Lowe's Companies Q3 2025 Earnings Report

Lowe's Companies EPS Results

• Actual EPS: N/A
• Consensus EPS: $2.80
• Beat/Miss: N/A
• One Year Ago EPS: $3.06

Lowe's Companies Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $19.94 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Lowe's Companies Announcement Details

• Quarter: Q3 2025
• Date: 11/19/2024
• Time: Before Market Opens
• Conference Call Date: Tuesday, November 19, 2024
• Conference Call Time: 9:00AM ET

Founded in 1921, Lowe's Companies (NYSE:LOW) Inc. is one of the largest chains of home improvement stores in the United States and the second-largest hardware chain in the world. Operating 1,971 stores in the U.S. and 210 in Canada and Mexico, Lowe's Companies Inc. offers a wide range of products for use in residential and commercial construction, repair, property maintenance, remodeling and decorating. 

The company also provides a variety of in-house and third-party installation services, offered through partnerships with independent local contractors and extended protection plans purchased through Assurant Inc., an insurance company located in New York. Lowe's Companies Inc. also offers subcontracted in-warranty and out-of-warranty repair services under its privately labeled Lowe's Protection Plan. 

Lowe's Companies Inc. is known for competitive pricing and customer service. It has made strategic acquisitions and investments to strengthen its position in the market, contributing to steady revenue growth over the past decade. Additionally, it has embraced new technologies, investing in online ordering, artificial intelligence-enabled customer service and virtual design services to stay ahead of competitors. Lowe's Companies Inc. has also implemented various sustainability initiatives to reduce its environmental impact, including increasing energy efficiency at retail stores and using more renewable energy throughout its logistical systems. 

Lowe's Companies Inc. has many competitive advantages, including a strong balance sheet and commitment to customer satisfaction, helping it remain a leader in the home improvement retail space. Its financials are strong, revenue has grown steadily over the past decade, and it provides shareholder returns that routinely outpace the industry average. 

With over six million shareholders, its financially sound decisions have enabled it to grow its earnings by over 22% in the past decade while increasing shareholder earnings per share to 16% in the same period. 

Lowe's Companies Q3 2025 Earnings Call Transcript

Presentation

[Operator]

Good morning, everyone. Welcome to Loews Company's 3rd Quarter 2024 Earnings Conference Call. My name is Rob, and I'll be your operator for today's call. As a reminder, this conference is being recorded. I will now turn the call over to Kate Perlman, Vice President of Investor Relations and Treasurer.

[Kate Pearlman, Vice President, Investor Relations & Treasurer at Lowe’s]

Thank you and good morning. Here with me today are Marvin Ellison, Chairman and Chief Executive Officer Bill Bolz, 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 2024. 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.

[Kate Pearlman, Vice President, Investor Relations & Treasurer at Lowe’s]

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.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

Thank you, Kate, and good morning, everyone, and thank you for joining us today. Before discussing our Q3 results, I'd like to take a moment to offer my sympathy to the Marcus family on the passing of Bernie Marcus. Bernie and his partners Arthur Blank, Ken Langone and Pat Ferra invented the modern home improvement business model. And many years ago, Bernie took me on his wing to teach me the home improvement business. As a young executive eager to learn about merchandising, marketing and business strategy for one of the icons of the industry, I was surprised that during my first meeting, the only thing that Bernie talked about was the importance of people, both customers and associates.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

Bernie provided me with a lot of coaching, wisdom and advice during my early years in home improvement. He was a true original in every sense of the word and because of his generosity and philanthropy, he leaves a legacy far beyond the home improvement industry. From me personally and from all of us at Lowe's, our thoughts and our prayers go out to his family and to his loved ones. Now allow me to transition to our 3rd quarter results. 3rd quarter sales were $20,200,000,000 and comparable sales were down 1.1%.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

Our results were modestly better than expected even excluding storm related activity driven by strong pro and online sales and smaller ticket outdoor DIY projects. While demand for DIY discretionary bigger ticket projects remain soft, we're tightly managing our operating expenses and continuing to invest in our total home strategy. We're particularly pleased with the sustained strength we're delivering in 2 key areas, pro and online sales. Our pro sales were up again in Q3 with high single digit positive comps. This growth is being driven by the investments we've made to better serve the small to medium sized Pro, which is our core Pro customer.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

Our efforts to transform the Pro shopping experience continue to pay dividends. We have the inventory depth in the brands that are the most important to these customers, and we're making it easy for them to shop in our stores and online. And through our Pro loyalty program, we're giving them reasons to keep coming back. Later in the call, Joe will provide more detail on our efforts to continue our momentum in Pro. We also continue to grow our online sales with 6% comparable sales growth.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

We've increased both online conversion and traffic, including a double digit increase in traffic on our Lowe's mobile app. And we're making it easier and more convenient for customers to order paint and paint supplies online by expanding our free same day paint delivery program via our Gig network. And as a reminder, paint remains the number one home improvement project. So we've added more brands and products to our same day delivery options so customers can get what they need to finish their projects faster, delivered right to their home or job site. Customers are also leveraging our new in store mode in the Lowe's app which gives them product information at their fingertips.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

Through the app, they are able to quickly access product details, reviews and in stock information and they can more easily navigate the store to find what they're looking for. And if they don't see the exact product they need on the shelf, they can shop on the app right within the aisles of our stores for a larger selection of products and finishes from our extended aisle on lowes.com. Another way we're driving traffic both online and in store is through our MyLowe's Rewards loyalty program, which we just launched in March. This free program is designed to reward DIY customers for choosing Lowe's over other retail competitors for their home improvement needs. Customers are engaging in the program to take advantage of new member only offers, earn MyLow's money and use their rewards.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

You'll hear more about our loyalty program from Bill later in the call. Now allow me to transition to the economy. When it comes to the macro environment, this remains a challenging home improvement market. While interest rates are beginning to drop, consumers continue to face affordability challenges as both inflation and interest rates are putting pressures on their wallet. Mortgage rates also remain stubbornly high and there's still a meaningful gap between current mortgage rates to purchase a home and a homeowner's existing rates with over half of current rates below 4%.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

Combined with the lack of available homes for sale, housing turnover remains near 30 year lows. Looking ahead, it's unclear when lower rates and improved consumer sentiment will translate into improved home improvement demand. However, the 3 primary drivers of our business continue to work in our favor: 1, strong home price appreciation 2, disposable personal income is outpacing inflation and 3, the medium age of homes is the oldest it's been in U. S. History currently sitting at 41 years old.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

