the call over to Brandon. Thank you, Joe, and good morning, everyone. Starting with our fourth quarter results, we generated GAAP diluted earnings per share of $1.09 $9 In the quarter, we recognized a pre tax gain of $80,000,000 on contingent consideration associated with the 2022 sale of our Canadian retail business. Excluding this benefit, we delivered adjusted earnings per share of $1.93 My comments from this point forward will include certain non GAAP comparisons that exclude this benefit where applicable. Fourth quarter sales were $18,600,000,000 with comparable sales up 0.2%. Strong growth in pro and online as well as storm related demand from hurricanes Helene and Milton drove better than expected results. We estimate the hurricane related demand positively impacted Q4 comp sales by roughly 100 basis points as homeowners began the shift from securing their properties and cleanup towards recovery and rebuilding.

Comparable average ticket was up 1.5% driven by strong positive comps in appliances, continued momentum in Pro and storm recovery project spend. Comparable transactions declined 1.3% with DIY discretionary pressure persisting especially in larger ticket interior projects. Our monthly comp sales were down 2.5% in November up 4.8% in December and down 2.2% in January. The calendar shift of Black Friday weekend and Cyber Monday from November in 2023 into December in 2024 shifted some demand between periods. Additionally, January was negatively impacted by unfavorable winter weather in the final two weeks of the month, especially in southern markets. Gross margin was 32.9% of sales in the fourth quarter up 46 basis points from last year driven by the benefits of our ongoing perpetual productivity improvement or PPI initiatives, partly offset by supply chain investment costs.

Adjusted SG and A of 21% of sales delevered eight basis points versus prior year driven by increased compensation and healthcare expenses, largely offset by benefits of multiple PPI initiatives. Adjusted operating margin rate of 9.4% of sales improved 36 basis points versus prior year. And the adjusted effective tax rate was 23.5% slightly below prior year. Inventory finished the year up $515,000,000 versus prior year as we accelerated targeted spring seasonal builds ahead of this critical period. Turning now to capital allocation. In 2024, we generated $7,700,000,000 in free cash flow and returned $6,500,000,000 to shareholders through share repurchases. In the fourth quarter, we paid $650,000,000 in dividends and repurchased 5,500,000.0 shares for $1,400,000,000 returning $2,100,000,000 to our shareholders Lowe’s. Capital expenditures totaled $548,000,000 in the quarter as we continue to invest in tech driven productivity projects and key growth initiatives. Adjusted debt to EBITDAR and we delivered a return on invested capital of 32% for the year. Now, I would like to take a few minutes to discuss our 2025 outlook.

In December, we laid out three scenarios detailing a range of potential outcomes based on the performance of the home improvement market. Core demand drivers remain supportive Real incomes are forecast to grow again in 2025 home prices are near record highs, and we have the oldest housing stock in U. S. History. But there is still a good deal of near term market uncertainty around the timing of an inflection in the home improvement market, especially for larger ticket discretionary spend. We also expect mortgage rates to remain elevated continuing to put pressure on existing home sales some of the larger projects that are linked to those occasions. Based on these factors, we are forecasting the home improvement market to be roughly flat this year with pro outpacing DIY driven by the repair and maintenance occasion. However, the investments we have made to drive growth are resonating. Which is reflected in our strong pro and online results this quarter. That the new initiatives we laid out as part of our updated total home strategy will enable us to grow faster than the market [indiscernible] Taking all of this into account, for 2025, we are expecting sales ranging from $83,500,000,000 to $84,500,000,000 with comparable sales in a range of flat to up 1%.

We expect operating margin in a range of 12.3% to 12.4% with PPI initiatives across store operations, merchandising and supply chain driving approximately $1,000,000,000 in productivity this year, This productivity will offset pressure from merit increases and general operating cost inflation, elevated healthcare expenses investments in our total home strategic priorities and higher depreciation expense, which is forecasted to increase approximately $100,000,000 over prior year as we lean into our tech driven Additionally, we expect net interest expense of approximately 1,300,000,000.0 as we plan to repay $2,500,000,000 in debt maturities this year but will also have less interest income due to lower short term investment rates.

