Prepared remarks
Good morning, everyone. Welcome to Lowe's Companies First Quarter 2026 Earnings Conference Call. My name is Rob, and I'll be your operator for today's call. As a reminder, this conference call is being recorded. I'll now turn the call over to Shelly Hubbard, Vice President of Investor Relations.
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. I would like to remind you that our notice regarding forward-looking statements is included in our press release this morning, which can be found on Lowe's Investor Relations website. During this call, we will be making comments that are forward-looking, including our expectations for fiscal 2026; 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&A and other sections of our annual report on Form 10-K 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 the Quarterly Earnings section of our Investor Relations website. Now I'll turn the call over to Marvin.
Thank you, Shelly. Good morning, everyone. Before we begin, let me take a moment and welcome Shelly Hubbard to the team. Shelly recently joined Lowe's as Vice President of Investor Relations, and we're excited to have her on board. Now let's start with our results. In the first quarter, we delivered sales of $23.1 billion with comparable sales increasing 0.6%, leading to adjusted diluted earnings per share of $3.03, up 3.8% versus the prior year. Our results were driven by strong spring execution, along with continued strength in Pro, Appliances, Online and Home Services. We're pleased with our performance this quarter despite February storms that slowed the start of the spring season. Our teams executed at a high level throughout the quarter, particularly during SpringFest, where we were well positioned with strong in-stocks, compelling offers, targeted member deals and traffic-driving store events. Bill will provide additional perspective on our spring performance later in the call. Our continued growth in Pro, Online and Home Services in Q1 reflects how our Total Home strategy is positioning Lowe's for short- and long-term market share gains. Starting with Pro. We maintain our momentum with our competitive assortment of national brands, consistent strong in-stock position and outstanding service levels. Additionally, we are pleased that our loyalty program, MyLowe's Pro Rewards designed specifically for the small to medium Pro continues to resonate with our customers. Combined, these investments are providing the reliability, value and convenience our Pro customers have come to expect from Lowe's. Now shifting to online. We delivered sales growth of 15.5% this quarter driven by continued enhancements to our user experience, standout online deals and improved fulfillment capabilities, including same-day delivery, and to enhance the value of our loyalty programs, we began offering free same-day delivery for purchases over $25 for MyLowe's Rewards and MyLowe's Pro Rewards members. This offering further differentiates our loyalty experience, helping to drive increased member engagement for both DIY and Pro customers. We're also pleased by the impact of Mylow, our AI-powered shopping assistant is having on the online shopping experience, giving our customers the ability to ask questions on recommendations, budget guidance and other home improvement needs. Since launching 1 year ago, Mylow adoption has scaled meaningfully and now supporting over 1 million customer inquiries each month. Importantly, the conversion rate for online customers who use Mylow is triple that of customers who do not use the tool, suggesting a well-designed agentic AI experience can be a clear driver in the purchasing decision. Turning to Home Services. We again delivered growth this quarter, underscoring our ability to capture market share in a highly fragmented category and reinforcing that our enhanced installation experience continues to resonate with homeowners undertaking complex projects. Additionally, we recently announced HomeCare+, a first-of-its-kind subscription service to support customers with routine home maintenance tasks. This service taps high-performing, technically trained Red Vest Lowe's store associates to help busy customers stay on top of their to-do list. HomeCare+ is available exclusively to MyLowe's Rewards members further strengthening customer engagement and loyalty while building long-lasting relationships with our DIY customers. Let me now transition to our view of the macro environment. While DIY demand remains under pressure, we're continuing to grow market share in a challenging housing environment shaped by elevated interest rates, higher cost, and low housing turnover. And while we expect the broader market to remain flat in 2026, our focus remains on disciplined execution of our Total Home strategy driving continued growth regardless of market conditions. We believe Lowe's is well positioned not only to perform in this environment but to deliver meaningful upside as macro conditions normalize. Which brings me to our acquisitions of FBM and ADG. Our near-term integration efforts are on track as we focus on extracting cost synergies from overlapping areas of spend and at the same time, exploring cross-selling opportunities. We remain confident that FBM and ADG will enable Lowe's to capitalize on the future recovery of the residential homebuilding market. Before I close, I'd like to highlight our expanded commitment to the Skilled Trades. The Lowe's Foundation recently announced a $250 million investment to help train and develop the next generation of skilled trades people. Through this effort, we aim to support approximately 250,000 individuals helping address the growing need for skilled labor across our industry and beyond. This investment reflects our commitment to strengthening the communities we serve and create an economic opportunity while also supporting long-term demand for the home improvement and construction industry. In closing, I'd like to thank our frontline associates for their continued dedication throughout our busy spring season. Their commitment to serving customers and supporting the communities where we live and work are critical to our success. And with that, I'll turn the call over to Bill.