These drivers will support demand over the long term, which means existing homeowners are likely to continue investing in repairs and upgrades to their homes. Especially as interest rate pressures ease, we expect that homeowners will start to tap into the record $35,000,000,000,000 in home equity to finance larger home improvement projects. These factors along with long term demand drivers like millennial household formation, baby boomers aging in place and continued remote work reinforce our optimism around the medium to long term outlook for the home improvement industry. In the meantime, we're investing in our total home strategy to position the company for long term growth and sustainable market share gains in preparation for the anticipated home improvement market recovery. We're looking forward to telling you more about our plans at our Analyst and Investor Conference next month.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

Before I wrap up, I'd like to extend our thoughts and prayers to everyone was impacted by hurricanes Helene and Milton. And I want to express my gratitude to our associates, suppliers and first responders for their efforts to support those in the storm's path. Working together, the teams provided round the clock support ahead of both hurricanes and immediately mobilized in their wake to help address urgent needs and impacted communities across the Southeast. As part of the largest storm recovery efforts in our company's history, Lowe's has pledged $12,000,000 to support disaster relief assistance through several non profit organizations with boots on the ground. As part of this commitment, we recently announced plans to provide $2,500,000 in grants and support to help small businesses in Western North Carolina recover and to rebuild.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

Joe, Bill and Brandon will each share more detail on Lowe's response efforts and provide more context on how these storms impacted our results. In closing, I'd like to thank all of our frontline associates for their dedication to serving our customers and supporting our communities. I especially would like to salute our frontline associates in Florida and North Carolina for their commitment to their neighbors and for their resiliency. Now I'd like to turn the call over to Joe to talk more about our storm recovery efforts and our store operations.

[Joseph McFarland, Executive Vice President of Stores at Lowe’s]

Thank you, Marvin, and good morning, everyone. Hundreds of stores felt the impact of hurricanes Helene and Milton, and our operations team worked tirelessly to get them up and running quickly, leveraging our improved disaster response capabilities that we have continued to enhance over the years. Investments in our supply chain network helped us mobilize essential supplies, staging inventory in nearby distribution center facilities more efficiently ahead of the storms and flowing products to impacted stores more quickly afterward. Recent investments in pro job site delivery, especially in hurricane prone areas, also help with our relief efforts, so we can more quickly flow larger orders to our pro customers to support their work helping homeowners recover. In the largest activation of its history, our command center team coordinated these efforts across the company, while district and store managers responded to the needs of their communities by ensuring that critical supplies were positioned for convenient access for our customers.

[Joseph McFarland, Executive Vice President of Stores at Lowe’s]

Additionally, hundreds of associates have volunteered in Western North Carolina to clean houses, clear debris and serve warm meals. And I'm particularly grateful to the over 1,000 emergency response team members who voluntarily left their homes to support stores in the impacted areas. These teams quickly mobilized to serve customers reeling from storm impacts and to relieve local associates so they could focus on their own recovery efforts. Despite the challenges posed by the storms, I'm pleased that we maintained our recent gains in customer satisfaction. This is a reflection of the investments we've made in tech driven enhancements to the customer experience as well as the ongoing commitment of our associates to deliver outstanding customer service.

[Joseph McFarland, Executive Vice President of Stores at Lowe’s]

Shifting gears to our performance in Pro. As Marvin mentioned, we delivered positive high single digit Pro comp sales in the quarter with broad based growth across regions and merchandising categories. And we continue to deliver outsized growth in Pro online sales, driven by our enhanced digital offering for the pro. We recently launched Shop the Job, a digital shopping experience that helps our pro loyalty customers purchase everything they need for specific jobs more quickly and efficiently, cutting down on the time spent sending runners from job site to buy forgotten items. We launched this program with a focus on kitchens, bath and flooring projects and look forward to expanding to additional project types as we incorporate our Pro customers' feedback on this initial rollout.

[Joseph McFarland, Executive Vice President of Stores at Lowe’s]

Looking ahead, Pros in our recent survey indicated that their backlogs remain strong and consistent with prior year. They also remain confident about their access to financing, labor and materials, all key factors driving the success of their business. Turning to our efforts to become the employer of choice in retail. A few weeks ago, we concluded our annual engagement survey, a critical component of our proactive associate listening strategy. Our 90 plus percent response rate is industry leading and we're pleased that our preliminary scores across the key measures of engagement and leadership effectiveness continue to improve as past surveys show a correlation between more engaged associates and stronger business results driven by better customer service.

[Joseph McFarland, Executive Vice President of Stores at Lowe’s]

As Marvin mentioned, we continue to see increased engagement in our MyLowe's rewards programs, and we're pleased this quarter to recognize first responders by upgrading them automatically to Silver Key status. This is part of our 4th annual first responders appreciation event held last month. This is just another way we're working to show our gratitude for the mission critical work they do for our communities. Finally, I'm looking forward to discussing what's next on our perpetual productivity improvement or PPI roadmap next month at the Analyst and Investor Conference. We'll discuss our continuing efforts to elevate the customer experience, while at the same time enhancing labor productivity through tech driven solutions.

[Joseph McFarland, Executive Vice President of Stores at Lowe’s]

I would like to close by thanking all of our associates for their hard work and commitment to our customers. And now let me turn it over to Bill.

[William Boltz, Executive Vice President of Merchandising at Lowe’s]

Thank you, Joe, and good morning, everyone. We're pleased with the strong performance we delivered in pro and online again this quarter. And while DIY bigger ticket discretionary demand remains pressured, we saw improved results in outdoor categories. Now turning to our results in Hardlines, where we delivered positive comps driven in part by hurricane related sales of products like generators, chainsaws, cleaning supplies, water, gas cans, tarps and flashlights. We also saw customers engage in projects to help their lawns recover from a summer of intense heat, which drove strength in outdoor categories like lawn care, landscape products and fall cleanup supplies.

[William Boltz, Executive Vice President of Merchandising at Lowe’s]

Taking all of this into account, we delivered positive comps for the quarter in both seasonal and outdoor living and hardware. Next, we're getting ready for the upcoming holiday season. We're offering customers innovative products at great values all season long. Starting with our new Black Friday build up event, we're encouraging customers who are gearing up for the holidays to shop early with deals on top rated Craftsman, DEWALT and Cobalt tools. And next week, we're excited to welcome customers to our Black Friday event where they can continue to save with online exclusive deals and special in store offers that will be too good to pass up.