These assumptions result of approximately $12.15 to $12.4 We also expect capital expenditures of approximately 2,500,000,000.0 As we invest in our total home strategic priorities and begin to ramp up new store builds. In 2025, we plan to open five to 10 new stores. To assist with your modeling, here are a few items We expect comp sales in the first half to be roughly flat with some spring demand moving from the first quarter into the second quarter, we are cycling particularly poor weather. Taking this into account, we expect first quarter comp sales approximately 200 basis points below the bottom end of our full year guide. We also expect first quarter operating margin rate to be approximately 50 basis points below the bottom end of our full year guide driven by deleverage on the lower sales volume, the wrap of incremental wage actions for our frontline associates and the prioritization of investments in our total home strategic initiatives including category accelerators to capture the spring selling season. In closing, we remain focused on executing at high level Through the near term market pressures by driving productivity, Diligently managing cost and investing in our total home strategy.

All while continuing to drive sustainable long term shareholder value. And with that, we will open it up for your questions.

Thank you.

We are now ready for questions. Order to allow questions for as many individuals as possible, Our first question comes from the line of Christopher Horvers JPMorgan. Thanks and good morning everybody. I want to talk a little bit about the strength that you saw in the fourth quarter and how you're putting that into context? You had maybe did you see election or weather benefit that maybe helped November and December? Obviously, you had the hurricane and the storm. Do you think there was tariff pull forward Putting that into context of that comp in the context of how you guided the year, you're really not expecting much improvement even though we're another year out from the COVID pull dynamics?

Chris, this is Marvin. I'll take the first part and I'll let Brandon give some specifics. Look, main point is overall, we're really pleased with how we performed in the quarter. Of this and we're pleased across the board with the execution of the merchants and store supply chain and in our stores. As a result of that, we delivered a positive comp and we still have confidence in 2025, in spite of the fact that we don't inspect expect the market to have any growth. Alelett Brandon give you more specific growth Thanks, Marvin. Chris, I'd just echo really pleased with the execution in Q4 beats top and bottom line positive comps and EPS growth here for the first time in a couple of years, high single digit growth in pro and online gave us the ability to share in that success with our associates paying $80,000,000 in discretionary bonuses back. You mentioned the weather was a drag in particular for January. Impacted the month just north of about 150 basis points That is pressing into here the month of February, which is we've seen particularly poor weather here over the course of the first three weeks. That is factoring in to how we're thinking about Q1 and the full year.

Just from a company specific standpoint. But from an overall macro standpoint, we expect the conditions to remain challenging in 2025. As we talked about in the prepared remarks and all that's been been taken into consideration as we looked at a flat home improvement market And then where we fall relative to that, we expect to drive about 100 basis points from our total home initiatives and that's how we get our guide as we start thinking about 25 Got it. And then as a follow-up, you talked about the investment pressure pressures here in the first quarter along with obviously the deleverage can you talk about the on the other side of it, can you talk about the shape of gross margin over there, you are still expecting, I think the vendor clawbacks do do cycle into the first half of the year and I think they should be decent in terms of tailwinds. So Do you expect gross margin up and then roughly flattish over the year?

Yes. Chris, you cited the 50 basis points that we highlighted on the operating margin Majority of that is from the sales deleverage. We have about $400,000,000 that we expect to shift from Q1 to Q2. So that's going to put a little bit of pressure on Q1. There's also a few other unique items with the wage investment that we made in second half of the year that we're cycling in some upfront investments in particular in the category accelerators that we're rolling out. We're expecting the PPI to continue to ramp as we move through the year. Your question on gross margin We are expecting that to be overall flat for the year.