Thanks, Marvin, and good morning, everyone. We're pleased that we delivered positive comp sales for the fourth consecutive quarter, driven by strong performance in our spring seasonal categories across all three geographic divisions. We accomplished this despite a slow start to the quarter after winter storms hit much of the country. Before I walk through our performance, let me start with a quick update on our merchandising structure. We recently realigned select product categories, reducing our merchandise divisions from 14 to 13. Most notably, we combined power tools with outdoor power equipment to create a stand-alone power equipment division. This change will help us manage our battery platforms under one team and improve coordination and alignment between our merchants and supplier partners. Turning now to our performance in hardlines. We delivered positive comp sales across every merchandise division, including lawn and garden, seasonal and cleaning, tools and hardware and power equipment. As spring kicked into full gear, we saw broad-based growth in many of our seasonal categories. This performance reflects strong alignment between our merchandising, marketing, supply chain and store teams, all focused on serving customers and converting demand as weather improved. Our merchants ensured we had the strongest lineup and the best values. Our marketing team delivered a clear and compelling message to drive traffic to our stores and our website. Our supply chain team kept product in stock, our stores executed at a high level with excellent customer service. A key driver of this performance was our third annual SpringFest event, where we leaned into our MyLowe's Rewards loyalty program and gave customers what they told us they want most: extended savings, rewards and convenient delivery options, including free same-day delivery on key items like mulch, one of the most popular spring projects. These offers resonated with customers and gave them more reasons to choose Lowe's for their spring home improvement needs. As a result, we saw a standout performance in live goods, landscape products and hardscapes from great brands like Scott's, Oldcastle and Pavestone, along with strong engagement from customers shopping for patio furniture and riding lawn mowers. This performance was supported by our industry-leading lineup of outdoor power equipment brands, such as John Deere, Toro, EGO, Husqvarna, CRAFTSMAN and Cobalt, where we drove strong engagement, including during our Toro and EGO Days events. And as we continue to focus on improving our space productivity, a key pillar of our Total Home strategy, we grew sales in categories like workwear and pet, where our strong offering includes national brands like Carhartt, Dickies and Wrangler Apparel, and private brands like Heart & Herd, Pet Toys and Treats. We remain on track to complete the national rollout of workwear and pet to all of our stores by the end of the year. Now turning to Building Products. We continue to drive growth in Pro-driven categories, particularly in rough plumbing and electrical, especially with our core small- to medium-sized Pro, who remains busy with repair and maintenance projects. The warmer-than-average weather in March across much of the country, combined with our strong in-stock position, led to standout performance in irrigation and sprinkler projects. And we also saw a particular strength in HVAC and water heaters supported by our improved Lowe's Home Services offering, which provides fast, convenient repair and installation for our do-it-for-me customers. With simple scheduling, professional service and the confidence that comes with an experience backed by Lowe's. And this capability continues to also drive our millwork category, which again delivered positive comps in the quarter, driven by windows and doors. Customers are returning to Lowe's for these replacement projects supported by our leading brands such as Pella, Therma-Tru and Larson, which are exclusive in the home center channel. And lastly, to home decor, where we drove positive comp sales in appliances and paint. In appliances, we continue to drive sales with our broad assortment of the leading brands, fast delivery and best-in-class omnichannel experience positioning Lowe's as the destination for urgent replacement purchases. As a reminder, approximately 70% of appliance transactions are driven by a duress occasion, where a customer needs to replace a refrigerator or a washing machine quickly. Customers can research appliances online, come into the store and work with a knowledgeable Red Vest associate and then choose to complete the transaction wherever and however they prefer. This is where Lowe's continues to stand out. We're the only retailer that can deliver and install major appliances next day in virtually every ZIP Code in the U.S., a capability that continues to drive our performance. Now let's shift to paint, another area where we're driving results through an improved customer experience. This quarter, we delivered growth across multiple categories, including interior paint, sundries, tools, stain, spray paint and buckets. Behind our performance in paint is the work our teams have been doing to remove friction from the shopping experience from simplifying the in-store journey to make it easier for customers to navigate the category online. We've enhanced our digital experience with a paint color visualizer, improved online product information and created a more intuitive checkout experience, all of which are driving stronger online engagement and conversion. At the same time, we're partnering closely with our vendor partners, like Sherwin-Williams to elevate the in-store support for our Red Vest associates ensuring that they have the tools and expertise to guide customers with confidence and help them drive sales across the category. Finally, as we move through quarter 2, we're excited about the value, innovation and fast and free delivery options we're offering around key holidays like Memorial Day, Father's Day and July 4, with a strong focus on key seasonal categories like lawn and garden, patio furniture and grills from Weber, Char-Broil and Blackstone. We're also looking forward to building on our partnership with Lionel Messi this summer as fans around the world tune in for the World Cup. Our campaign includes a limited edition 10-foot Messi inflatable and exclusive fan experiences that tap into the growing soccer culture across North America. As I close, I want to thank our merchants, our MST associates and our supplier partners for their continued collaboration and strong execution as we kicked off spring. And with that, I'll turn the call over to Joe.
