Lowe's Sales Up, Earnings Dip Amid $10.1B Acquisition Spree

TL;DR

**Lowe's is betting big on Pro customers with $10.1B in acquisitions, but it's costing them short-term earnings and piling on debt – a risky long play.**

AI Summary

Lowe's Companies Inc. (LOW) reported net sales of $20.813 billion for the three months ended October 31, 2025, a 3.19% increase from $20.170 billion in the prior year. However, net earnings decreased by 4.66% to $1.616 billion, down from $1.695 billion in the same period last year, resulting in diluted EPS of $2.88 compared to $2.99. For the nine months, net sales rose to $65.701 billion from $65.120 billion, but net earnings declined to $5.654 billion from $5.833 billion. Key business changes include the significant acquisitions of Artisan Design Group (ADG) for $1.3 billion on June 2, 2025, and Foundation Building Materials (FBM) for $8.8 billion on October 9, 2025, totaling $10.1 billion in cash outlays for acquisitions. These acquisitions substantially increased intangible assets to $5.994 billion and goodwill to $3.982 billion as of October 31, 2025, from $281 million and $311 million respectively, on November 1, 2024. The company's strategic outlook focuses on expanding its Pro customer offering and accelerating its Total Home strategy through these acquisitions, despite the immediate impact on net earnings and a substantial increase in long-term debt to $37.498 billion from $32.906 billion. Cash and cash equivalents significantly decreased to $621 million from $3.271 billion year-over-year due to these large investments.

Why It Matters

Lowe's aggressive $10.1 billion acquisition strategy, particularly the FBM and ADG deals, signals a strong pivot towards the Pro customer segment, directly challenging competitors like Home Depot. While this could unlock significant long-term growth and market share, the immediate financial impact includes a notable decline in net earnings and a substantial increase in debt, which could concern investors focused on short-term profitability and balance sheet health. Employees and customers of the acquired entities, ADG and FBM, will experience integration changes, potentially leading to new opportunities or disruptions. The broader home improvement market will see increased competition and consolidation, potentially driving innovation and service improvements.

Risk Assessment

Risk Level: high — The company's risk level is high due to the substantial cash outlays for acquisitions totaling $10.1 billion for ADG and FBM, which led to a significant decrease in cash and cash equivalents from $3.271 billion to $621 million. Additionally, long-term debt increased by $4.592 billion to $37.498 billion, and net earnings declined by 4.66% for the three months ended October 31, 2025, indicating immediate financial strain and integration risks.

Analyst Insight

Investors should closely monitor the integration progress of ADG and FBM and the realization of expected synergies. While the long-term Pro strategy has potential, the immediate financial strain and increased debt warrant caution; consider holding or reducing exposure until clearer signs of successful integration and improved profitability emerge.

Financial Highlights

revenue

$20.813B

operating Margin

11.92%

total Assets

$53.453B

total Debt

$37.498B

net Income

$1.616B

eps

$2.88

gross Margin

34.19%

cash Position

$621M

revenue Growth

+3.19%

Revenue Breakdown

Key Numbers

• $20.813B — Net sales for three months ended Oct 31, 2025 (Increased from $20.170B in prior year, a 3.19% rise.)
• $1.616B — Net earnings for three months ended Oct 31, 2025 (Decreased from $1.695B in prior year, a 4.66% decline.)
• $2.88 — Diluted EPS for three months ended Oct 31, 2025 (Decreased from $2.99 in prior year.)
• $1.3B — Acquisition price of Artisan Design Group (ADG) (Completed on June 2, 2025.)
• $8.8B — Acquisition price of Foundation Building Materials (FBM) (Completed on October 9, 2025.)
• $10.1B — Total cash spent on acquisitions (Combined cost of ADG and FBM acquisitions.)
• $621M — Cash and cash equivalents as of Oct 31, 2025 (Significantly decreased from $3.271B on Nov 1, 2024.)
• $37.498B — Long-term debt as of Oct 31, 2025 (Increased from $32.906B on Nov 1, 2024.)
• $5.994B — Intangible assets as of Oct 31, 2025 (Increased from $281M on Nov 1, 2024 due to acquisitions.)
• $3.982B — Goodwill as of Oct 31, 2025 (Increased from $311M on Nov 1, 2024 due to acquisitions.)