As we look at that, again, the PPI initiatives are offsetting pressure we're seeing as we invest in the probe business and in our supply chain. I will also say, we're very focused on continuing to invest in value for our customers. We're investing sales and traffic driving actions, especially as we look at first half seasonal promotions, marketing and price action to ensure that we maintain leadership And we really like the model. We've created a model that allows us to make investments in the associates, improve our value proposition with our customers and still hit our rule of thumb as we start to see sales increase over the course of the year.

Got it. Thank you. Have a great spring. Thanks, Chris. Our next questions are from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question. Good morning, everyone. Just to clarify, the sales guidance for the year, is this roughly the same framework from two months ago or did it move slightly because of either backdrop or even Lowe’s slower start some of the volatility that you saw it sounds roughly the same. And if you are going to take market share, I think it would still lean closer to the one. So I'm just just trying to put that out to understand if anything changed at all in the last couple of months.

Sure, Simeon. This is Brandon. Roughly the same, I would say, from an overall macro, as I mentioned, the weather pressure in January, we're factoring that in as we've seen a slower start here to February. Also mentioned, we're lapping the expected hurricane benefit that actually outpaced our expectations in terms of what we saw in 2024. We saw about 100 basis benefit each in both Q3 and Q4 and that's going to create a slight drag for us as we look at 25%. But the conditions still remain challenging, elevated rates, cautious consumer, particularly around the big ticket discretionary, those are all things that we cited back in December. And again, relative market still roughly flat. So overall the framework would trying to take into account some near term company specific items. But I would say overall, still the same framework. Simeon, this is Marvin. Just two additional points. So specific to February, where the weather has cooperated spring is off to a good start in February. But overall, February is pressured because of the weather specifically in parts of the Sapa and that's again not a surprise to anyone. Relative to the scenarios we laid out in December and Aldreteaux scenario as a reminder it included outperformance.

And so even though we look at the home improvement market or our relevant home improvement market in twenty twenty five being roughly flat, we plan to outperform that. And so if the market is better than what we anticipate We anticipate our performance is going to be better than the market. So irrespective of what the market gives us, we believe we have the initiatives, the agility and the strategic plan to outperform it. It.

Fair enough. My follow-up, about the relationship with PPI and then how the business performs. So let's just say the market ends up being a little lighter You have a specific plan on what you're going to spend and invest in for this year. Does that change at all?

And then if it doesn't change, do you have toggles in PPI to help offset it to basically land the margin in a certain place? So can you just give us a sense of the flex that you have in both of those areas?

And how you approach them?

Yes, Simeon. I would say definitely some some flex in that. But right now, we've built the plan We highlighted in December, we have $1,000,000,000 of productivity that we're expecting to deliver here in 2025. That's split roughly evenly across the portfolio about $500,000,000 in margin consisting of the merch and supply chain efforts and other $500,000,000 on the expense side mainly through the stores teams. We expect that to continue to sort of ramp as we move through the year. And as we've referenced, we're confident in the flywheel that we've created with PPI. And believe we have the right opportunity here for 2025 as well as the multiyear opportunity. So look as things soften, as they get better, certainly can ramp up, ramp down in terms of near term factors as well as some of the larger initiatives, but really confident with the plan that we have and the operating margin that's been included in our outlook Thanks. Best of luck. Our next question is from the line of Peter Benedict with Baird.

Please proceed with your questions.

Hi, guys. Thanks for taking the question. First, just on the outlook for the hurricane rebuild. I understand you start to cycle into the back half of the Any reason you wouldn't expect kind of a similar dollar lift, I guess, over the first half of the year versus what you've seen. Is there anything unique or different about the rebuild or the cadence of the rebuild you're seeing versus maybe what your expectation were? That's my first question.

Yes. So Peter, I think definitely have some benefit that we've baked in here in the first half. But as you know, especially in some of these hurricane markets, the timing of the insurance proceeds, when that's going to get awarded, that's going to be re spent. So we've tried to take a little bit of a little bit more of a conservative approach. And as we think about the benefit that we do have baked in, as I mentioned, slightly lower than what we saw in the back half of the year. And that's how we cadenced it in. But we're ready. We're we're ready to support in these markets. We've loaded in inventory from a pro standpoint ready to support across the Carolinas and Florida. But just in terms of financially what we've baked in, that's the assumption. [indiscernible] Seems prudent. Leads me to my next question around the pro. Really good to see the performance there. Can you maybe talk about the broadening of the engagement or the demand that you're seeing within the Pro segment Give us a sense for or remind us how you define kind of small versus medium versus larger pro And then any categories in particular that are kind of resonating as you continue to put these good growth rates with your pro business?