Thank you, Bill, and good morning, everyone. Let me start by thanking our frontline associates for their hard work throughout the spring season, their commitment to delivering outstanding service to our customers during one of our busiest times of the year, continues to make a meaningful difference across our stores. Their focus showed up this quarter in strong customer satisfaction scores during SpringFest as our team prioritized execution and delivered a consistent experience across all departments. Customers also appreciated our flexible fulfillment options as they work to complete their spring projects, including same-day delivery for their time-sensitive needs, which you heard about from Marvin and Bill. Fulfillment is just one of the improvements enabled by our transformed front-end layout, which provides a smoother pickup experience for customers using buy online, pick up in store, for drivers executing same-day deliveries and for our associates serving them both. Turning now to our first quarter performance and starting with Pro, where we delivered another quarter of growth. We continue to build on our momentum with our core small- to medium-sized Pro customer, who has remained resilient in this macro environment. Pros are responding positively to the enhanced tools we've deployed digitally and at the Pro desk, which are designed to save time and simplify the shopping experience. And we're continuing to leverage AI to create new capabilities. A recent example is our launch of materials list. Pros can bring in the list in just about any format, whether a photo, handwritten note, PDF or spreadsheet, and our associates can use this tool to convert it into an actionable quote. In the past, this was a manual task, which meant generating these quotes could take days, taking associates away from serving Pro customers. Now with this AI-enabled tool, we've reduced that time from days to minutes. In a recent survey, our core Pro customers indicated their backlogs are generally stable, but they have concerns about the growing costs associated with labor as they continue to navigate a constrained labor market. On this note, I'd like to take a moment to reiterate what you heard from Marvin about our expanded commitment to address the nation's skilled trades workforce gap. Our Pro customers are at the forefront of this growing demand, and we hear from them directly about the difficulty in hiring trained workers to fill out their crews. This is one of the most critical challenges facing the home improvement industry and this $250 million investment by the Lowe's Foundation is integral to supporting our Pro customers and helping them grow their business. Switching gears now to our perpetual productivity improvement, or PPI initiatives within store operations. Over the past year, we continued to scale Mylow Companion, our AI-powered tool designed to support associates on the sales floor. We've enhanced this capability with new features, including voice detect, to help associates access information more quickly and confidently. And we've expanded its language capabilities, so associates can now ask for and receive information in Spanish. Our associates are embracing this technology. In fact, they have asked more than 5 million questions through Mylow Companion since its launch, reflecting strong adoption across our stores. As we continue to integrate AI-enabled tools into our operations, we're making it easier for associates to deliver a better customer experience while driving productivity at the same time. We're also making progress on our freight flow 3.0 and full shelf replenishment initiatives. These efforts accelerate the speed of product from the distribution center to the sales floor while better leveraging our associates' time. As a result, we are improving in-stocks, making it easier for customers to find the product they need to complete their projects. Before I close, let me thank our associates once again for their continued dedication to our customers and our communities. As a demonstration of our appreciation, we closed our stores on Easter, giving our teams time to rest, recharge and spend the day with their families. And as we approach the Memorial Day and the end of Military Appreciation Month, I also want to recognize the more than 26,000 military members and spouses who are Lowe's associates and thank them for their service; their leadership and commitment continue to make a positive impact across our company, and I'm proud that for the third consecutive year, Lowe's has been recognized as a 5-star Employer by the VETS Indexes Employer Awards. With that, let me turn it over to Brandon.