[William Boltz, Executive Vice President of Merchandising at Lowe’s]

During the event, MyLowe's Rewards loyalty members will also have early access to more exclusive doorbusters on Thanksgiving Day on lowes.com. In fact, since tools are perfect holiday gifts for both the do it yourselfer and the pro in your family, we'll have compelling offers from brands like Klein and DeWalt and DeWalt will take over the pro drop zone in a big way throughout the holiday season. We're featuring a great selection of DEWALT's best performing 20 volt MAX XR batteries and power tools, which have more power, longer run times and increased durability compared to a typical 20 volt battery. Turning to building products, where we delivered comps above the company average driven by positive comps in building materials with the continued strength in Pro as well as hurricane related sales. And we're continuing to add to our powerful Pro brand arsenal by welcoming to Lowe's the world leader in drywall tools, wallboard tools.

[William Boltz, Executive Vice President of Merchandising at Lowe’s]

This new assortment will include a comprehensive range of the best and most innovative products in the industry that caters to both seasoned drywall professionals and DIYers with tools for every step of the drywall process from taping knives and trowels to texturing and repair patches. We're also pleased to introduce the PELUS Steadyset interior installation system, an innovative way for pros to install windows from the inside. It's faster and safer than exterior installation because installers now won't have to carry a window up a ladder. This innovative solution turns a 3 day installation into a one day job and reduces ladder time by 70%. This will be a game changer for pros, making it easier than ever for them to provide high quality window installation while cutting down on labor expense.

[William Boltz, Executive Vice President of Merchandising at Lowe’s]

Shifting now to home decor. We continue to see ongoing pressure in DIY bigger ticket discretionary projects in categories like flooring, kitchen and bath and decor. In appliances, 3rd quarter comps improved slightly from our Q2 trends driven by growth in average ticket size. We delivered positive comps in laundry partly driven by the expansion of the new all in one washer and dryer units and integrated wash towers. These new and exciting products are driving growth in laundry and reflect the customers' willingness to trade up for innovation in new products.

[William Boltz, Executive Vice President of Merchandising at Lowe’s]

Another example of consumers responding to innovation is in refrigeration with LG's new 0 clearance line, which has a hinge system that allows homeowners to install the refrigerator in tight spaces and still fully open both doors with virtually no extra clearance needed. Finally, we're pleased to see continued momentum in our Milo's Rewards loyalty program with promising results in key performance metrics like repeat purchases, average order value and penetration of loyalty member purchases. And we're now leveraging the insights we gained from our loyalty program to transform our marketing with tailored offers by anticipating what customers need next. And we're reminding them to take advantage of their Milo's money, sending them tailored offers to entice them to return and shop categories we know they've shopped before. We're also giving members exclusive access to new product launches like best customer events and doorbusters.

[William Boltz, Executive Vice President of Merchandising at Lowe’s]

In October, we launched our first ever member week with offers across categories like appliances, kitchens and bath, paint and more. For the first time, we now have the ability to drive our own event schedule for our DIY customers. Instead of being tied to the calendar, we can now create events when we see an opportunity to drive excitement, traffic and sales. In closing, I'd like to thank our supplier partners and merchants for their hard work and shared commitment to ensuring we have the right brands and the right assortment for our DIY and Pro customers. And I'd like to recognize 2 of our suppliers for their support of our storm recovery efforts.

[William Boltz, Executive Vice President of Merchandising at Lowe’s]

Starting with Niagara Water, this team sent more than 700 truckloads of additional bottled water from their plants outside of our typical network, in many cases turning around our orders in less than 24 hours to help us serve our customers in need. And also Furman Power Equipment, they source generators from all around North America to get them to our stores and our customers in the hardest hit areas where their warehouse crews worked literally overnight and through the weekends to ensure our emergency orders arrived in less than 24 hours. They also deployed 2 storm trailers with dedicated staff to Lowe's stores across Georgia, North Carolina and South Carolina to help our customers start their generators, find the right product for their needs and even repair old units regardless of the brand. I want to thank them and all of our suppliers who stepped up to help during this difficult time. And now I'd like to turn the call over to Brandon.

[Brandon Sink, Executive VP & CFO at Lowe’s]

Thank you, Bill, and good morning. Beginning with our Q3 results, we generated GAAP diluted earnings per share of $2.99 In the quarter, we recognized a pretax gain of $54,000,000 on deferred consideration associated with the 2022 sale of our Canadian retail business. Excluding this benefit, we delivered adjusted diluted earnings per share of $2.89 My comments from this point forward will include certain

[Brandon Sink, Executive VP & CFO at Lowe’s]

non GAAP comparisons that exclude this

[Brandon Sink, Executive VP & CFO at Lowe’s]

benefit where applicable. My comments

[Brandon Sink, Executive VP & CFO at Lowe’s]

from this point forward will include certain non GAAP comparisons that exclude this benefit where applicable.

[Brandon Sink, Executive VP & CFO at Lowe’s]

3rd quarter sales were $20,200,000,000 with comparable sales down 1.1%. We estimate the demand generated by hurricanes Helene and Milton positively impacted comp sales by roughly 100 basis points. Excluding the storm related lift, sales came in modestly better than expected, driven by continued strength in pro and online, as well as smaller outdoor projects as customers work to address the impact of intense summer heat on their outdoor living spaces. Comparable average ticket was up 0.2% driven by strength in pro, an increase in average ticket for appliances and sales of storm related products. Comparable transactions declined 1.3% as continued softness in DIY discretionary projects was partly offset by growth in pro transactions.

[Brandon Sink, Executive VP & CFO at Lowe’s]

Our monthly comps were down 3.3% in August, down 1.2% in September and up 1.3% in October as hurricane related sales positively impacted the second half of the quarter. Gross margin was 33.7 percent of sales in the 3rd quarter, up slightly from prior year. Gross margin benefited from ongoing PPI initiatives, which were largely offset by continuing supply chain investments and storm related pressures which included mix pressure from lower margin products like generators, chainsaws and lumber, incremental transportation costs to expedite product into affected areas and inventory losses from damages in multiple locations. Adjusted SG and A of 19.2 percent of sales delevered 86 basis points versus prior year. Adjusted SG and A was largely in line with our expectations except for direct storm related expenses which included philanthropic support for our communities and associates, repair and impairment costs for damaged stores and facilities and incremental labor and other operating expenses like using diesel generators to power buildings during extended electrical outages.