Thank you.

Yes. So Peter, I'll take the first part of that and I'll let Bill talk about the category performance we define the pro based on the Pro's shopping pattern in their annual spend. And again, we do quarterly surveys, so we really engage with these customers. We understand the business that they're in. We understand what their annual spend and we basically understand what their overall financial position is. And so we define it in that regard. Now the thing that we've been able to do is to really see the benefits of our [indiscernible] investments really taking hold on things like responding to product Lowe’s and improved service levels of more flexible and agile delivery and we saw double digit pro growth online. And again, we just think we have a best in class online offering. And as you think about the overall engagement of the Pro, We think it has a lot to do with some of the brands that Bill and the merchant teams have brought to bear in addition to the fact that we have made a commitment to have inventory where it needs to be and to have the delivery flexibility that we really never had before And we're excited about the relaunch of our loyalty program My Lowe’s Pro Rewards based on the fact that the data we receive from those customers is that they wanted something that was more simplistic, but also something that they could earn and achieve high rewards Lowe’s lower spend levels because again they are more of a smaller to medium sized small business.

Overall, we feel great We think that momentum is going to continue. And I'll let Bill be specific about some of the categories that we've seen take out as a result of these efforts.

Thanks, Marvin. Peter, as I said in my prepared remarks, really pleased with the pro business both for the quarter and for the year as we saw positive growth across every merchandising category for the quarter and for the year. And so largely led by what you would think is those pro centric areas, but building materials, lumber, millwork, some of those key categories, but also strength across appliances, paint, in some other businesses across store tools, hardware, So it's really encouraging for us to see the strength both in the quarter and for the year across those merchandising categories and Great. Thanks guys. Good luck. Our next question is from the line of Kate MacShane with Goldman Sachs. Please proceed with your question.

Hi, good morning. Thanks for taking our question.

We wondered if you could talk to us about how you're thinking about transaction versus ticket throughout 2025? And how much inflation do you think can be in the space during the year?

And specific to Q1, when you're going through why the margin would be slightly below the range for the year. You mentioned category accelerators as one of of the drags. Is that just something that's happening more in Q1 than the other quarters? And can you Sure, Kate. This is Brandon. I'll hit the ticket transaction assumption for '25 We are expecting slight ticket growth and that's mainly driven by the continued strength that we're expecting to see in pro. The offset is that we also expect DIY traffic pressures. To persist as we look at the balance of '25 Commodity inflation, not really a part of that formula. We expect that to be muted just as we've seen for the majority of '24 and that's as it relates to lumber and copper. As it relates to the Q1 pressure, I mentioned the main item just being the shift in sales due to the season that we're cycling last year. So you have the sales deleverage the wage investment. And I would say from a total home strategy standpoint, and the initiatives, a little bit of unique pressure in Q1 just given the timing of the rollout in particular the category accelerators where we're going out and resetting and touching our stores as we look at the rural initiative rollout and some of the other things that we're doing there.

So I would say that's the uniqueness there as it relates to Q1. In particular with that initiative.

Thank you. Thank you, Kate. The next question is from the line of Greg Melek with Evercore ISI.

Please proceed with your question.

Hi, thanks. Wanted to just follow-up a little bit there on inflation. What was it in the quarter? Was it anything as part of that ticket growth And are tariffs contemplated in your guide Greg, I would say like for like inflation, pretty muted when we look at Q4.

