Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis summarizes the significant factors affecting our consolidated operating results, liquidity and capital resources during the three months ended May 2, 2025, and May 3, 2024. This discussion and analysis should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements that are included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2025 (the Annual Report), as well as the consolidated financial statements (unaudited) and notes to the consolidated financial statements (unaudited) contained in this report. Unless otherwise specified, all comparisons made are to the corresponding period of fiscal 2024. This discussion and analysis is presented in four sections:

• Executive Overview

• Operations

• Financial Condition, Liquidity and Capital Resources

• Critical Accounting Policies and Estimates

EXECUTIVE OVERVIEW

The following table highlights our financial results:

			Three Months Ended
(in millions, except per share data)			May 2, 2025						May 3, 2024
Net sales			$	20,930					$	21,364
Net earnings			1,641						1,755
Diluted earnings per share			$	2.92					$	3.06
Net cash provided by operating activities			$	3,379					$	4,262
Capital expenditures			518						382
Repurchases of common stock1			72						743
Cash dividend payments			645						633

1 Repurchases of common stock on a trade-date basis.

Net sales in the first quarter of fiscal 2025 declined 2.0% to $20.9 billion compared to net sales of $21.4 billion in the first quarter of fiscal 2024. Comparable sales for the first quarter of fiscal 2025 decreased 1.7%, consisting of a 3.8% decrease in comparable customer transactions, partially offset by a 2.1% increase in comparable average ticket. Net earnings in the first quarter of fiscal 2025 were $1.6 billion, compared to net earnings of $1.8 billion in the first quarter of fiscal 2024. Diluted earnings per common share were $2.92 in the first quarter of fiscal 2025 compared to $3.06 in the first quarter of fiscal 2024.

For the first three months of fiscal 2025, cash flows from operating activities were approximately $3.4 billion, with $518 million used for capital expenditures. Continuing to deliver on our commitment to return excess cash to shareholders, during the three months ended May 2, 2025, we paid $645 million in dividends.

The Company faced ongoing challenges in the housing market and pressure in DIY big ticket discretionary demand during the first quarter of fiscal 2025. In addition, unfavorable weather early in the quarter led to a slower start to spring. Despite these challenges, our Pro and online sales continued to grow which reflects the results of our investments in our Total Home strategy.

During the first quarter, we re-launched our Pro customer loyalty program, which is now My Lowe’s Pro Rewards. The updated program is more intuitive to use which we expect will lead to greater utilization. In addition, our technology transformation has made our gains in online possible through an improved user experience and enhanced visualization tools. We also launched Mylow this quarter, the first Artificial Intelligence (AI)-powered home improvement virtual advisor that provides step-by-step instructions for any project, and then helps customers find and purchase the right tools and materials needed for their project directly on lowes.com or the Lowe’s mobile app.

Overall, we delivered solid results in the first quarter through disciplined execution and our continued focus on elevating the customer experience. While we continue to monitor the trade policy environment and execute our mitigation efforts, we

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believe we are making the right investments in leading technology solutions, while focusing on our Total Home strategy, to drive sustainable growth and meaningful long-term shareholder value.

OPERATIONS

The following table sets forth the percentage relationship to net sales of each line item of the consolidated statements of earnings (unaudited), as well as the percentage change in dollar amounts from the prior period. This table should be read in conjunction with the following discussion and analysis and the consolidated financial statements (unaudited), including the related notes to the consolidated financial statements (unaudited).

			Three Months Ended												Basis Point Increase/(Decrease) in Percentage of Net Sales from Prior Period
			May 2, 2025						May 3, 2024
Net sales			100.00		%				100.00		%				N/A
Gross margin			33.38						33.19						19
Expenses:
Selling, general and administrative			19.33						18.77						56
Depreciation and amortization			2.13						2.00						13
Operating income			11.92						12.42						(50)
Interest – net			1.61						1.65						(4)
Pre-tax earnings			10.31						10.77						(46)
Income tax provision			2.47						2.56						(9)
Net earnings			7.84		%				8.21		%				(37)

The following table sets forth key metrics utilized by management in assessing business performance. This table should be read in conjunction with the following discussion and analysis and the consolidated financial statements (unaudited), including the related notes to the consolidated financial statements (unaudited).

			Three Months Ended
Other Metrics			May 2, 2025						May 3, 2024
Comparable sales decrease 1			(1.7)		%				(4.1)		%
Total customer transactions (in millions) 2			199						207
Average ticket 2, 3			$	105.12					$	103.22
At end of period:
Number of stores			1,750						1,746
Sales floor square feet (in millions)			195						195
Average store size selling square feet (in thousands) 4			112						112
Net earnings to average debt and shareholders’ deficit			26.7		%				28.1		%
Return on invested capital 5			31.0		%				32.6		%

1 A comparable location is defined as a retail location that has been open longer than 13 months. A location that is identified for relocation is no longer considered comparable in the month of its relocation. The relocated location must then remain open longer than 13 months to be considered comparable. A location we decide to close is no longer considered comparable as of the beginning of the month in which we announce its closing. Operating locations which are sold are included in comparable sales until the date of sale. Comparable sales are presented on a transacted basis when tender is accepted from a customer. Comparable sales include online sales, which positively impacted first quarter fiscal 2025 and fiscal 2024 comparable sales by approximately 65 basis points and 10 basis points, respectively. The comparable store sales calculation included in the preceding table was calculated using comparable 13-week periods.

