Lowe's Q2 2025 Earnings: Steady Sales, Margin Growth, and a Buyback Shift

Lowe's, a cornerstone of the American home improvement landscape, recently released its financial results for the second quarter of 2025. For anyone tracking the health of the consumer and the housing market, this 10-Q filing offers a wealth of information. Let's break down the key numbers to see how the company is performing.

A Picture of Stability

At first glance, Lowe's Q2 results paint a picture of stability in a challenging economic environment.

• Net Sales: For the three months ending August 1, 2025, net sales came in at $23.96 billion, a modest 1.6% increase from $23.59 billion in the same period last year. For the first six months of the year, sales were nearly flat at $44.89 billion.
• Net Earnings: The bottom line held steady, with quarterly net earnings of $2.40 billion, essentially unchanged from $2.38 billion a year ago.

This flow diagram provides a visual breakdown of how Lowe's revenue is generated and allocated through its costs and expenses to arrive at its net earnings for the quarter.

Margin Improvement and Expense Management

A key highlight from the report is an improvement in profitability. Lowe's Gross Margin for the quarter expanded to 33.81% of sales, up from 33.47% last year. This 34 basis point improvement suggests the company is effectively managing its product costs and pricing strategies.

However, this gain was partially offset by rising operating costs. Selling, General, and Administrative (SG&A) expenses grew as a percentage of sales, climbing to 17.42% from 17.07% a year ago. This increase, known as deleveraging, indicates that expenses grew slightly faster than sales. The result was a nearly flat operating income of $3.47 billion for the quarter.

A Look Inside the Aisles

The filing provides a breakdown of sales by product category, revealing where customers are spending their money.

• Home Décor (including appliances, flooring, and kitchens) was the largest division, contributing $8.36 billion (34.9% of sales).
• Hardlines (hardware, garden, and tools) followed with $7.82 billion (32.6% of sales).
• Building Products (lumber and plumbing) accounted for $7.08 billion (29.6% of sales).

Both the Home Décor and Hardlines segments saw year-over-year sales growth, indicating resilient consumer demand in these areas.

Capital Returns and Cash Flow

Lowe's continues to generate strong cash flow, with $7.61 billion from operations in the first half of the year. This financial strength allows the company to invest in its business and return capital to shareholders.

Interestingly, while the company paid out $1.29 billion in dividends over the last six months, it significantly scaled back its share repurchase activity. Cash used for buybacks fell to just $113 million in the first six months of 2025, a steep drop from the $1.93 billion spent in the same period last year. This could signal a more cautious approach to capital allocation or a strategic shift towards other priorities, like the recent acquisition of a business for $1.3 billion mentioned in the cash flow statement.

Final Thoughts

Lowe's second-quarter performance demonstrates resilience. In a market feeling the pressure from interest rates and a cooling housing sector, the company maintained its sales levels and protected its profitability through improved gross margins. The earnings per share (EPS) growth, from $4.17 to $4.27, was primarily driven by a lower share count from past buybacks rather than higher net income.

Looking ahead, the significant reduction in share repurchases will be a key point for investors to watch. Overall, Lowe's appears to be navigating the current economic climate with a steady hand, focusing on operational efficiency while adapting its capital strategy.