[Brandon Sink, Executive VP & CFO at Lowe’s]

Adjusted operating margin rate of 12.3% declined 86 basis points and the adjusted effective tax rate of 24.2% was in line with prior year. Inventory ended Q3 at $17,600,000,000 which was roughly flat to prior year as we continue to manage our purchases in line with sales trends and invest in key pro items. Now turning to capital allocation. In the Q3, we generated $728,000,000 in free cash flow. Capital expenditures totaled $571,000,000 as we continue to invest in our key growth initiatives.

[Brandon Sink, Executive VP & CFO at Lowe’s]

We repurchased 2,900,000 shares for $758,000,000 and paid $654,000,000 in dividends returning over $1,400,000,000 to our shareholders. In September, we repaid a $450,000,000 bond maturity and ended Q3 at adjusted debt to EBITDAR of 3.04 times. And we delivered a return on invested capital of over 31%. Now turning to our outlook. We are updating our full year 2024 financial outlook to reflect better than expected Q3 results and anticipated modest storm related demand in the 4th quarter.

[Brandon Sink, Executive VP & CFO at Lowe’s]

While our Q3 results came in ahead of expectations, much of it was driven by hurricane related sales, while underlying DIY demand remains pressured, especially for discretionary projects. Taking these factors into account, we are now expecting 2024 sales in the range of $83,000,000,000 to $83,500,000,000 with comparable sales in a range of down 3% to down 3.5%. We also now expect adjusted operating margin of between 12.3% 12.4 percent reflecting the benefits of our ongoing PPI initiatives as well as the incremental direct costs and a lower gross margin rate profile for storm related activities. Additionally, we expect full year net interest expense of approximately $1,300,000,000 capital expenditures of approximately $2,000,000,000 and adjusted effective income tax rate of approximately 24.5%. This results in an updated outlook for adjusted diluted earnings per share of approximately $11.80 to $11.90 I'm confident that our continued investments in our total home strategy and our ability to effectively manage our business in any environment will allow us to navigate any near term market uncertainty while continuing to deliver long term shareholder value.

[Brandon Sink, Executive VP & CFO at Lowe’s]

And with that, we will open it up for your questions.

[Operator]

Thank you. We are now ready for questions. Our first question is from the line of Peter Benedict with Baird.

[Peter Benedict, Managing Director - Equity Research at Robert W. Baird & Co]

Hi, good morning guys. Thanks for taking the question. First, just on the DIY loyalty program, you mentioned better penetration levels and renewal rates or repeat rates, I should say, in the AOV. Any more color you can add on that? I'm curious as to where those maybe sit and curious on the year 2 playbook for DIY loyalty.

[Peter Benedict, Managing Director - Equity Research at Robert W. Baird & Co]

I imagine a lot has been focused on kind of gathering the membership at this point. But just curious kind of what the year 2 playbook looks like for the DIY loyalty program? That's my first question.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

Hey, Peter, this is Marvin. I'll take your question. I would say we're really pleased with the entire program. As a reminder, we launched it in March, and we're continuing to see the membership build. This past October, we launched our first ever member week, which really allowed us to hit a record enrollment week based on that event.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

So all in all, we're extremely pleased. We're seeing the key metrics that really matter for loyalty program, things like repeat purchases, average order value for loyalty members, and we're also seeing a higher penetration of our loyalty members making larger purchases. Now the caveat is that we're going to provide a lot more detail on this program, not only kind of where we are, but where we're headed at the Analyst Investor Conference next month. As a matter of fact, it's going to be one of our key discussion topics. So we'll kind of hold off on talking about the future of the program until that time.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

I'll see if Bill has any other specifics on the program just to share our degree of confidence and excitement around kind of what we're seeing thus far.

[William Boltz, Executive Vice President of Merchandising at Lowe’s]

Peter, the only thing I would add is that in my prepared remarks, I talked about being able to offer some tailored events. And so next week, as we head into Black Friday on Thanksgiving Day, we'll give our members early access to some Milo's rewards offers. And so we're excited about that. And as Marvin mentioned, we did our first ever October member only week. And so I think that allows us to learn a lot.

[William Boltz, Executive Vice President of Merchandising at Lowe’s]

And we can now work within our own calendar to create these exclusive events for our members and do some special things as we go forward.

[Peter Benedict, Managing Director - Equity Research at Robert W. Baird & Co]

Okay, great. That's helpful. Thanks on that. My follow-up would just be around tariffs. Any way you'd want to frame kind of the exposure?

[Peter Benedict, Managing Director - Equity Research at Robert W. Baird & Co]

And actually even more interested in just what the playbook looks this time in the event some of the increases being tossed around come to fruition. Everybody went through this a handful of years ago. Just curious your kind of approach, your level of exposure and your thoughts on tariffs, if they are to increase here? Thanks so much.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

Yes. So Peter, this is Marvin. I'll start it off by saying a statement of the obvious, and that is, it's very early. And like everyone, we're waiting to see what happens when the Trump administration actually takes office in January. Having said that, we feel good about the processes and the systems we put in place since the 1st Trump administration to manage tariffs or other challenges.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

I'll hand it over to Bill to talk about some of the work we've done to diversify our sourcing over the past few years. And then I'll see if Brandon after that has any additional comments.

[William Boltz, Executive Vice President of Merchandising at Lowe’s]

Yes. Thanks, Marvin. We've built out what I think is probably one of the strongest teams in retail. And so as far as from a playbook perspective, we've got enhanced tools, a really strong process in order to deliver whatever gets thrown at us. In addition to Marvin's comment, we've been working over the last few years with our supplier partners and our private brand partners to diversify our products and we'll continue to do that.

[William Boltz, Executive Vice President of Merchandising at Lowe’s]

And a big part of our playbook is to work closely with our suppliers to manage whatever comes our way. And so we feel really comfortable and confident that we can address whatever is that gets thrown at us. Yes.

[Brandon Sink, Executive VP & CFO at Lowe’s]

And Peter, this is Brandon. Just as Marvin said, definitely staying very close to this. We're preparing internally for what may be coming from the new administration. I'll just mention roughly 40% of our cost of goods sold are sourced outside of the U. S.

[Brandon Sink, Executive VP & CFO at Lowe’s]

And that includes both direct imports and national brands through our vendor partners. And as we look at potential impacts, certainly would add product costs, but timing and details remain uncertain at this point. But just as Bill said, we believe we're well prepared to respond when and if it does happen.

[Peter Benedict, Managing Director - Equity Research at Robert W. Baird & Co]

Great. Thanks so much guys. See you in a couple of weeks.

[Brandon Sink, Executive VP & CFO at Lowe’s]

Yes. Thanks, Peter.