2 In the first quarter of fiscal 2025, the Company adjusted its customer transactions metric to exclude certain order modifications which were previously included as a separate transaction. The prior year period has been adjusted to align with the current period presentation.

3 Average ticket is defined as net sales divided by the total number of customer transactions.

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4 Average store size selling square feet is defined as sales floor square feet divided by the number of stores open at the end of the period.

5 Return on invested capital is calculated using a non-GAAP financial measure. See below for additional information and reconciliations of non-GAAP measures.

Non-GAAP Financial Measures

Return on Invested Capital

Return on Invested Capital (ROIC) is calculated using a non-GAAP financial measure. Management believes ROIC is a meaningful metric for analysts and investors as a measure of how effectively the Company is using capital to generate financial returns. Although ROIC is a common financial metric, numerous methods exist for calculating ROIC. Accordingly, the method used by our management may differ from the methods used by other companies. We encourage you to understand the methods used by another company to calculate ROIC before comparing its ROIC to ours.

We define ROIC as the rolling 12 months’ lease adjusted net operating profit after tax (Lease adjusted NOPAT) divided by the average of current year and prior year ending debt and shareholders’ deficit. Lease adjusted NOPAT is a non-GAAP financial measure, and net earnings is considered to be the most comparable GAAP financial measure. The calculation of ROIC, together with a reconciliation of net earnings to Lease adjusted NOPAT, is as follows:

			For the Periods Ended
(In millions, except percentage data)			May 2, 2025						May 3, 2024
Calculation of Return on Invested Capital
Numerator
Net Earnings			$	6,843					$	7,221
Plus:
Interest expense – net			1,299						1,384
Operating lease interest			176						162
Provision for income taxes			2,166						2,317
Lease adjusted net operating profit			10,484						11,084
Less:
Income tax adjustment 1			2,520						2,692
Lease adjusted net operating profit after tax			$	7,964					$	8,392
Denominator
Average debt and shareholders’ deficit 2			$	25,661					$	25,720
Net earnings to average debt and shareholders’ deficit			26.7		%				28.1		%
Return on invested capital			31.0		%				32.6		%

1 Income tax adjustment is defined as lease adjusted net operating profit multiplied by the effective tax rate, which was 24.0% and 24.3% for the periods ended May 2, 2025, and May 3, 2024, respectively.

2 Average debt and shareholders’ deficit is defined as average current year and prior year ending debt, including current maturities, short-term borrowings, and operating lease liabilities, plus the average current year and prior year ending total shareholders’ deficit.

Results of Operations

Net Sales – Net sales for the first quarter of fiscal 2025 decreased 2.0% to $20.9 billion. Comparable sales declined 1.7% consisting of a 3.8% decrease in comparable customer transactions, partially offset by a 2.1% increase in comparable average ticket.

During the first quarter of fiscal 2025, we experienced comparable sales increases in three of 14 product categories: Building Materials, Appliances, and Rough Plumbing. Growth in Building Materials and Rough Plumbing reflect strong demand with the Pro customer, demonstrating improvement from our investments in our Pro product and service offerings.

Gross Margin – For the first quarter of fiscal 2025, gross margin increased 19 basis points as a percentage of sales. The gross margin improvement for the quarter is primarily driven by ongoing productivity initiatives and improvement in shrink and credit revenue.

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SG&A – For the first quarter of fiscal 2025, SG&A expense deleveraged 56 basis points as a percentage of sales compared to the first quarter of fiscal 2024 due primarily to lower sales volume, incremental wage actions and higher health care costs.

Depreciation and Amortization – Depreciation and amortization deleveraged 13 basis points for the first quarter of fiscal 2025 compared to the prior year.

Interest – Net – Interest expense for the first quarter of fiscal 2025 leveraged four basis points as a percentage of sales.

Income Tax Provision – Our effective income tax rates were 23.9% and 23.7% for the three months ended May 2, 2025 and May 3, 2024, respectively.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Sources of Liquidity

Cash flows from operations, combined with our continued access to capital markets on both a short-term and long-term basis, as needed, remain adequate to fund our operations, make strategic investments to support long-term growth, return excess cash to shareholders in the form of dividends and share repurchases, and repay debt maturities as they become due. We believe these sources of liquidity will continue to support our business for the next twelve months. As of May 2, 2025, we held $3.1 billion of cash and cash equivalents, as well as $4.0 billion in undrawn capacity on our revolving credit facilities.

