Lowe's Companies (LOW -1.70%) delivered Q1 2025 results on May 21, 2025, posting sales in line with guidance amid challenging DIY spending and adverse weather effects.

Key highlights include resilient Pro segment growth, strengthened online sales (+6%), gross margin expanded by 19 basis points, and an affirmed full-year sales outlook of $83.5-$84.5 billion for FY2025. The ADG acquisition and technology investments represent major strategic actions affecting long-term positioning.

Pro Segment Expansion and Strategic ADG Acquisition

Pro sales delivered mid-single-digit growth, bucking headwinds in discretionary DIY projects, while Lowe’s announced the $1.325 billion acquisition of Artisan Design Group (ADG) with expected closure in Q2 FY2025. The deal brings exposure to a fragmented $50 billion market adjacent to Lowe’s traditional retail business and targets deeper share among homebuilders and property managers. ADG generated $1.8 billion in sales in 2024 and is on track to be EPS accretive in FY2026 following the closing. Lowe’s is sharpening its focus on professional markets and securing a foothold in new home construction cycles, directly linking the company to long-term housing demand fundamentals.

"We announced a deal in April 2025 to acquire Artisan Design Group or ADG, which is a leading provider of design distribution and installation services for interior, surface finishes including flooring, countertops, and cabinets. ADG serves national, regional, and local home builders as well as property managers. We expect this acquisition to increase our penetration of pro plan spend and will position us to gain share in a highly fragmented $50 billion market. And with an estimated 18 million homes needed in the US by 2033, new home construction is expected to be a major driver of pro plan spend over the next decade."
-- Marvin Ellison, Chairman and Chief Executive Officer

Digital Transformation and Marketplace Initiative

Online sales increased 6% in the first quarter, propelled by improved traffic and higher conversion rates, with further scaling anticipated via partnerships with technology providers such as Miracle -- the leading marketplace platform.

The company remains in the early stages of deploying its third-party home improvement marketplace, giving Lowe’s the ability to broaden SKUs and offer value/premium product mixes without inventory risk or major fulfillment investment. This initiative enhances product breadth and mitigates capital intensity, bolstering competitive positioning against e-commerce and omnichannel rivals while supporting margin resilience.

"Through Miracle, trusted marketplace sellers will be able to easily manage their catalogs on lowes.com, This will add new product categories across the home, and offer DIY and pro customers a full spectrum of value and premium product. Can accomplish all of this without having to carry the inventory or invest in new fulfillment centers. As we scale our new product marketplace and unlock its potential, I look forward to keeping you updated on our continuing efforts. To drive online growth."
-- Marvin Ellison, Chairman and Chief Executive Officer

Global Sourcing Diversification and Tariff Risk Mitigation

Sixty percent of purchases are sourced domestically on an annual basis, with China now comprising approximately 20% after focused multi-year diversification efforts that included both direct and indirect procurement channels.

Current supply chain strategy actively seeks to further reduce China exposure and employs robust supplier relationships, advanced pricing tools, and portfolio management to safeguard against tariff-induced cost volatility.

"Over the past several years, we've been partnering with our private and national brand suppliers to diversify our global sourcing efforts. As a result, approximately 20% of our purchase volume is currently concentrated in China. Although we're pleased with this reduced dependency, we're not satisfied. And we're working to accelerate our diversification efforts. Our global sourcing team has identified exciting diversification opportunities in the US and around the globe we're actively pursuing."
-- Marvin Ellison, Chairman and Chief Executive Officer

Proactive supply chain risk management supports margin stability in the face of geopolitical and trade-related uncertainties, reinforcing Lowe's ability to deliver value even as tariff headwinds shift across product categories.

Looking Ahead

Management reaffirmed FY2025 sales guidance of $83.5-$84.5 billion, with comparable sales expected to range from flat to up 1%, operating margin forecasted at 12.3%-12.4%, and diluted EPS outlook of $12.15-$12.40. Capital expenditures are projected at $2.5 billion, including new store builds, and adjusted debt/EBITDAR stands at 2.99x at the end of Q1 FY2025.

Guidance does not incorporate potential impacts from the pending ADG acquisition, which is expected to close in Q2 FY2025 and become EPS accretive in FY2026.