Thank you, Joe, and good morning. Beginning with our Q1 results, we generated GAAP diluted earnings per share of $2.90. In the quarter, we recognized $96 million in pretax non-GAAP charges from acquisition-related intangible asset amortization. Excluding these impacts, we delivered adjusted diluted earnings per share of $3.03, up from $2.92 last year. My comments from this point forward will include certain non-GAAP comparisons that exclude these impacts where applicable. Sales for the first quarter were $23.1 billion, up 10.3% from Q1 last year, in line with expectations. Comparable sales were up 0.6% driven by well coordinated spring execution, including our SpringFest event, along with continued strength in Pro, Appliances, Online and Home Services. Comps for February were down 1.4% as winter storms impacted much of the country. Comps accelerated to 2.1% in March and 0.5% in April as spring arrived across the country and customers responded to our seasonal offerings. Comparable average ticket increased 1.5% driven by modest price inflation and strength in Pro and Appliances, while comparable transactions declined 0.9% as growth in seasonal categories was offset by continued DIY discretionary pressures. For the first quarter, gross margin was 32.7%, down 70 basis points and in line with our expectations, primarily driven by the dilutive impact of FBM and ADG, offset by favorability in credit revenue. SG&A was 19.2% of sales, leveraging 17 basis points from continued disciplined cost management and the accretive impact of FBM and ADG. Adjusted operating margin rate of 11.5% was down 43 basis points versus prior year, also in line with our expectations. Our perpetual productivity improvement, or PPI initiatives, continued to deliver meaningful results, helping offset underlying cost pressures, mitigate inflation and support reinvestment and value for our customers. The effective tax rate was 24.5%. Inventory ended the first quarter at $18.4 billion, up $112 million versus prior year including inflationary pressures from tariffs as well as approximately $500 million related to recent acquisitions. Excluding these pressures, the year-over-year inventory reduction reflected continued progress on SKU rationalization and productivity initiatives while maintaining strong in-stock levels to support customer demand. Moving to capital allocation. In the first quarter, we generated $2.8 billion in free cash flow. Capital expenditures totaled $521 million, reflecting continued investment in our Total Home strategy, including tech-driven productivity efforts and key AI initiatives. In the quarter, we paid $674 million in dividends at $1.20 per share. We also repaid $2.4 billion in bond maturities as we continue progressing towards our commitment to deleverage and return to a 2.75x leverage ratio by mid-2027. Adjusted debt to EBITDAR was 3.1x at the end of the quarter. And we ended the quarter with $786 million of cash and cash equivalents and delivered return on invested capital of 26.8%. Looking forward to the remainder of the year, today, we are affirming our fiscal 2026 outlook. We continue to expect sales in the range of $92 billion to $94 billion, with comparable sales in a range of flat to up 2%. We expect adjusted operating margin in a range of 11.6% to 11.8% and full year adjusted diluted earnings per share of approximately $12.25 to $12.75. We also expect capital expenditures of up to $2.5 billion. In terms of the second quarter, here are a few items to keep in mind. We saw solid growth in our spring categories in the first quarter, along with continued strength in Pro, Appliances, Online and Home Services. And as Bill mentioned, we have a great lineup of top brands and compelling values as well as tailwinds from the rollout of our workwear and pet assortments to additional locations. All of this positions us well for the second quarter, where we expect our Total Home strategic initiatives, including Pro, Loyalty, Online and Home Services to continue to drive performance. Based on this, we expect second quarter comp sales to be roughly in line with the midpoint of our full year guide, and we expect second quarter adjusted operating margins to be pressured from: the impact of acquisitions, which we will begin to anniversary in the second half of the year; investments in our sales driving actions, which are more focused in the second quarter due to our mix into the spring season and key holidays; and near-term pressure from higher transportation costs that we are actively working to offset through productivity initiatives in the back half of the year. Additionally, we expect adjusted diluted earnings per share in the second quarter to be approximately 2% below prior year adjusted diluted earnings per share. This results in first half sales and adjusted diluted earnings per share essentially in line with our expectations from the start of the year. We have been clear in our intent to remain competitive and drive sales in this environment, particularly around key seasonal moments and through enhanced fulfillment options, and we are seeing customers respond to those actions consistent with our expectations. As we look ahead, we are confident in our team's ability to continue executing with discipline while navigating within the current uncertain environment. We remain committed to advancing our Total Home strategy and driving value for both our customers and shareholders. And with that, we will open it up for your questions.
