Lowe's Q2 Sales Rise FBM Deal Announced

Lowe's(NYSE:LOW) reported results for the second quarter of fiscal 2025 (ending Jan. 31, 2026) on August 20, 2025, delivering $24 billion in sales (up 1.1% in comparable sales) and adjusted diluted EPS of $4.33, a 5.6% increase over the prior year quarter. The company announced a major $8.8 billion acquisition of Foundation Building Materials (FBM), with the transaction expected to close in 2025, complementing its prior ADG purchase and pivoting the long-term strategy toward large pro customers and pro distribution, aiming to expand its addressable market and diversify revenue streams.

Lowe's accelerates pro market push through FBM acquisition

The $8.8 billion FBM deal follows the recent closing of Artisan Design Group (ADG) in June, securing a robust foothold in the large pro segment and introducing new categories such as drywall and ceiling systems for commercial and residential customers. FBM’s 370 branches extend Lowe's reach in California, the Northeast, and Midwest, areas where current brick-and-mortar density is low, but project demand remains high.

"With the acquisition of FBM, we are strategically expanding our pro offering to serve the large pro, especially their plan spend. We're now well positioned to not only continue driving growth with our core DIY, and small to medium pro customers, but this acquisition also unlocks our ability to serve the larger pro within a $250 billion total addressable market. The acquisition of FBM strengthens our portfolio, diversifies our revenue streams, and allows us to capture a larger portion of pro sales all of which is expected to deliver significant long-term value to our shareholders."
-- Marvin Ellison, Chairman and Chief Executive Officer

This transformational acquisition positions Lowe's to mitigate cyclicality risk, accelerate cross-selling, and capture incremental share in the structurally attractive and largely underpenetrated large pro segment, supporting both revenue growth and long-term earnings resilience.

Lowe's delivers margin expansion and record free cash flow

Adjusted gross margin rose 37 basis points year-over-year to 33.8%, and adjusted operating margin increased to 14.7% (up 23 basis points YoY), while free cash flow reached $3.7 billion, and return on invested capital improved to 29.5%. The improvement was driven by PPI (perpetual productivity improvement) initiatives, optimized inventory allocation, and reduced shrink, despite modest SG&A deleverage due to ADG transaction costs.

"For the quarter, comparable average ticket increased 2.9% and comparable transactions declined 1.8%. Adjusted gross margin was 33.8% in the quarter, up 37 basis points from last year with improvements in both shrink and credit revenue as well as continued benefits from our perpetual productivity improvement or PPI initiatives. And adjusted SG&A of 17.3% of sales deleveraged six basis points in line with our expectations. Adjusted operating margin rate of 14.7% was up 23 basis points versus prior year and the adjusted effective tax rate of 24.1% was in line with prior year results. Inventory ended Q2 at $16.3 billion, down $499 million versus prior year. We continue to manage our inventory replenishment in line with demand trends while also driving strong in-stock across both pro and DIY categories. ADG operations did not have a material impact on our results"
-- Brandon Sink, Chief Financial Officer

The company’s disciplined cost management and operational improvements enabled margin expansion and robust cash generation, even as it absorbed integration costs from recent acquisitions.

Lowe's integrates digital and AI tools to drive customer satisfaction and productivity

The rollout of the MyLo Companion AI-powered app contributed to improved customer satisfaction scores by empowering associates to provide fast, expert assistance across departments, while MyFBM’s technology is planned for integration post-acquisition to deliver real-time order management for pro customers. Online sales grew 7.5%, reflecting growing digital engagement and successful loyalty program enhancements.

"These increases coincide with the rollout of MyLo Companion, our AI-powered app designed specifically to support associates on the sales floor. The app is helping new associates build confidence early while enabling experienced associates to expand knowledge across departments. For example, a paint department associate in the garden center can use the app to instantly calculate how much mulch a customer needs, recommend the right tools for sparing it, and a hardware associate can help a customer in the appliance department quickly identify the most energy-efficient washer and dryer pair available under $1,500. We're pleased with the strong adoption rate, which has already surpassed our targets. Because the app is powered by AI, it has the capacity to learn from feedback and deliver even more helpful responses over time."
-- Joe McFarland, Executive Vice President, Stores

The integration of proprietary AI solutions internally, and customer-facing digital innovation, strengthens Lowe's competitive differentiation and advances engagement.

Looking Ahead

Management now guides full-year fiscal 2025 (ending Jan. 31, 2026) sales of $84.5 billion-$85.5 billion, comparable sales flat to up 1%, adjusted operating margin of 12.2%-12.3%, and adjusted diluted EPS of $12.20-$12.45, incorporating the ADG acquisition but excluding FBM until close. Capital expenditures are projected at $2.5 billion, and share repurchases are paused until after debt ratios return to target levels by the end of 2027. No quantified financial guidance for FBM is provided until post-closing, expected later in 2025.

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This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool recommends Lowe's Companies. The Motley Fool has a disclosure policy.