And then your question on on tariffs, it's not explicitly included or incorporated in our guide in terms of what's recently been enacted, but I would say there the situation very fluid Our teams are already activating against the tariffs that have been enacted. We're running the play. We're keeping a close watch on other potential policy changes or announcements that may be coming. And prepared to respond. We're confident in our merchant and finance teams across my team and Bill's team have the right tools and process effective manner.

Got it. And on the leverage, you've talked about at the Analyst Day that sort of 10 bps of leverage on the upside and potentially 15 on the downside.

Is that still a good good framework to think about given the demand levels here?

Yes. I think it's spot on, Greg. We still have that framework in place. 10 on the upside, 15 on the down.

Doesn't necessarily apply On a quarterly level, the framework works better when you thinking about sort of the full year, but yes, very much still operating against that expectation.

That's great. Thanks and good luck. Thanks, Greg.

Your next question comes from the line of Michael Lasser UBS.

Please proceed with your questions.

Good morning. Thank you so much for taking my question.

Where do some of the large ticket remodeling categories for Lowe’s stand today versus where they were in 2019, specifically areas like kitchen remodels and bathroom Lowe’s. Because it does seem like Lowe's is being disproportionately adversely impacted by the softness. So presumably, it would be a benefit as those categories improve? Well, Michael, this is Marvin.

I think one thing we've said consistently is that DIY discretionary big ticket is under pressure and everything you listed is DIY discretionary big ticket And so the obvious answer is Lowe’s categories are under pressure since 2019. And with 70% of our revenue coming from the DIY customer, [indiscernible] big ticket discretionary categories [indiscernible] impacts our business and our revenue. And so I'll let Brandon give you more context.

Yes, Michael, we've been pretty consistent around sort of the overreversion in these categories as we look at flooring, decor, K and B relative to five years ago. Just in terms of what we've seen. So certainly believe There's pent up demand when the market inflects and when it turns. And we're ready for that. But another data point I'll call out just when we look specifically at larger tickets and the sequential improvement here in 2024 The term I would use is it looks like it's getting less worse On our bigger ticket, we were high single digit negatives over the course of Q1, Q2. We're coming out of Q4 here roughly flat on tickets over $500 So a good sign that we're seeing in those categories, not projecting an inflection or a recovery certainly as we look at 2025, but we hope we're kind of bumping along the trough in the bottom here.

Thank you very much for that. My follow-up question is, there was a description around some incremental activity to drive the DIY business between promotions, advertising, and other initiatives.

So, A, can you quantify that? And B, how are you thinking about the cost to drive the DIY business today versus where it has been in the future, where it's been in the past, Meaning, is it just becoming more expensive to maintain market share given all the changes that have taken place? Michael, don't know exactly the context of the question, but what I will tell you is that we are not planning nor have we seen any inflection point change in promotional cadence for DIY nor are we anticipating doing anything to create any change in our cadence. The one thing that we will do is to leverage our DIY loyalty program which we will be cycling over the launch in March and we're very excited about that program. That is [indiscernible] to the DIY And as Joe mentioned, I mean, we're the only home improvement retail with a distinct PRO and DIY loyalty program. Other than that, we're going to continue to be competitive in the marketplace, but we have no expectation that we're going to be investing more aggressively in the DIY marketing space going to continue to run a very specific play and one of the key benefits of a loyalty program is that it gives you more database modernize one to one marketing capabilities than what we've had in the past.

Michael, I would just add just in terms of the cost or the investment, whether it's in the promotional space, pricing actions, all that factored in as we look at 2025 and that flat gross margin expectation that our referenced marketing within SG and A flow through all of that factored in in terms of what it's going to take for us us to continue to resonate, continue to take leadership in the right categories and at the same time deliver on our financial guide.

Thank you very much and good luck. Thanks, Michael. Our next question is from the line of Zach Fadem with Wells Fargo.

Please proceed with your question. Hey, good morning. Do you think it's fair to say there was some post election exuberance on behalf of the consumers a whole in Q4 that's maybe died down a little bit in 2025 as it sounds like you attribute this January, February air pocket to be more about weather So just trying to think through the factors that give you confidence that trends can snap back as we move through Q1 and into Q2 and through the year? So Zach, this is Marvin.