Questions and answers
First question comes from the line of Christopher Horvers with JPMorgan.
I wanted to put the comp outlook into perspective, and think about the first quarter a little bit. Do you look at some of the strength in March as deferred February demand and a comparison? And then as you think about the overall spring seasonal business, you tend to have a bit more southern exposure, and it seems like the deferral on the weather front is maybe in the northern tier. So do you think there was any shift of spring out of the first quarter into the second quarter?
Chris, this is Brandon. I would say overall for weather, the theme for Q1 was roughly mix for the quarter. I think February results were definitely impacted by the winter storms early in the year. If you look at just the first weekend of February, it had a 30 basis point drag on the entire quarter just from the storms rolling through. March and April saw much more normal spring temperatures. We did see some dry weather start spread out over most of the country. But I think as we looked at the exit rate into April, some of that had to do with just the timing of our events and our SpringFest. April was relatively in line with expectations. And then as we mentioned in the comments, I think we're really excited about Q2. Great products, value in spring categories, our biggest weeks with Memorial Day, Father's Day, July 4—great offers and go-to-market plans. We do also expect some benefits from tax refunds here in Q2. And then as we look at the second half, really excited as we continue to drive the Total Home strategy across a number of different areas.
And then just stepping back because obviously, tax stimulus has helped the consumer broadly, and you could see that as all retail is reporting earnings right now. As you think about how much that maybe helps your business, do you think it's helped so far this year? Do you have concerns that as you get into the back half of the year if energy prices rise, you could see the actual consumer pullback? Or do you sit here today on May 20 and say, overall, net-net, it's coming in line with your overall expectations from the tenor of the consumer, how they're purchasing and where they're engaging in the assortment?
Chris, we've done a lot of work on the tax stimulus trying to understand the nature and timing. Obviously, the macro events place a little bit more of a question mark around that. But we looked at Q1, the tax refund impact was more limited on our business. More significant drivers were the weather that I mentioned earlier. At this point, we estimate about 20% of the refunds have been spent, about 50% of that sitting in savings with consumers just given the uncertainty and the remainder has offset some of the higher fuel prices of recent. And then we're also estimating as we look forward, and this is based on IRS data, there still is just under about $50 billion of refunds that are yet to be distributed over the next three to four months, likely tied to extensions. So in terms of spending, we do believe we could still see some benefits in Q2, in particular from higher income consumers, and we've contemplated that in our outlook here for Q2 and the balance of the year.
The next question is from the line of Steve Forbes with Guggenheim Securities.
Marvin, I wanted to explore the recent launch of HomeCare+. Really just curious if you could talk about what the hypothesis is as it pertains to member spend trends over time and, realizing it's early, any comment on how those initial member cohorts are engaging with not just the services themselves, but also the broader ecosystem that you guys have in the market?
Steve, thanks for the question. I think the key word is early, and it is early, but we're pleased with the launch. Our goal is to build a long-term relationship with the DIY customer. We're embracing the fact that the majority of our customers are do-it-yourself customers, and we think that this is something unique and differentiated that doesn't exist in the marketplace. But it's early, it's a long-term play. We think it gives us a unique opportunity to leverage our loyalty platform, MyLowe's Rewards, offering a unique subscription service at a great value, leveraging trained local associates that customers will trust and have confidence in. We see this as a long-term play; it's part of our mission statement of solving problems and fulfilling dreams for our customers. We're really excited about what we've seen early, but it is early.
And then just a quick follow-up on Pro Extended Aisle. You guys have been talking about it for quite some time now. I don't know if it's at a point where you can maybe comment on how fast that segment is growing versus the total Pro segment and whether you're already capturing revenue synergies. You hinted at cross-selling synergies with FBM, but would love to hear you expand more about the Pro Extended Aisle initiative.
We're excited about it. It's part of our initiative to do a better job of getting more Pro plan sales, and it gives us the opportunity to extend our product offering and our delivery capabilities without having to add inventory to our stores. We are in the process of continuing to add suppliers and capabilities, but we believe Pro Extended Aisle success is a direct correlation to the fact that we had another strong quarter in Pro sales. And we're forecasting that Pro will continue to outperform DIY not only in the second half but for the balance of the year, and we think the Pro Extended Aisle initiative is tied directly to that outcome.
