Lowe's grew second-quarter sales 8.3% to $26.0 billion, but roughly 90% of that increase came from the FBM and ADG acquisitions rather than its stores; comparable sales rose just 0.2%, earnings per share were flat at $4.27, and management trimmed full-year guidance to the bottom of its prior range.
Revenue
$26.0B
+8.3% YoY
Net income
$2.4B
0.0% YoY
Diluted EPS
$4.27
0.0% YoY
Operating margin
13.7%
Headline: the growth is bought, not built — and the earnings line shows it
Lowe's (NYSE: LOW) reported net sales of $25,956 million for its fiscal second quarter ended July 31, 2026, up 8.3% from $23,959 million a year earlier. That is the fastest reported sales growth Lowe's has posted in years. It is also almost entirely the result of two acquisitions.
The filing's own segment table makes this unambiguous. Lowe's now reports a Retail Home Improvement segment (the stores) and an Other segment (mainly Foundation Building Materials, acquired 9 October 2025 for $8.8 billion, and Artisan Design Group, acquired 2 June 2025 for $1.3 billion — both wholesale-style distributors serving professional contractors and homebuilders).
Segment
Q2 FY2026 sales
Q2 FY2025 sales
Change
Retail Home Improvement
$24,015M
$23,821M
+0.8%
Other (FBM + ADG)
$1,941M
$138M
+$1,803M
Total
$25,956M
$23,959M
+8.3%
Of the $1,997 million of extra sales, $1,803 million — about 90% — came from the acquired businesses. The actual Lowe's store base grew 0.8%. Strip the deals out and this was another roughly-flat quarter for a retailer waiting on a housing market that has not turned.
Net earnings were $2,399 million, versus $2,398 million a year ago — flat to the nearest million. Diluted earnings per share (EPS — profit divided by the number of shares outstanding) came in at $4.27, identical to the prior-year quarter. Lowe's spent nearly $10 billion on two companies and, one quarter into owning both, is earning the same per share as it did before.
Metrics
Metric
Q2 FY2026 (qtr. ended 7/31/2026)
Q2 FY2025 (qtr. ended 8/1/2025)
YoY Change
Net sales
$25,956M
$23,959M
+8.3%
Comparable sales
+0.2%
+1.1%
-90 bps
Gross margin
$8,577M (33.04% of sales)
$8,101M (33.81%)
-77 bps
Operating income
$3,549M (13.67%)
$3,469M (14.48%)
+2.3% / -81 bps
Net earnings
$2,399M (9.24%)
$2,398M (10.01%)
+0.04%
Diluted EPS
$4.27
$4.27
0.0%
Adjusted diluted EPS
$4.40
$4.33
+1.6%
Comparable average ticket
$107.90
$105.49
+2.3%
Customer transactions
219M
225M
-2.7%
Online sales
—
—
+15.7%
Retail stores at period end
1,761
1,753
+8 stores
Return on invested capital (trailing 4 qtrs.)
25.5%
29.5%
-400 bps
Dollar figures in millions of USD, as reported in the 10-Q. "Comparable sales" counts only locations open more than 13 months, so it strips out the effect of opening or closing stores. "Gross margin" is what's left of each sales dollar after the cost of the goods themselves. "Basis points" (bps) are hundredths of a percentage point.
Comparable sales: positive only because of the website
Comparable sales rose 0.2%, the fifth consecutive quarter of growth by CEO Marvin Ellison's count in the earnings release. But the composition is the story:
Average ticket +2.3% — customers spent more per visit.
Transactions -2.1% on a comparable basis (219 million total, down from 225 million) — fewer customers came in.
So the entire comp gain is price/mix, not traffic. More importantly, the 10-Q discloses in a footnote that online sales added approximately 195 basis points to comparable sales this quarter, versus 85 basis points a year ago. Online sales themselves grew 15.7%. Do that arithmetic and the physical-store comparable sales were around -1.75%. The stores shrank; the website more than covered the gap.
Management's own description of demand is blunt for a company press release: "persistent pressure in discretionary DIY demand, periods of challenging weather, elevated fuel prices and broader economic uncertainty. Customers remained cautious in their spending and prioritized repair, maintenance and smaller projects."