I appreciate the question. I will tell you that we have no real tangible data to support any election exuberance during the holiday season, but what we can point to specifically is the impact of weather on our business As we look at for the points of January and February, as Brandon mentioned, as we look at the geographic spread of our business, it is crystal clear that where the sun is shining and we have seasonal normal weather spring is resonating really well. And where we have seasonally cool, wet and any Lowe’s in precipitation the business is not performing well. So we see this more today as a weather story than any election impact or any other broader macro shock that could be happening, again, we have no data to support that.

Got it. Appreciate that. And then on the policy environment, lots of moving parts here. You talked about the incremental potential for tariffs. Curious how you think through other policy dynamics like immigration and how that could impact your business?

No, it's another really, really fair and timely question. What I will tell you is that like most large U. S. Companies, we are paying very close attention to it. We are highly engaged with all of our customer segments. We have one of the government relations teams of any public company in The U. S. And we are going to just be as agile as we can. The one thing that we do know is if there are any policies that impact our business, we will not be alone. And so our objective is to just focus on controlling what we control and being very keenly aware of the marketplace. Again, your question is a timely and very fair question. But what I can tell you is we are prepared for [indiscernible] prepared for anything and we believe that our team has the agility and the high level of execution ability to manage through any political environment or any policy changes that could be coming our way. Appreciate the time. Thanks, Marvin. Thank you.

Our next question is from the line of Brian Nagel with Oppenheimer. Mr. Nagel, your line is live for questions.

Sorry, I was on mute.

So this may be a bit competitive, so I apologize. But think a lot of us are looking at your results today. Congratulations on a nice quarter. Together with the results of your competitor report yesterday and just really trying to make sense of that the sales pick up we saw late in 2024. So I guess, and this is a repetitive part, I apologize. But Marvin, as you're looking at the business, again, recognizing there's a lot of movie pieces out there with weather, the election like someone else has mentioned, but is there anything you can see that may give us some indication that there is a we have hit some type of positive inflection in the business despite these ongoing macro challenges.

No, Brian, thanks for the question. What I would tell you for us it comes down and Brandon mentioned it, it comes down to discretionary big ticket for DIY. I mean that to us is one of the key indicators that the homeowner is going to be returning to what we consider to be a normal cadence of home improvement spend And so we're going to be tracking that really, really close and we're going to be paying king attention to it Another key for us is our home services business, I. E. Home installations, That's another indicator for us that consumers are either tapping into the equity and as you know, we have record amounts of equity. I think we on average, roughly $400,000 per home.

And so we believe at some point customers are going to get normalized in this high mortgage rate environment and they're going to start to tap into that equity making the decision that they're going to stay in their existing home, but modernize that home. So the moment we start to see that home services business start to tick up positive on a more continuous basis. That's going to be another positive sign for us. So those are our two key data points that we look at that will really give us a sign that the inflection is hopefully around the corner.

That's very helpful. Then my second question is somewhat related but on the Pro business, so another great quarter. Where you're clearly performing well and outpacing the market. A lot of internal initiatives are sort of taking hold at Lowe's. So I guess the question I have is, how should we think about the sustainability here? You're looking at these initiatives and the pro business start to take hold materialize. How should we think about this? How much from your standpoint, I mean, given nothing else changing maybe in the macro environment, how much longer can Lowe’s continue to put up these substantial market share gains in Pro?

So again another fair question. I'll just give you kind of a broad perspective. I'll let Joe talk about some of the key initiatives that we're executing that gives us confidence So the way we look at the total addressable market for Pro is that it's roughly a $500,000,000,000 market [indiscernible] 50% of that is the smaller to medium pro where we are focused as our key Pro customer segment and that is an extremely fragmented marketplace. And as Joe cited in his prepared comments, when we surveyed surveyed our customers, they still feel confident in their backlog and they still feel confident in their ability to have really good sales, although they're paying really close attention like we all are, to changing dynamics in the political process that we're in and policies and macro, etcetera, but overall the degree of confidence remains high. So we have a $250,000,000,000 fragmented marketplace where the customer feels confident in their ability to drive business. And so that gives us an indication that there's still lots of opportunity for us to grow. And I'll let Joe give you some examples on some of the initiatives that gives us additional confidence. Yes. Thanks, Marvin.