Next question is from the line of Kate McShane with Goldman Sachs.
We know in the original guidance discussion you have left some room for possible promotions. How did that look in Q1? And what are your thoughts around promotions heading into the rest of the year?
So the first thing is when we think about promotional cadence, we're really consistent with how we perform year-over-year. We're excited about some of the things that we were able to do with SpringFest, and we're really excited about what's coming up with some of these big holiday events in the second quarter. But as an overall comparison, we're very consistent with how we have historically executed promotions. I'll let Bill talk about some of the key promotional activity from Q1 that led to some sales success and what we're expecting leading into some of these big events for Q2.
Yes. Thanks, Marvin. And so Kate, in my prepared remarks, I talked about our third annual SpringFest event in the quarter. We're really pleased with how we executed against that. We had member offers that were strong. We had a really strong in-store event. Our merchants brought really great offers to drive traffic and conversion both in our store and online. We continue to demonstrate to our customers that we've got to bring value, we've got to bring innovation, and we've got to continue to bring new products. And I think our team did a really nice job of doing that as well. When we think about Q2, what's up in front of us coming into this weekend with Memorial Day is continuing to keep these values front and center for the customer. So we're excited about what we've got to offer in lawn and garden and our seasonal business, grills, appliances and outdoor project areas like decking, paint and stains. The team has done a really nice job. We've got great brands that are helping to drive it. And then as we shift gears into June and July, it's all about taking care of that in June and then coming back in July and executing against a strong July 4th event.
And Kate, we've been consistent in our intention to remain competitive and drive sales in this environment, particularly in the key seasonal categories, events and fulfillment options that we've been able to offer. We're seeing great responses from customers to these actions, as Bill mentioned. At the beginning of the year, we said we were going to be investing in sales-driving initiatives tailored around this and our guidance of 11.6% to 11.8% fully contemplates that.
The next question is from the line of Scot Ciccarelli with Truist Securities.
You had positive comps in 70% of your product categories, but the total comp for the quarter was 60 basis points. How should we read that? Is it that most or all of your categories are slightly positive and a few are slightly negative? Or are there some outsized upside performers offset by some sizable drags?
Scot, I think the pressure you're continuing to see is really around the DIY consumer. Marvin mentioned ongoing strength we've seen with the Pro consumer, our services business and online. DIY is still very much engaging, but it continues to be in the repair, maintenance and replacement-related categories. And then obviously, here in Q1 with the seasonal nature of the business, smaller transactions in outdoor, lawn and garden were strong. But the categories related to big-ticket discretionary items are those that continue to lag. That's what we're dealing with and where we're trying to lean in and provide additional value.
Is there any way to size the amount of your exposure to those bigger projects that are the weakest point?
Yes, Scot. We've said pretty consistently as we look at the overall portfolio, about two-thirds of our business is repair, maintenance and replacement and about one-third is in the discretionary category. So that's roughly how it breaks out, and there really hasn't been a change in that.
The next question is from the line of Simeon Gutman with Morgan Stanley.
It looks like transactions are below 2019 levels. If you think about the age of the housing stock and maintenance and repair needs, how big of a piece of the business could that be over time? Do you think the sector can really grow without faster turning homes?
Simeon, this has been the most difficult housing market I've faced in this business since the financial crisis. As Brandon mentioned, the pressure is disproportionately on the DIY customer, which is the majority of our revenue. We've delivered four quarters of positive comps in an environment where DIY faces more economic pressure than I've ever seen. We're confident that as we start to see moderation in the housing market, we're positioned well for long-term gains because we've structured the business to win in any economic environment. With roughly 60% to 65% of our revenue coming from DIY and still being able to deliver positive comps, we take that as a win. We're also focusing on areas like Home Services, Pro and Online, which are allowing us to continue to perform well. I'll hand it over to Brandon to add some perspective.
Yes, and I'll just add we've been extremely focused on driving transactions and traffic to our stores and site. I think that shows with our performance with transactions—some of the best performance we've seen in several years. Our focus is there. We've called out sales-driving actions we will continue to invest in. For the first half, it will be largely skewed towards ticket, but as we look at the second half we expect transactions to continue to improve. It will be centered in repair and maintenance categories, and any consumer engagement on big-ticket discretionary categories would be upside.
A follow-up on the cost environment: it looks like it's gotten a bit more challenging since you guided. Can you talk about the amount of cushion or flexibility you have and whether you may pivot more PPI to get to your margin goals given the cost pressures?