The merchandise mix corroborates that. Within the retail segment:
Merchandise division
Q2 FY2026
Q2 FY2025
Change
Hardlines (lawn & garden, power equipment, seasonal, tools)
$7,952M
$8,006M
-0.7%
Home Décor (appliances, flooring, kitchens & bath, paint)
$7,817M
$7,782M
+0.4%
Building Products (building materials, electrical, lumber, millwork, rough plumbing)
$7,554M
$7,472M
+1.1%
Hardlines — the most weather-exposed and most discretionary of the three, full of lawn equipment and seasonal goods — was the only division to decline. Building Products, which skews toward the professional contractor doing repair work, led. Lowe's says nine of its 13 product categories had positive comps, led by Rough Plumbing, Electrical, and Tools & Hardware, driven by "continued momentum with our Pro customer and online channels, due to ongoing strength in repair and maintenance projects." That is the profile of a market where nobody is remodeling a kitchen but pipes still burst.
Margins: a mix effect, not an execution failure
Operating margin — the share of each sales dollar left after all the costs of running the business, before interest and tax — fell 81 basis points, from 14.48% to 13.67%. The 10-Q's own line-by-line bridge accounts for it precisely:
Driver
Effect on operating margin
Gross margin
-77 bps
Selling, general & administrative (SG&A)
+25 bps
Depreciation & amortization
-29 bps
Total
-81 bps
It would be a mistake to read the gross-margin decline as Lowe's discounting or losing pricing power. Management attributes it to "the operational cost structure of acquisitions during 2025 and increased fuel costs, partially offset by favorability from credit revenue and tariff refunds" — and attributes the favourable SG&A movement to the same acquisitions. Those two lines are the same fact seen twice: a building-products distributor like FBM runs at a lower gross margin than a retail store but also spends far less on stores, staff and advertising, so its costs sit in cost of goods sold rather than SG&A. Consolidating it mechanically pushes gross margin down and SG&A leverage up.
What is not mix is the depreciation and amortization line, up from $457M to $572M, which the filing ties to "amortization of intangible assets of acquired businesses in 2025." That is a real, cash-free but earnings-reducing charge — $96 million pre-tax in the quarter — that will recur for years.
The cleanest evidence that the core retailer held its ground: the Retail Home Improvement segment's own operating margin actually improved, from 14.59% to 14.77% (+18 bps). The consolidated margin fell because the Other segment earned $3 million of operating income on $1,941 million of sales — 0.11%. Whatever FBM and ADG eventually contribute, in this quarter they were essentially a break-even revenue bolt-on that diluted every consolidated ratio.
The adjusted EPS number needs a second look
Lowe's reports adjusted diluted EPS of $4.40, up 1.6% from $4.33, excluding the $96 million of acquisition-related intangible amortization ($0.13 per share after tax). That adjustment is defensible.
What the adjustment does not remove is a genuine one-off. On 20 February 2026 the Supreme Court declared tariffs imposed under the International Emergency Economic Powers Act (IEEPA) invalid, and in this quarter Lowe's "recognized approximately $80 million pre-tax of tariff refunds." The earnings release states plainly that "both diluted EPS and adjusted diluted EPS include an $0.11 benefit from IEEPA tariff refunds."
Strip that out and adjusted EPS was roughly $4.29 against a prior-year $4.33 — down about 1%, not up 1.6%. The entire reported adjusted-EPS improvement, and then some, is a legal windfall on tariffs Lowe's should not have paid. Management itself flags the fragility: full-year guidance "includes tariff refunds recognized during the second quarter and excludes any potential additional tariff refunds in the second half of the year," and "uncertainty remains as to the amount and timing of future IEEPA refund collections."
Takeaway: Once you remove the acquisitions from the sales line and the tariff refund from the earnings line, Lowe's second quarter was a low-single-digit-negative-traffic retailer earning slightly less per share than a year ago — the 8.3% sales growth and 1.6% adjusted EPS growth are both artefacts of items that will not repeat in the same form.
Balance sheet: paying for the deals
The acquisitions were funded with debt, and the second quarter shows Lowe's working it back down.
Long-term debt excluding current maturities: $35,204M, down from $37,490M at fiscal year-end (30 January 2026), though still well above the $30,548M of a year ago.
$2,397 million of debt repaid in the first six months, versus $796 million a year earlier. Management explicitly frames this as progress "toward our deleveraging commitment."
Net interest expense rose to $374M from $313M (+19.5%), which the filing attributes to "the costs related to the September 2025 debt issuance and the 2025 Term Loan." That single line consumed about 13 basis points of margin and is a direct, ongoing cost of the FBM deal.
Total shareholders' deficit of -$7,437M, improved from -$11,400M a year ago. (A negative equity balance here is a consequence of many years of share buybacks exceeding retained earnings, not a solvency signal.)