[Operator]

Our next question is from the line of Stephen Forbes with Guggenheim Securities. Please proceed with your

[Operator]

questions.

[Steven Forbes, Senior Managing Director at Guggenheim Securities]

Good morning. Marvin, maybe a follow-up to Peter's question on DIY and really just wanted to get your higher level thoughts on how you guys are thinking about planning the business for next year. As we look at DIY trends sort of this quarter maybe showing signs of stability on a multiyear basis or really just wanted to dig into how you guys are thinking about predicting or forecasting the DIY performance of the business, just given some of the challenging comps you've had over the past couple of years here? And if there's any sort of path or visible path to a return to sort of stability in comp as it pertains to DIY?

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

No. Hey, Steve, thanks for the question. And look, I state all the time with the team that we have to accept our reality as a company. And the reality is we are a DIY dominant business, which means that this is very important to us. Our loyalty program that we launched this year was specifically designed around putting more control of the DIY business under our stewardship versus being victims to the macro or really victims to weather patterns.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

And so we're excited next month to give some level of detail around the loyalty program and how we believe that that's going to give us the ability to again be more on offense, so to speak, when you think about the DIY customer. Now the reality is, is that the macro environment puts a lot of pressure on our DIY business because we kind of skew more to that big ticket DIY discretionary. Think of appliances, think of flooring, kitchen and bath, etcetera. And so, we are requiring some positive response in the macro environment before we can change these trends the way that we would like. But our business thesis is really simple.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

We're going to continue to invest in pro and online, and we're incredibly pleased with what we've seen thus far. Anytime you can deliver high single digit positive comps in any category in this environment, you have to feel good about it. And as we've mentioned, we grew our online sales by 6%. So, our business thesis is that we can continue to grow pro at 2x the market, we can continue to grow online, and we can get this DIY business just growing at market based on some macro support, we're going to have a really good financial outcome. And so, we're going to provide a lot of detail at the upcoming Analyst and Investor Conference, specifically around our thoughts on the DIY, and more importantly, the initiatives that we're going to be either executing at a higher level or implementing that we believe is going to give us a lot more ability to drive this customer segment in the future.

[Steven Forbes, Senior Managing Director at Guggenheim Securities]

Appreciate the color there, Marvin. And just a quick follow-up for Brandon, two parts on the storm related impacts. I guess, first, can you quantify the comp contribution in the latter 2 months of the period? And then as it specifically pertains to gross margin, what were the storm related pressures on gross margin during the quarter?

[Brandon Sink, Executive VP & CFO at Lowe’s]

Yes, Stephen, this is Brandon. Just as I said in the prepared remarks, 100 basis points impact to comps in Q3. That was weighted to the back half of the quarter. And again, that's largely related to prep cleanup activities. We saw strength in categories like generators, chainsaws, cleaning supplies and lumber.

[Brandon Sink, Executive VP & CFO at Lowe’s]

But again, the majority of that back half weighted. As it relates to our margins and pressure from the storms, really what we saw in terms of impacting gross margins, it's reflective of product mix, again, categories like generators, OPE, we had incremental transportation, damaged inventory in multiple locations. And then from an SG and A standpoint, just a number of one timers there as it relates to community support, facility repairs, store impairments and then just some incremental OpEx to support our stores. So definitely a bit of a drag on the incremental sales, mostly isolated to Q3.

[Steven Forbes, Senior Managing Director at Guggenheim Securities]

Thank you.

[William Boltz, Executive Vice President of Merchandising at Lowe’s]

Thank you.

[Operator]

Our next questions are from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.

[Simeon Gutman, Analyst at Morgan Stanley]

Hey, good morning, everyone. Thanks for getting me on. Can I just ask a follow-up on maybe the hurricane and related to Q4? It looks like comps will be a little bit better because of hurricane, but EBIT dollars doesn't look like it will be. So is there anything unique on margin that's holding back Q4?

[Simeon Gutman, Analyst at Morgan Stanley]

And I apologize if you said it earlier and I missed it.

[Brandon Sink, Executive VP & CFO at Lowe’s]

No, I think, Simeon, this is Brandon. We are adding some modest storm related benefit to Q4 in the top line, but from an operating margin standpoint, in Q4, excluding storm related impacts

[Brandon Sink, Executive VP & CFO at Lowe’s]

as it relates to

[Brandon Sink, Executive VP & CFO at Lowe’s]

the full year, roughly in line with the prior year outlook. So as I mentioned, most of that's isolated to Q3. Slight impact on top line for Q4, but are not expecting any sort of significant drags from a gross margin or operating margin standpoint in Q4.

[Simeon Gutman, Analyst at Morgan Stanley]

Okay. And a follow-up on the Pro. It picked up on at least a single year basis. I think it's high single digits. So can we talk about what's driving it?

[Simeon Gutman, Analyst at Morgan Stanley]

And I guess this may be difficult to answer, but when the cycle turns, curious does traditionally does DIY or DIFM accelerate more? And I get DIY is a bit depressed relative to where you'd like it to be. But does that mean it necessarily comes up first or does the pro strength continue given where it is?

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

So Simeon, I'll take the first part of that and I'll let Joe just give some specifics on some of the initiatives that we're seeing that's really driving the business. So, if I could take you back, I mean, when we started this journey back in 2018, I mean, our pro penetration was less than 20%, and we didn't really have a true strategy to speak of. And our total home strategy is really starting to pay some benefits, and that's really driving the outperformance. The things that I can be very specific on that we're seeing that's really resonating with our pro customers, and let me remind you, this is the small to medium pro customer, which has a total addressable market of about $250,000,000,000 just that small to medium pro. And so our focus has been on expanding pro brands, which Bill and his team have done just an incredible job of getting us brands that literally had walked away or brands that we had to reintroduce to our company.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

We've improved service levels in the stores, and I'll let Joe speak specifically on that. And we've made just aggressive investments in what we call never out key SKUs to make sure that the Pro is always serviced when they come in to buy those items. And our loyalty program is providing some level of stickiness, even though we're going to talk next month at the Investor Conference, some unique tweaks we're going to make to that. And digital online for Pro grew double digits as well, and we're just really pleased with the fulfillment capabilities. So that's the snapshot of kind of how we performed as well as we did in Q3.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

Now, as we think about the recovery, obviously, we don't have a crystal ball, but the way we look at it is what I said earlier. We're committed to growing Pro at 2 extra market because we think that there's market share we can continue to gain. And the small to medium sized Pro, we believe, is up for grabs and also it's a very fragmented marketplace. So we believe that what we've designed can allow us continue to grow that at 2x market. But when the market recovers, we believe that recovery is going to come in earnest in that DIY big ticket and also for that do it for me customer.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

And those are going to be 2 specific topics that we're going to be very purposeful in discussing at the upcoming conference around initiatives to drive that. So when the inflection happens, we're going to be in a really good position as a company to take advantage of that inflection and have exactly what the customers need from technology and capabilities to serve them. Now, let me just transition to Joe, and he can talk specifically about some of the service initiatives in the store that's really helping us drive this pro customer.