Yes, Simeon. The macro has introduced new risks and uncertainties over the last few months, and we're monitoring it closely. We're seeing an immediate impact from oil prices, pressuring fuel and commodity-based products like resin and plastics. Q1 net impact has been manageable. In Q2 we are starting to see pressure. We're working with vendor and supply chain partners to mitigate through adjustments to contracts and sharing the burden where possible. We're also looking hard at the PPI portfolio, pulling things forward where we can to get outsized benefit to offset cost pressure. This work is in motion. While challenging, this team has proven the ability to manage through multiple inflationary cycles in the last several years, and we have a playbook to remain competitive and manage profitability. So while it's challenging, I'm confident we can work our way through it.
Our next questions are from the line of Seth Sigman with Barclays.
If you look back over the last few quarters, growth has been driven by ticket, which got you to positive growth. That moderated in Q1. Are you seeing a shift in mix, or was there less inflation in Q1 that led to a moderation in ticket? Also, could you elaborate on pricing and where we are in the price increases that started last year related to tariffs and more recent fuel-related pressures—what inning are we in?
On ticket growth, the moderation in Q1 is a function of mix—Q1 leaned into smaller-ticket spring seasonal projects like lawn and garden. Our big-ticket performance was still positive over 2% in Q1, driven by Appliances, Pro and services. On tariffs and inflation, we're continuing to work through the tariff environment and the renewed round of inflation from fuel. It's fluid. We're managing tariffs under the current rules and working with supplier partners—Bill and his team are executing our country of origin and diversification strategies. These dynamics are in our outlook and we showed we could manage through the tariff environment in 2025, so we're comfortable with our positioning for the back half of the year.
Okay. On FBM and ADG, I believe those will come into the comp base later this year. Can you talk about their underlying performance in Q1 and how you are planning these businesses for the rest of the year?
Seth, let me start with the strategic rationale for these acquisitions. We estimate roughly 12 million new homes will be needed by 2033. Historically, Lowe's has had no revenue in new single-family and multifamily construction projects, which is a roughly $250 billion total addressable market. These two acquisitions put us in a good position with an interior solutions platform for residential and commercial builders. That's the strategic rationale, and we're pleased with what we've seen so far from synergies and cost activities. I'll hand it over to Brandon for specifics.
Seth, short-term, we expected to navigate a challenging residential construction market, and it's playing out as expected. ADG is fully exposed to new home construction; FBM has a more diversified customer base and has been doing well on the commercial side, winning data center, stadium and municipal contracts. We're pleased with synergy and integration progress primarily in procurement cost areas like drywall, steel and insulation. Tough macro conditions present opportunities to win new business, and we expect both ADG and FBM to build on leadership positions and emerge stronger when the residential market turns.
The next question is from the line of Steven Zaccone with Citi.
You guided to about 1% same-store sales growth in the second quarter. How should we think about the second half? What are the drivers to see improvement in the second half to get to the high end of the range?
If you're looking at the high end of the range, continued traction with our sales-driving initiatives and Total Home strategy is key. Marvin mentioned Extended Aisle momentum and progress with Online and loyalty platforms, expanded fulfillment, rollout of pet and workwear to all stores by year-end. We also contemplate potential stimulus from remaining tax refunds and any HELOC activity unlocking home equity. All of these could push us toward the upper end of the range if they come together.
Marvin, how do you view the risk of higher rates impacting the business? Backlogs are stable, but do you think higher rates pose downside risk or is it more that we face a prolonged period of softer industry growth?
For us, we've factored rate-related impacts into our 2026 guidance. We started the year with a muted view of the sector broadly and set guidance to take share and outperform the market. We avoid making macro predictions on rates. The lock-in effect from low housing turnover due to higher rates is something we observe, but we came in with a muted view and planned to take market share. We've continued to take share in small- to medium-sized Pro, Home Services, and online grew 15.5%. Despite a difficult DIY environment, we've performed well and we see the market as anticipated and factored that into our guidance.
Our next question is from the line of David Bellinger with Mizuho.
Can you clarify recent trends? You've guided to about 1% same-store sales growth in Q2—are you running at that level today? As April progressed into early Q2, have you noticed any changes in consumer spending patterns across DIY, Pro or income cohorts that would break the consistency of the resilient consumer narrative?