Key Players & Entities

• LOWES COMPANIES INC (company) — registrant
• Artisan Design Group (ADG) (company) — acquired company
• Foundation Building Materials (FBM) (company) — acquired company
• New York Stock Exchange (regulator) — exchange where common stock is registered
• SEC (regulator) — Securities and Exchange Commission
• Financial Accounting Standards Board (regulator) — issued accounting standards update
• Home Depot (company) — competitor

FAQ

Risk Factors

• Increased Debt Load [high — financial]: The company's long-term debt has significantly increased to $37.498 billion as of October 31, 2025, up from $32.906 billion on November 1, 2024. This substantial increase is primarily due to the financing of major acquisitions, which could heighten financial risk and impact future borrowing capacity.
• Reduced Cash Reserves [high — financial]: Cash and cash equivalents have sharply declined to $621 million from $3.271 billion year-over-year. This reduction is a direct consequence of the $10.1 billion spent on acquisitions, potentially limiting the company's short-term financial flexibility.
• Integration of Acquisitions [medium — operational]: The successful integration of Artisan Design Group and Foundation Building Materials is critical. Challenges in integrating these businesses could lead to operational disruptions, failure to realize expected synergies, and impact overall financial performance.
• Impact of Acquisition Accounting [medium — financial]: The acquisitions have led to a substantial increase in intangible assets to $5.994 billion and goodwill to $3.982 billion. Future impairment charges on these assets could negatively impact earnings.
• Competitive Landscape [medium — market]: Lowe's operates in a highly competitive home improvement retail market. Intense competition from other large retailers and online platforms could pressure pricing and market share.
• Evolving Accounting Standards [low — regulatory]: New accounting standards, such as ASU 2025-06 regarding intangibles, may require significant changes in accounting practices and disclosures, potentially impacting financial reporting and requiring management attention.

Industry Context

The home improvement retail sector is characterized by intense competition, with major players like Home Depot and a growing presence of online retailers. Industry trends include a focus on professional contractors (Pro customers) and the integration of digital and physical retail experiences (Total Home strategy). Acquisitions are a key strategy for market consolidation and expansion of service offerings.

Regulatory Implications

Lowe's must comply with SEC reporting requirements, including accurate disclosure of financial performance and material events. The significant increase in goodwill and intangible assets due to acquisitions necessitates careful monitoring for potential impairment, which could trigger further disclosures and impact reported earnings.

What Investors Should Do

1. [object Object]
2. [object Object]
3. [object Object]
4. [object Object]

Key Dates

• 2025-06-02: Acquisition of Artisan Design Group (ADG) — Expanded capabilities and market reach in the Pro customer segment.
• 2025-10-09: Acquisition of Foundation Building Materials (FBM) — Further strengthened the Pro customer offering and accelerated the Total Home strategy.
• 2025-10-31: End of Third Quarter Fiscal Year 2025 — Reporting period for the financial results discussed, showing increased sales but decreased net earnings.
• 2024-11-01: Prior Year Comparison Date — Benchmark for year-over-year changes in key financial metrics like cash, debt, goodwill, and intangibles.

Glossary

Goodwill

An intangible asset that arises when a company acquires another company for a price greater than the fair value of its identifiable net assets. (Significantly increased to $3.982 billion due to acquisitions, impacting the balance sheet and potentially subject to impairment.)

Intangible assets

Non-physical assets that have value, such as patents, trademarks, and customer lists. In this context, it includes assets acquired in business combinations. (Increased substantially to $5.994 billion due to acquisitions, reflecting the value attributed to acquired brands and relationships.)

Diluted EPS

Earnings per share calculated by dividing net income by the total number of diluted common shares outstanding, which includes the effect of stock options and convertible securities. (Decreased to $2.88 from $2.99, indicating a reduction in profitability on a per-share basis for shareholders.)

Operating lease right-of-use assets

Assets recognized on the balance sheet representing a lessee's right to use an asset for the lease term. (Increased to $4.345 billion, reflecting the company's leasing activities, potentially related to expanded operations or store footprint.)

Cost of sales

The direct costs attributable to the production or purchase of the goods sold by a company. (Increased to $13.697 billion, reflecting higher sales volume and potentially increased input costs.)