[Joseph McFarland, Executive Vice President of Stores at Lowe’s]

Yes. Thanks, Marvin. Simeon, as you know, we've been focused on the pro for the last 6 years. And it's all part of the total home strategy. And when I think about what is driving the pros to choose Lowe's today, and we talked a lot about the tools we continue to provide to the pro, the easy in and out, the investments we're making in our outside sales teams.

[Joseph McFarland, Executive Vice President of Stores at Lowe’s]

And more specifically, as you think about our pro fulfillment centers that we've been focused on across the country. And so these allow us to use these facilities in a dual purpose. And we're very pleased about the survey from Q3. The PROs backlogs continue to have a lot of strength. They continue to remain healthy, really focused on smaller projects, and we feel that our ability to service this PRO is taking share.

[Simeon Gutman, Analyst at Morgan Stanley]

Thank you very much.

[Operator]

Our next questions are from the line of Christopher Horvers with JPMorgan. Please proceed with your question.

[Christopher Horvers, Senior Analyst at JP Morgan]

Thanks guys and good morning. So I'm going to try to go after the DIY question a little bit of a different way. It looks like DIY was maybe down 4%, the first half was down about 7%. Was this in line with your expectation? And then thinking forward, if you went back to post the financial crisis, there's a lot of small update projects like paint, some appliance replacement, maybe some decor items and needs.

[Christopher Horvers, Senior Analyst at JP Morgan]

So as you look ahead, how does the progression of DIY over the year influence your view on not only like when DIY flips, but how it flips? And do you think that this next cycle, especially considering where rates are, looks like that past period of like 2010 to 2013?

[Brandon Sink, Executive VP & CFO at Lowe’s]

Yes, Chris, this is Brandon. I'll just speak to high level DIY performance in this kind of ex hurricane for the quarter. I would say our trends that we saw largely were in line with our expectations. As you mentioned, we continue to see strength in some of the smaller project activity we called out outdoor projects. When we look at the DIY customer, they remain engaged across key events and continue to look for value.

[Brandon Sink, Executive VP & CFO at Lowe’s]

We saw that over Labor Day and the Milo's Rewards Week. But certainly continued underlying pressure in big ticket discretionary, so categories like kitchen and bath, flooring and decor, and really continue to just see that tied to the macro. We look at mortgage rates that continue to remain elevated, consumer sentiment, housing turnover, affordability continue to create pressure here in the near term. So we do see that pressure sort of continuing as we transition from 'twenty four and into 'twenty five. We are expecting some level of additional engagement and some acceleration as we move from smaller repairs into some of the larger projects.

[Brandon Sink, Executive VP & CFO at Lowe’s]

But really the timing of that and into 2025 and when that happens is still continues to be uncertain. So that's what we're looking for as we look for an inflection point, but as it relates to the near term, more in line with expectations at this point.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

And Chris, this is Marvin. So we've been very specific over the last few years on where we placed our capital investments. And we spent a lot on IT infrastructure, on digital, and we spent a lot on store improvements. So if you think about kitchen and bath showrooms, we have a best in class presentation in our stores and we have a best in class experience online. When you think about appliances, we have a best in class appearance in our stores and presentation, we have the best assortment in retail and we have the best experience online where we're the only retailer that can ship almost virtually any zip code in the country next day and today.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

And so my point is, is we don't know when the inflection is going to occur, but we think it will occur in a DIY do it for me category. And we made investments to position ourselves to be able to take market share and take our unfair share of the demand that will show up based on this $35,000,000,000,000 in equity that's out there in these homes that are aging on average of 41 years or older than the year's history. So we don't know when the inflection happens, but when it happens, we've been building a playbook to be prepared and positioned unfair share of that market demand. And that's what the intent is for us. And we'll again provide more specifics on that when we update on our long term strategy next month.

[Joseph McFarland, Executive Vice President of Stores at Lowe’s]

Got it. And more specifically to

[Christopher Horvers, Senior Analyst at JP Morgan]

Sorry, go ahead.

[Joseph McFarland, Executive Vice President of Stores at Lowe’s]

More specifically to your smaller projects, things that we've been focused on are same day delivery options for paint, paint samples, expanding our gig delivery network. And then the infrastructure we've been building around our do it for me business. We've been laser focused on things like central selling to complement. And so again, as we don't know when the inflection point will happen, we're certainly confident in the investments we're making.

[Christopher Horvers, Senior Analyst at JP Morgan]

Got it. Thank you. And then my follow-up is a margin question. So one, was the hurricane actually a net drag to earnings? It seems like that's what your point is too.

[Christopher Horvers, Senior Analyst at JP Morgan]

Can you share any detail there? And then I know you changed your operating margin for the storm impact. As you think about the gross margin, you had previously guided gross margin up in the 3rd Q4. I think it would have been ex the storm impact. Do you still expect gross margin up in the 4th quarter?

[Brandon Sink, Executive VP & CFO at Lowe’s]

Yes, Chris. To the first part of your question, from an earnings standpoint, it was slightly accretive. So carried a lower margin profile, but still accretive to earnings when we look at the incrementality on the sales. And then your second part of your question on the gross margin profile, and I'm speaking for the year. Now we still are roughly expecting flat for the full year.

[Brandon Sink, Executive VP & CFO at Lowe’s]

So that's inclusive of the hurricane related pressure that we called out from Q3, ongoing headwinds as it relates to margin, our supply chain investments with market delivery in the early innings of pro fulfillment network. And then in terms of offsets there, merchant supply chain PPI, so initiatives, including expanding private brands, pricing initiatives. And then we're seeing really nice progress on the cost clawback with our suppliers. And we've seen that benefit accelerate as we move through the year and turn through inventory. And then other items in gross margin items like credit and shrink continue to be roughly flat for the full year.

[Brandon Sink, Executive VP & CFO at Lowe’s]

So really great job by the teams managing those pressures.

[Christopher Horvers, Senior Analyst at JP Morgan]

Thanks so much.