David, where the weather is seasonal, the business is performing well. This time of year is very weather-dependent. The biggest sales weeks are ahead—Memorial Day, Father's Day and July 4. We believe we're the best executing retailer in this space, and our merchants have given us great value, but it's too early to say we are seeing anything different in consumer behavior. What we've seen aligns with our earlier guidance: a K-shaped economy where higher-income consumers spend on innovation and modernization, while lower-income consumers remain cautious. We haven't seen anything different as we start this quarter compared to Q1. We've built a business to perform in any environment, have a track record of managing expenses and growing sales irrespective of the macro, and we plan to take share throughout the year.
A quick follow-up. Where is like-for-like inflation running? With upward pricing pressures from the Iran conflict and other factors, is there a scenario where pricing does not accelerate? Can Lowe's use any potential tariff refunds as an offset to keep prices as low as possible?
Like-for-like inflation is running about 3%, fairly consistent with what we saw in Q4. As we cycle some of last year's tariff noise, we expect moderation in those impacts, which is reflected in our outlook for moderating average ticket and an acceleration in transactions. We're doing everything we can to mitigate inflation risk, protect value for our consumers, and drive repeat traffic into stores. That includes working with vendor partners and leveraging PPI investments to offset pressures. We're committed to these efforts through the remainder of the year.
Our next question is from the line of Zach Fadem with Wells Fargo.
There is an implied acceleration in Q2 and the second half on both a one- and two-year basis. How has your view of the category changed in light of recent global events, and could you walk through the factors that give you confidence in your ability to take share and widen your spread versus the category as the year progresses?
Zach, the year is playing out consistent with our expectations. We're through one quarter and a couple weeks of Q2. We're confident in the initiatives that correlate to our Total Home strategy. At the beginning of the year we expected more growth in the back half than the front, based on cadence of comps and timing of initiatives. This is not dependent on a macro inflection; it's about when our initiatives will pay dividends. Bill can outline key initiatives, and Joe can talk about Pro-specific developments.
Zach, it's the initiatives we've been focused on. We're excited about rolling Daltile into our flooring department—it's the #1 brand for Pro and helps with DIY confidence. We're excited about continued appliance expansion, private brand growth, and innovations across the 13 merchandise divisions set to come in the back half. The rollout of workwear and pet, STAINMASTER innovation in soft flooring, improvements in Pro-focused categories like electrical and rough plumbing, and supply chain work to ensure job lock quantities and localized assorting all support our confidence. Online teams are removing friction and improving navigation across categories.
Zach, on the Pro front, we still have meaningful growth opportunities through Pro Extended Aisle. This is a multiyear build-out. We continue to add capabilities, suppliers and programs, and enhance fulfillment options. We're seeing encouraging early signs as we expand through markets and localization.
The final question comes from the line of Peter Benedict with Baird.
PPI is important for protecting profitability in a sluggish demand period. You discussed AI in prepared remarks for associates and customers online. Can you talk more about AI helping back-end systems—demand planning, pricing and promotion, replenishment? Is there something on the horizon we should be thinking about?
Peter, we're excited about the framework we've put around leveraging AI, framed as how we sell, how we shop and how we work. Our virtual assistant Mylow and Mylow Companion, built on an open AI platform, has been instructive in understanding agentic commerce. Combined associate and customer inquiries approach roughly 2 million a month into the system; it's learning, getting smarter and more intuitive. We're pleased that even tenured associates have embraced the tool; it is intuitive and effective. Joe and I visited a store recently and met associates who had been onboard less than a month who could demo the Companion tool and show how it helped them get up to speed in a complex environment. Our tech team is also using AI tools for development and code review, resulting in double-digit productivity gains. AI will create productivity possibilities as we redesign jobs and AI agents' roles. It's a tool for productivity and for enhancing associate capabilities. Bill can list merchant use cases, and Joe covered store benefits. We're leveraging AI to improve customer satisfaction and associate efficiency.
Peter, to add, areas like demand planning, allocation, replenishment, pricing and promotional platforms and assortment planning are all in motion. We've allocated capital this year to invest heavily in these areas. We're starting to see benefits from PPI; the $1 billion of PPI we've discussed is increasingly apportioned to efforts in these categories. We'll continue to drive this and work through these initiatives, which gives us confidence to deliver the $1 billion goal for this year.
Thank you all for joining us today. We look forward to speaking with you on our second quarter earnings call in August.
This concludes the Lowe's first quarter 2026 earnings call. You may now disconnect.