Selling, general and administrative expenses

Expenses incurred in the normal course of business that are not directly related to the production of goods or services. (Increased to $4.160 billion, likely due to the integration of acquired businesses and expanded operations.)

Year-Over-Year Comparison

Compared to the prior year period ended November 1, 2024, Lowe's reported a 3.19% increase in net sales to $20.813 billion for the three months ended October 31, 2025. However, net earnings saw a 4.66% decline to $1.616 billion, with diluted EPS falling to $2.88 from $2.99. This period is marked by significant strategic acquisitions, leading to a substantial increase in goodwill and intangible assets, a sharp decrease in cash and cash equivalents, and a notable rise in long-term debt.

Key Financial Figures

• $0.50 — ich registered Common Stock, par value $0.50 per share LOW New York Stock Exchange

Filing Documents

• low-20251031.htm (10-Q) — 1272KB
• exhibit151_10312025.htm (EX-15.1) — 8KB
• exhibit311_10312025.htm (EX-31.1) — 9KB
• exhibit312_10312025.htm (EX-31.2) — 9KB
• exhibit321_10312025.htm (EX-32.1) — 4KB
• exhibit322_10312025.htm (EX-32.2) — 4KB
• low-20251031_g1.jpg (GRAPHIC) — 45KB
• low-20251031_g2.jpg (GRAPHIC) — 48KB
• 0000060667-25-000210.txt ( ) — 6696KB
• low-20251031.xsd (EX-101.SCH) — 39KB
• low-20251031_cal.xml (EX-101.CAL) — 85KB
• low-20251031_def.xml (EX-101.DEF) — 137KB
• low-20251031_lab.xml (EX-101.LAB) — 536KB
• low-20251031_pre.xml (EX-101.PRE) — 354KB
• low-20251031_htm.xml (XML) — 1004KB

Forward-Looking Statements

Forward-Looking Statements ii

- Financial Information

PART I - Financial Information 1

Financial Statements

Item 1. Financial Statements 1 Consolidated Statements of Earnings 1 Consolidated Statements of Comprehensive Income 1 Consolidated Balance Sheets 2 Consolidated Statements of Shareholders' Deficit 3 Consolidated Statements of Cash Flows 5

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 6 Note 1: Summary of Significant Accounting Policies 6 Note 2: Acquisition 6 Note 3: Revenue 8 Note 4: Restricted Investments 9 Note 5: Fair Value Measurements 9 Note 6: Accounts Payable 11 Note 7: Debt 11 Note 8: Derivative Instruments 12 Note 9: Shareholders' Deficit 12 Note 10: Earnings Per Share 13 Note 11: Supplemental Disclosure 14 Note 12: Segment Information 14 Report of Independent Registered Public Accounting Firm 16

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 17

Quantitative and Qualitative Disclosures about Market Risk

Item 3. Quantitative and Qualitative Disclosures about Market Risk 24

Controls and Procedures

Item 4. Controls and Procedures 24

- Other Information

PART II - Other Information 25

Legal Proceedings

Item 1. Legal Proceedings 25

Risk Factors

Item 1A. Risk Factors 25

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 25

Other Information

Item 5. Other Information 25

Exhibits

Item 6. Exhibits 26 Signature 28 i Table of Contents

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS This Form 10-Q includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements including words such as "believe", "expect", "anticipate", "plan", "desire", "project", "estimate", "intend", "will", "should", "could", "would", "may", "strategy", "potential", "opportunity", "outlook", "scenario", "guidance", and similar expressions are forward-looking statements. Forward-looking statements involve, among other things, expectations, projections, and assumptions about future financial and operating results, objectives (including objectives related to environmental and social matters), business outlook, priorities, sales growth, shareholder value, capital expenditures, cash flows, the housing market, the home improvement industry, demand for products and services including customer acceptance of new offerings and initiatives, macroeconomic conditions and consumer spending, share repurchases, and Lowe's strategic initiatives, including those relating to acquisitions and dispositions and the impact of such transactions on our strategic and operational plans and financial results. Such statements involve risks and uncertainties and we can give no assurance that they will prove to be correct. Actual results may differ materially from those expressed or implied in such statements. A wide variety of potential risks, uncertainties, and other factors could materially affect our ability to achieve the results either expressed or implied by these forward-looking statements including, but not limited to, the possibility that the anticipated benefits and synergies of our acquisition of Foundation Building Materials (FBM) are not realized when expected, or at all, including as a result of the impact of, or problems arising from, the integration of the two companies, changes in general economic conditions, such as volatility and/or lack of liquidity from time to time in U.S. and world financial