[Brandon Sink, Executive VP & CFO at Lowe’s]

Thanks, Chris.

[Operator]

Our next question is from the line of Eric Bossard with Cleveland Research. Please proceed with your question.

[Eric Bosshard, CEO at Cleveland Research Company]

Thanks. 2 things. First of all, Bill, you talked about and Marvin, you talked about as well affordability challenges is something that's pressuring the consumer. I'm curious how you're thinking now and even in 'twenty five, what you're doing in response to that? I guess you talked about a couple of categories appliances where maybe there was some trade up.

[Eric Bosshard, CEO at Cleveland Research Company]

But curious if as you think about promotions and price points, if you're doing anything in response to that to better position the business for traffic with consumers or if where you are now is where you want to stay?

[William Boltz, Executive Vice President of Merchandising at Lowe’s]

Yes, Eric, great question. We continue to stay focused, really laser focused on value. And as we've said in past meetings, value can come a number of different ways. Value can certainly come through price, can come through new and innovative products and we've seen it really come all three ways. And so some of the stuff that I referenced in my prepared remarks, being able to drive some of these smaller projects was really value driven based on getting the consumer focused on different projects and products across the store.

[William Boltz, Executive Vice President of Merchandising at Lowe’s]

And as we head into the holiday season, we're obviously excited about some of the new stuff that we're bringing. We've got great values across the board from Klein, DeWalt, Craftsman, Cobalt. We've got great innovation coming from appliances as well as new products that we're introducing as I called out in my prepared remarks from LG in these laundry, this new innovation in laundry with the all in one is really a whole new segment. And that's not a low price point, but it's a great value product when a consumer looks to combine both the washer and the dryer in one. And now it's a category of products where it had only been one item in the past.

[William Boltz, Executive Vice President of Merchandising at Lowe’s]

And then as we said about Milo's Rewards, that gives us the opportunity to differentiate to our members and offer them best customer offers as well as exposure to new stuff ahead of time. So yes, to your question, we want to continue to do it through a number of different avenues and we're going to be laser focused on it as we go forward just as we have been.

[Eric Bosshard, CEO at Cleveland Research Company]

Okay. And then secondly, as you think about, again related or considering the affordability challenges, when you think of, as you commented, sustained pressure on DIY and especially DIY discretionary, as you think about, we don't know what's going to happen with tariffs, but we do know what's going to happen with tariffs that there's going be some incremental cost and certainly on your direct sourced business. And then you think about managing expenses. I'm just curious how you think about managing expenses as it relates to margin in an environment with the sluggish demand with probably some incremental costs coming through. You've done a good job in the past of taking cost out to manage margins through this environment.

[Eric Bosshard, CEO at Cleveland Research Company]

I don't know, in terms of what's going on now, is there anything incremental or any incremental opportunity on the horizon in the area of managing expenses to manage margin?

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

So Eric, this is Marvin. I'll take the first part, then I'll hand it over to Brandon. I think relative to managing expenses, I would look at the reputation of this team and how well we have focused on not only just the fundamental management of the business and being really, really prudent on taking out costs and expenses, but also on our PPI initiatives and how that's permeated to every functional area of the company. And so that's going to maintain irrespective of the macro environment, irrespective of our top line revenue, we're going to be laser focused on taking our costs and managing expenses, so we can get more of that flow through to the bottom line. I'll let Brandon add any additional color.

[Brandon Sink, Executive VP & CFO at Lowe’s]

Yes, Marvin or Eric, just to add on what Marvin said. SG and A, excluding the hurricane benefits for this year, largely in line with our expectations. We're super pleased as to how we've been managing the business over the last 3 years amidst significant top line pressures. We've continued to make investments in our strategic initiatives, continue to manage our margins. We have great alignment across the organization to maintain disciplined expense management, effective cost controls.

[Brandon Sink, Executive VP & CFO at Lowe’s]

And then as Marvin mentioned, our PPI initiatives where those have come into play, continue to flex the muscles to manage the P and L, really outrun our expectations for this year. So we're going to continue with that. We have next inning of PPI initiatives we're going to talk through in December as we look ahead and continue to be pleased with the progress that we're making there on SG and A.

[Eric Bosshard, CEO at Cleveland Research Company]

Thanks.

[Operator]

Thank you. Our next question is from the line of Karen Short with Melius Research. Please proceed with your question.

[Karen Short, Managing Director – Head of Consumer/Retail Research at Melius Research LLC]

Hey, thanks very much. Just a few questions. The range in 4Q is very wide when I look at operating profit growth and margin expansion specifically. So maybe can you talk to that a little bit? And then I don't know where your philosophy is on breaking out storms just going forward, but can you give an impact of the storm specifically on October?

[Brandon Sink, Executive VP & CFO at Lowe’s]

So Karen, I'll talk about your first question on the range and really as it relates to operating margin and EPS, just a function of the 50 basis point range that we have for top line. Again, that assumes no improvement underlying macro pressures. We still expect big ticket DIY pressure kind of across both ends of the range. And then really when we look at Q4, weather can be volatile, the timing kind of intensity of storms can impact demand. And we also have one less shopping week between Thanksgiving and Christmas, which this year could create some volatility, and that could impact how kind of holiday demand plays out.

[Brandon Sink, Executive VP & CFO at Lowe’s]

So we try to be prudent in setting those expectations and allowed for a bit of that uncertainty as it relates to the top line range, and that's reflected in the operating margin and EPS. And then I think to the second part of your question, we're comfortable given the guidance on the storm related impact for the full quarter, the 100 basis points, and we're not going to get into the details of breaking that out by month.

[Karen Short, Managing Director – Head of Consumer/Retail Research at Melius Research LLC]

Okay. And then just my follow-up as it relates to your Analyst Day. Are you still thinking about a format that gives 3 scenarios? Or is that maybe too complicated?

[Brandon Sink, Executive VP & CFO at Lowe’s]

Yes, Karen, we're excited for Analyst Day. We will provide an update on financial expectations, one for the home improvement market. And then as you mentioned, we're also looking forward to sharing some initial scenario planning views for 2025 and beyond. So we are preparing to have that discussion here in a few weeks.

[Karen Short, Managing Director – Head of Consumer/Retail Research at Melius Research LLC]

Okay. Thanks very much.

[Brandon Sink, Executive VP & CFO at Lowe’s]

Thank you, Karen.

[Operator]

Our next question is from the line of Seth Sigman with Barclays. Please proceed with your question.