Cash and equivalents of $3.2 billion plus $5.0 billion of undrawn revolving credit.
Cash generation softened: first-half operating cash flow of $7,009M versus $7,610M a year ago, which the filing ascribes to "timing of prior year income tax payments and other changes in working capital." Merchandise inventory of $17,737M is up 8.5% year over year — broadly in line with the 8.3% sales increase, and largely the acquired businesses' stock, so it does not look like an overhang.
Capital returns stayed modest relative to history: $1,346M of dividends and only $367M of buybacks in the first half (1.5 million shares at an average of roughly $244). A year ago buybacks were $71M, so the run-rate is rising — but at this pace Lowe's is barely offsetting dilution, with the diluted share count unchanged at 560 million. Debt repayment is clearly ahead of repurchases in the priority order right now.
Return on invested capital fell to 25.5% from 29.5% — the predictable arithmetic of adding nearly $10 billion of capital that is currently generating almost no operating income.
Guidance: trimmed to the floor of the prior range
Alongside results, Lowe's updated its fiscal 2026 outlook. In every case the new number is the bottom end of what was previously a range:
Metric
New FY2026 outlook
Previous
Total sales
$92.0 billion
$92.0–94.0 billion
Comparable sales
Flat vs. prior year
Flat to +2%
Operating margin
11.2%
11.2–11.4%
Adjusted operating margin
11.6%
11.6–11.8%
Diluted EPS
~$11.75
$11.75–12.25
Adjusted diluted EPS
~$12.25
$12.25–12.75
Net interest expense
~$1.6 billion
—
Effective tax rate
~24.5%
—
Capital expenditures
Up to $2.5 billion
—
Collapsing a range to its lower bound is a guidance cut in everything but name: it removes up to $2 billion of expected sales and $0.50 of expected EPS. The stated reason is "operational results for the first half of the year as well as current demand trends" — i.e. the DIY customer did not come back in the spring selling season, and management no longer expects them to in the autumn.
Our read on trajectory. Three things are worth watching over the next two quarters.
First, the reported growth rate is about to fall off a cliff, and that is arithmetic rather than deterioration. First-half sales of $49.0 billion against full-year guidance of $92.0 billion implies roughly $43 billion in the second half — growth of only about 4-5%, versus 9.2% in the first half. ADG has already been in the base since Q2, and FBM starts lapping its 9 October 2025 acquisition date in the fourth quarter. By fiscal 2027 the acquisition tailwind is gone entirely and Lowe's reported growth will simply be its comparable sales growth again. Investors accustomed to the 8% headline should expect a very different-looking top line.
Second, the second half carries no tariff cushion in guidance. Management explicitly excluded any further IEEPA refunds. If more refunds land, that is upside to $11.75; if the first-half $80 million proves to be most of what Lowe's recovers, then the second half has to deliver roughly $4.58 of GAAP EPS on genuinely operating performance. Full-year guidance of $11.75 against first-half actuals of $7.17 leaves very little room for another weak quarter.
Third, the case for the acquisitions is still entirely prospective. FBM and ADG currently contribute 7.5% of sales and 0.1% of segment operating income while adding $96 million a quarter of amortization and a materially higher interest bill. Management's thesis — "enhanced capabilities, faster fulfillment, improved digital tools, a robust trade credit platform, and significant cross-selling opportunities" to capture "more planned Pro spend" — is plausible: the professional contractor is the one customer segment actually spending, and Lowe's is buying its way into the part of that spend that never came through a retail store. But nothing in this quarter's numbers yet demonstrates it working. Lowe's does not disclose a Pro comparable-sales figure, which makes the central claim of the strategy the one thing an outside reader cannot verify. Until the Other segment's operating margin moves meaningfully off 0.11%, the deals are a drag being defended on faith.
The underlying retailer, for what it is worth, is being run well in a bad market: segment operating margin up 18 basis points, nine of 13 categories positive, online up 15.7%, costs held flat enough that SG&A did not deteriorate. That is roughly the best achievable outcome when housing turnover is frozen and interest rates keep homeowners in place rather than renovating. The turn, when it comes, will be driven by mortgage rates and housing transactions, not by anything Lowe's controls.
Source
All figures are from Lowe's Companies, Inc. Form 10-Q for the quarterly period ended 31 July 2026 (filed 27 August 2026, accession 0000060667-26-000117), and from the Exhibit 99.1 earnings release furnished on Form 8-K dated 19 August 2026 for the guidance table, online sales growth and the stated $0.11 tariff-refund EPS benefit.