And Brian, as we look at that pro business thinking about the relaunch of our MVP pro rewards, resonating with that Pro. But we talked about some of our asset light investments we're making things like our pro fulfillment centers, our flatbed fulfillment centers, what we're doing in outside sales and how we're leveraging Lowe's Pro supply. And so we have a lot of continued initiatives Just scratching the surface on what we're doing with Pro. We have great confidence that it'll continue into the future.

And the last point I'll make on this, Brian, just to close it out, is we have a a hypothesis that when the DIY customer comes back and this customer will come back, We're perfectly positioned for that with our new toll home strategy. So we see that DIY customer coming back and then at the same time, we're going to be able to execute on our small to medium pro initiative, we're going to continue to drive our omni channel strategy And when we do all of these things in concert, we think that it bodes really well for us. And our future. Rob, we have time for one more question. Thank you. That comes from the line of Steven Zaccone with Citi.

Great. Thanks so much for squeezing me in. I wanted to ask on the appliances side of the business. So, it seems like we're seeing some stabilization from yourself and from your larger competitor. What are you seeing there? Do you think we're just kind of seeing natural replacement cycles, maybe some duress, some innovation Just be curious to hear Yes. Stephen, thanks.

This is Bill.

So really pleased with our appliance business. So I've really strong results in the quarter. Across all of the key categories. We saw unit growth as well as You cited innovation, obviously driving it It is largely driven by duress customers and I think our model sets up well to be able to take care of that customer. As I cited in my prepared remarks, the delivery model that we have set up is best in class and being able to install and deliver an appliance in almost every zip code across the country remarkable for us. And our online business for appliances is equally as strong. And so the consumer is finding ways to engage with us and the level of service that we're providing in our stores to take care of the customer are kind of all the pieces of the puzzle, I guess, for us that we're excited about.

And the merchants have done a nice job of bringing innovation. We've got a lot of innovation coming as we go 2025.

Across every category, new launches, new products, that just keeps us at the forefront.

Yes. And then my other category question for just as we think about '25 would you expect any material change in kind of category performance across the business?

I ask it too in the sense of first quarter seems to have a little bit of noise of weather [indiscernible] when you think about spring overall here in the first half of the year, are you expecting your typical spring categories to see growth relative to what you saw last year? Yes, we're actually where we've seen some weather early in the quarter, we've actually were really encouraged about how our spring business is starting and the collaboration work we've had with our store teams, our inventory team, the merchants, supply chain of getting product ready. The resets are underway. We'll wrap those up in we have a lot of ammunition in the gun for spring that we're excited about, a lot of new product in addition to being just ready across both the do it yourself customer and the pro customer. And just to give you a few examples, we've got new innovation really across every merchandising category. Whether that's easy to install windows from Pella Lowe’s, new drywall tools that we talked about from Walbarden, which is the number one tool for a drywall professional, we are the go to destination for composite decking when you think about Trex, TimberTech and Deckorators.

We've got Whirlpool being launched in water softeners and rough plumbing. Then you go to the spring categories. You've got exclusive product from Weber that will only be found at Lowe's We've got 14 new products at Ego that continues to heighten that innovation in the outdoor power category.

New cap, new collections in patio, we've got new products from Valspar for metal application and garage floor paint. I mean, I can go on and on and on in regards to what [indiscernible] So mother nature gives us a little bit about a nudge. We're ready to rock and roll.

Okay. Thanks very much. Thanks, Steven.

You all for joining us today. Look forward to speaking with you on our first quarter earnings call in May. This concludes the Lowe’s fourth quarter twenty twenty four earnings call.

You may now disconnect.