[Seth Sigman, Managing Director, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

Good morning, everyone. Just a couple of margin follow-up questions. So if you could just update us on the vendor callbacks, just the progress with that. It'd be great if you could quantify the benefit this quarter. And if you could just remind us, is this a one time step up by kind of building up through this year and then we should expect more gradual gains from here as part of some of the processes you've put in place or any other way to think about that?

[Seth Sigman, Managing Director, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

Thank you.

[William Boltz, Executive Vice President of Merchandising at Lowe’s]

So Seth, this is Bill. I'll take the first part and I'll let Brandon have the second part of this. But I think it's important to remind everybody that cost management is an ongoing process that the teams are always involved in. And we're obviously pleased with the progress that we've made this year to help reduce costs and cost some of those back. And as we've talked about before, really appreciate the support of our supplier partners in order to do that.

[William Boltz, Executive Vice President of Merchandising at Lowe’s]

And then we're looking to invest those some of those dollars to remain competitive in the market as it relates to price, using it to drive traffic and sales on seasonally relevant offers that make sense, as well as investing in marketing and in store merchandising efforts so that we can put that money to work. But yes, ongoing efforts and will remain an ongoing effort as we go forward.

[Brandon Sink, Executive VP & CFO at Lowe’s]

Yes. And Seth, just as it relates to quantification of that, I would just say meeting our expectations as we outlined at the beginning of the year. And it was we did know it was back half loaded. So as we've made progress with our suppliers taking cost out, we expected that to flow through inventory and positively impact gross margin more significantly as we move through the back half of the year. But also, as Bill mentioned, we're continuing to invest in traffic driving initiatives that could be through better offers, reduced price, investments in advertising.

[Brandon Sink, Executive VP & CFO at Lowe’s]

So it's going to kind of be sprinkled across different areas of the P and L at different times of the year. But just in terms of our overall goals that we set out at the beginning of the year, really nice progress against that.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

And Seth, this is Marvin. I'll just add just one additional comment. When I arrived here, cost discussions with suppliers were emotional conversations with no internal data. And we've now built out a team, we've built out systems, processes that are data driven with component costs, with raw material costs and with a very detailed analysis that gives Bill's team and Brandon's team the ability to sit down and have very data driven conversations with suppliers relative to any cost increase or cost clockwise. And to Bill's point, this will be ongoing.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

It will be ongoing based on a much more robust process that we have in place that we didn't have before. And that's one of the main reasons why as we get into this unpredictability of a tariff environment, we're going to be very positioned to manage that as well as any other retailer in the world.

[Seth Sigman, Managing Director, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

Thank you for that. I guess even with the idea that you can continue to reinvest back in the business, you have put out an algorithm that points to operating margin expansion based on certain revenue targets. As you think about next year, you're going to be lapping lower gross margin in the Q1. You'll be lapping some of these incremental hurricane costs, although I guess net net you've had a positive impact to EBIT. But I'm just curious, has your view changed at all about the operating leverage in the model, the type of comp you need to get that breakeven or operating leverage?

[Seth Sigman, Managing Director, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

Thank you.

[Brandon Sink, Executive VP & CFO at Lowe’s]

Yes. This is Brandon. I would say you highlighted kind of our flow through rule of thumb. And I would just say it's just that, right, directional framework on how we expect to manage through different sales environments. This team, as we've mentioned, has proven our ability to manage profitability well through the downturn that we've been experiencing, continue to deliver on PPI commitments.

[Brandon Sink, Executive VP & CFO at Lowe’s]

And as it relates to kind of reframing that and how we're thinking about specifically 2025 scenarios and even beyond. We're going to hold off really on that discussion. I look forward to sharing details plans next month at our AIC on that. And Rob, with that, we have time for one more question.

[Operator]

And our final question comes from the line of Chuck Grom with Gordon Haskett.

[Chuck Grom, Managing Director at Gordon Haskett Research Advisors]

Hey, thanks. Good morning. Just to follow-up on Eric's question earlier, your PPI efforts continue to be the gift that keeps on giving. Can you guys size up the opportunity set as we look ahead? Are there significant buckets to source from?

[Chuck Grom, Managing Director at Gordon Haskett Research Advisors]

And then my follow-up is you called out 5 of your 15 regions outperforming. Are there any commonalities across those areas? 1 of your competitors called out the West as being a pretty strong region for them over the

[Chuck Grom, Managing Director at Gordon Haskett Research Advisors]

past few quarters. Just curious if

[Chuck Grom, Managing Director at Gordon Haskett Research Advisors]

we're seeing that too. Thank you.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

So relative to PPI, we're going to give a really robust update at the December Analyst and Investor Meeting.

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

But at

[Marvin Ellison, President, CEO & Chairman at Lowe’s]

a high level, we think we're in the early innings. This is a gift that keeps on giving because we keep on working the gift, so it can continue to keep on giving. And a lot of it is technology driven and a lot of it is process driven and we're really excited about the possibilities and you will hear from almost every presenter at our upcoming conference in December on ways they're identifying PPI value within their functional areas. And relative to regional breakouts, I would say relatively consistent with the exception of hurricane impacted areas. If you remove that, our overall performance was consistent relatively from coast to coast.

[Chuck Grom, Managing Director at Gordon Haskett Research Advisors]

Great. Thank you.

[Kate Pearlman, Vice President, Investor Relations & Treasurer at Lowe’s]

Thank you all for joining us today. We look forward to speaking with you at our Analyst and Investor Conference on December 11.

[Operator]

Thank you. This concludes Loews' 3rd quarter 2024 earnings call. You may now disconnect.

Participants

Executives

• Marvin Ellison, President, CEO & Chairman
• Joseph McFarland, Executive Vice President of Stores

Analysts

• Kate Pearlman, Vice President, Investor Relations & Treasurer at Lowe’s
• William Boltz, Executive Vice President of Merchandising at Lowe’s
• Brandon Sink, Executive VP & CFO at Lowe’s
• Peter Benedict, Managing Director - Equity Research at Robert W. Baird & Co
• Steven Forbes, Senior Managing Director at Guggenheim Securities
• Simeon Gutman, Analyst at Morgan Stanley
• Christopher Horvers, Senior Analyst at JP Morgan
• Eric Bosshard, CEO at Cleveland Research Company
• Karen Short, Managing Director – Head of Consumer/Retail Research at Melius Research LLC
• Seth Sigman, Managing Director, Senior Equity Research Analyst at Barclays Corporate & Investment Bank
• Chuck Grom, Managing Director at Gordon Haskett Research Advisors