Lowe's Companies, Inc.

Good morning, everyone. Welcome to the Lowe's Company's third quarter 2025 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'll now turn the call over to Kay Perlman, Vice President of Investor Relations and Treasurer.

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 2025. 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, Kate, and good morning, everyone, and thank you for joining us today. Third quarter sales were $20.8 billion, with comparable sales increasing 0.4% year-over-year. despite a roughly 100 basis point headwind related to hurricanes Helene and Milton. During the quarter, adjusted operating margin expanded approximately 10 basis points, leading to adjusted diluted earnings per share of $3.06, which is an increase of 6% versus last year. These results reflect continued operational discipline and strong execution across our perpetual productivity improvement, or PPI, initiatives. And although sales results continue to be impacted by softer demand within an uncertain macro environment, we're encouraged to see improvement in DIY customer engagement and discretionary projects across many areas of the home. We're also pleased with our performance in the north and west divisions, which were not affected by storms in the prior year. And we're seeing strength across all five key initiatives within our 2,000 and 25 total home strategy, which we launched at our Analyst and Investor Conference last year. Let me give you an update on the performance of our total home strategy, beginning with the small to medium pro, where we once again delivered growth this quarter. We're enhancing our pro offering through our pro extended aisle, which is a direct interface with our supplier systems. It allows our pro sales associates to sell directly from their product catalogs with the suppliers opting for filling the orders directly to the job site. This expands our product assortment, inventory quantities, and delivery capabilities for larger orders. Second, when it comes to accelerating online sales, we delivered online sales growth of 11.4% this quarter, driven by increased traffic and continued strong conversion. We're also continuing to enhance the online experience across Lowe's.com and our mobile lab, to make it simpler and faster for DIY and pro customers to find all the products they need. Looking ahead, we're pleased with the ongoing build-out of our marketplace. This allows us to expand our product assortment to offer our customers everything they need for their homes across the price spectrum from value to premium without assuming the risk of owning the inventory. Third, we're leveraging our loyalty ecosystem to increase our customer preferences for Lowe's so they choose us first and shop more often. In fact, our 30 million Milo's Rewards members shop twice as often and spend over 50% more than non-members. Through both our DIY and Pro loyalty programs, we're gaining deeper customer insights, which help us tailor more personalized, value-enhancing offers through data-driven marketing. Fourth, we're really pleased with the strong results this quarter in home services, where we delivered double digit comps. Later in the call, Joe will discuss the initiatives that are driving these gains. And the fifth and final initiative in our total home strategy is increasing space productivity. We made great progress optimizing our selling space, and Bill will provide details on a couple of key initiatives later in the call. Overall, I'm very pleased with the progress that we have delivered through our total home strategy and the strategic alignment we're driving across the organization. Let me now discuss the importance of generative AI to improve how we sell, how we shop, and how we work. This is what we refer to as our AI framework. And as we continue to make strategic investments in our AI capabilities, we're already seeing tangible results. Our virtual assistants, Milo and Milo Companion, which are built on an open AI platform, are answering nearly 1 million questions per month about everything from product specs to project know-how to the status of a customer order. In fact, when our customers engage with Milo Online, the conversion rate more than doubles, which is clear evidence that AI is simplifying decision-making and driving sales. And when our associates use Milo Companion to help customers shopping in our stores, we're seeing customer satisfaction scores increase 200 basis points. And every interaction with our virtual assistant is feeding our proprietary models, allowing us to continually improve accuracy and build a durable advantage in home improvement expertise. Within our technology team, engineers are using AI tools for development and code review, leading to double-digit productivity gains and accelerating our speed to market. In fact, Lowe's has just been recognized by OpenAI with their 100 billion token milestone award. as a reflection of the depth and breadth of AI adoption throughout the organization. Achieving this milestone places Lowell's in an elite tier of companies that are not just experimenting with AI, but operating at a true enterprise scale. Looking ahead, we have a detailed roadmap of several additional high impact AI initiatives that will drive further enhancements to the pro and DIY customer experience, both in-store and online. This will include our participation in a genetic commerce so we can continue to meet our customers where and how they choose to shop. And we also anticipate incremental productivity gains as we leverage AI to drive operating efficiency across the enterprise. Now let me turn to our acquisition of foundation building materials or FBM, which we completed in October. I'd like to begin by extending a warm welcome to the entire FBM team. As a reminder, FBM is a leading distributor in interior building products, including drywall, metal framing, insulation, and ceiling systems. FBM's business mix is balanced evenly between commercial and residential. And while the housing market is currently under some pressure, we're pleased with the momentum we're seeing with FBM's commercial sales. Some recent highlights include several data center projects, a luxury 150-unit residential high-rise and medical facilities, as FBM leverages a strong reputation for reliability and technical expertise to win these contracts. And when we consider the impact to Lowe's, this acquisition gives us a more comprehensive product portfolio, expands our revenue streams, and further enhances our offering to our pro customers. In fact, efforts are already underway to quickly connect FBM's product catalog to our pro extended aisle. And FBM customers will gain access to Lowe's' complimentary products like tools, safety gear, and fasteners so they can more quickly and conveniently source everything they need for their jobs. FBM's 370 locations nationwide also strengthens our fulfillment capabilities especially in high-density urban markets in California, the Northeast, and the Midwest, where Lowe's has less of a physical store presence. Our acquisition of FBM and Artisan Design Group, or ADG, creates a comprehensive interior solution for our home builders, with everything from drywall and insulation to doors, flooring, cabinets, and appliances. And I look forward to updating you on the progress we're making with both acquisitions in the future. Now let me transition to our view of the macro environment. Overall, the U.S. homeowner remains healthy, balance sheets are strong, and consumers continue to spend. However, affordability and uncertainty in the broader economy continue to weigh on consumer confidence, particularly when it comes to larger discretionary purchases as borrowing costs have been elevated for longer than originally anticipated. Looking ahead, lower interest rates, including for home equity loans, could begin to spur demand, even as many homeowners remain reluctant to move and give up their historically low mortgage rates. This cycle is different from past housing slowdowns in a few important ways. First, homeowners today have record levels of equity, roughly $400,000 on average. And at the same time, they're more likely to invest in the home they already own instead of giving up their low mortgage rate. This is referred to as the lock-in effect. and could make home equity financing a more attractive solution. So while the near-term macro backdrop reflects an anxious consumer, the combination of strong fundamentals, substantial home equity, and the potential for lower rates ahead gives us confidence in the long-term health of the home improvement sector. And we remain confident that the continued execution of our total home strategy will position Lowe's to win in the short and in the long term. Before I close, I'd like to wish all of our associates a blessed and safe holiday season. Our associates are our competitive advantage, and I appreciate all they do to make Lowe's a great company. And with that, I turn the call over to Bill.