- FINANCIAL INFORMATION

Part I - FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements Lowe's Companies, Inc. Consolidated Statements of Earnings (Unaudited) In Millions, Except Per Share and Percentage Data Three Months Ended Nine Months Ended October 31, 2025 November 1, 2024 October 31, 2025 November 1, 2024 Current Earnings Amount % Sales Amount % Sales Amount % Sales Amount % Sales Net sales $ 20,813 100.00 % $ 20,170 100.00 % $ 65,701 100.00 % $ 65,120 100.00 % Cost of sales 13,697 65.81 13,374 66.31 43,497 66.20 43,340 66.55 Gross margin 7,116 34.19 6,796 33.69 22,204 33.80 21,780 33.45 Expenses: Selling, general and administrative 4,160 19.99 3,827 18.97 12,381 18.85 11,860 18.22 Depreciation and amortization 475 2.28 433 2.15 1,378 2.10 1,284 1.97 Operating income 2,481 11.92 2,536 12.57 8,445 12.85 8,636 13.26 Interest – net 352 1.69 317 1.57 1,002 1.52 985 1.51 Pre-tax earnings 2,129 10.23 2,219 11.00 7,443 11.33 7,651 11.75 Income tax provision 513 2.46 524 2.59 1,789 2.72 1,818 2.79 Net earnings $ 1,616 7.77 % $ 1,695 8.41 % $ 5,654 8.61 % $ 5,833 8.96 % Weighted average common shares outstanding – basic 559 565 559 568 Basic earnings per common share $ 2.88 $ 2.99 $ 10.09 $ 10.24 Weighted average common shares outstanding – diluted 560 566 560 569 Diluted earnings per common share $ 2.88 $ 2.99 $ 10.07 $ 10.22 See accompanying notes to the consolidated financial statements (unaudited). Lowe's Companies, Inc. Consolidated Statements of Comprehensive Income (Unaudited) In Millions, Except Percentage Data Three Months Ended Nine Months Ended October 31, 2025 November 1, 2024 October 31, 2025 November 1, 2024 Amount % Sales Amount % Sales Amount % Sales Amount % Sales Net earnings $ 1,616 7.77 % $ 1,695 8.41 % $ 5,654 8.61 % $ 5,833 8.96 % Cash flow hedges – net of tax ( 7 ) ( 0.04 ) ( 3 ) ( 0.02 ) ( 14 ) ( 0.02 ) ( 9 ) ( 0.02 ) Other 1 — — — 1 — 1 — Other comprehensive loss ( 6 ) ( 0.04 ) ( 3 ) ( 0.02 ) ( 13 ) ( 0.02 ) ( 8 ) ( 0.02 ) Comprehensive income $ 1,610 7.73 % $

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) Note 1: Summary of Significant Accounting Policies Basis of Presentation The accompanying condensed consolidated financial statements (unaudited) and notes to the condensed consolidated financial statements (unaudited) are presented in accordance with the rules and regulations of the Securities and Exchange Commission and do not include all the disclosures normally required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The condensed consolidated financial statements (unaudited), in the opinion of management, contain all normal recurring adjustments necessary to present fairly the consolidated balance sheets as of October 31, 2025, and November 1, 2024, and the statements of earnings, comprehensive income, and shareholders' deficit for the three and nine months ended October 31, 2025, and November 1, 2024, and cash flows for the nine months ended October 31, 2025, and November 1, 2024. The January 31, 2025, consolidated balance sheet was derived from the audited financial statements. The Company consolidates the financial results of Artisan Design Group (ADG) and Foundation Building Materials (FBM) on a one-month lag due to differences in reporting calendars. These interim condensed consolidated financial statements (unaudited) should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Lowe's Companies, Inc. (the Company) Annual Report on Form 10-K for the fiscal year ended January 31, 2025 (the Annual Report). The financial results for the interim periods may not be indicative of the financial results for the entire fiscal year. Business Combinations The assets and liabilities of acquired businesses are recorded at their fair values at the date of acquisition. The excess of the purchase price over the fair values of the identifiable asset