Cash Flows Provided by Operating Activities

			Three Months Ended
(In millions)			May 2, 2025						May 3, 2024
Net cash provided by operating activities			$	3,379					$	4,262

Cash flows from operating activities continued to provide the primary source of our liquidity. The decrease in net cash provided by operating activities for the three months ended May 2, 2025, compared to the three months ended May 3, 2024, was primarily driven by changes in working capital and lower net earnings. Cash flows relating to changes in accounts payable were unfavorable $1.1 billion primarily due to timing of purchases and an earlier spring inventory build for the current year.

Cash Flows Used in Investing Activities

			Three Months Ended
(In millions)			May 2, 2025						May 3, 2024
Net cash used in investing activities			$	(533)					$	(378)

Net cash used in investing activities primarily consists of transactions related to capital expenditures. Our capital expenditures generally consist of investments in our strategic initiatives to enhance our ability to serve customers, improve existing stores, and support expansion plans. Capital expenditures were $518 million and $382 million for the three months ended May 2, 2025, and May 3, 2024, respectively. For fiscal 2025, our guidance for capital expenditures is approximately $2.5 billion.

Cash Flows Used in Financing Activities

			Three Months Ended
(In millions)			May 2, 2025						May 3, 2024
Net cash used in financing activities			$	(1,553)					$	(1,568)

Net cash used in financing activities primarily consists of transactions related to our debt, share repurchases, and cash dividend payments.

Debt

Our commercial paper program is supported by the 2023 Credit Agreement and the Third Amended and Restated Credit Agreement. The amounts available to be drawn under the 2023 Credit Agreement and the Third Amended and Restated Credit Agreement are reduced by the amount of borrowings under our commercial paper program. There were no outstanding borrowings under our commercial paper program, 2023 Credit Agreement, or the Third Amended and Restated Credit

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Agreement as of May 2, 2025. Total combined availability under the 2023 Credit Agreement and the Third Amended and Restated Credit Agreement as of May 2, 2025 was $4.0 billion.

The 2023 Credit Agreement and the Third Amended and Restated Credit Agreement contain customary representations, warranties, and covenants. We were in compliance with those covenants at May 2, 2025.

The following table includes additional information related to our debt for the three months ended May 2, 2025, and May 3, 2024:

			Three Months Ended
(In millions)			May 2, 2025						May 3, 2024
Net proceeds from issuance of debt			$	—					$	—
Repayment of debt			(778)						(22)
Net change in commercial paper			—						—
Maximum commercial paper outstanding at any period			—						250
Short-term borrowings outstanding at quarter-end			—						—
Weighted-average interest rate of short-term borrowings outstanding			—		%				—		%

Share Repurchases

We have an ongoing share repurchase program, authorized by the Company’s Board of Directors, that is executed through purchases made from time to time either in the open market or through private off-market transactions. We also withhold shares from employees to satisfy tax withholding liabilities. Shares repurchased are retired and returned to authorized and unissued status. The following table provides, on a settlement date basis, the total number of shares repurchased, average price paid per share, and the total cash used to repurchase shares for the three months ended May 2, 2025, and May 3, 2024:

			Three Months Ended
(In millions, except per share data)			May 2, 2025						May 3, 2024
Total amount paid for share repurchases 1			$	112					$	923
Total number of shares repurchased			0.5						4.0
Average price paid per share			$	243.44					$	229.53

1 Excludes unsettled share repurchases and unpaid excise taxes.

As of May 2, 2025, we had $10.8 billion remaining available under our share repurchase program with no expiration date. The Company determines the timing and amount of repurchases based on its assessment of various factors including prevailing market conditions, alternate uses of capital, liquidity, and the economic environment, among others. The timing and amount of these share repurchases are subject to change at any time.

Dividends

Dividends are paid in the quarter immediately following the quarter in which they are declared. Dividends paid per share increased from $1.10 per share for the three months ended May 3, 2024, to $1.15 per share for the three months ended May 2, 2025.

Capital Resources

We expect to continue to have access to the capital markets on both a short-term and long-term basis when needed for liquidity purposes by issuing commercial paper or new long-term debt. The availability and the borrowing costs of these funds could be adversely affected, however, by a downgrade of our debt ratings or a deterioration of certain financial ratios. The table below reflects our debt ratings by Standard & Poor’s (S&P) and Moody’s as of May 29, 2025, which we are disclosing to enhance understanding of our sources of liquidity and the effect of our ratings on our cost of funds. Our debt ratings have given, and should continue to give, us the option to refinance our debt as it becomes due. Our commercial paper and senior debt ratings may be subject to revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating.

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Debt Ratings			S&P			Moody’s
Commercial Paper			A-2			P-2
Senior Debt			BBB+			Baa1
Senior Debt Outlook			Stable			Stable

There are no provisions in any agreements that would require early cash settlement of existing debt or leases as a result of a downgrade in our debt rating or a decrease in our stock price.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our significant accounting policies are described in Note 1 to the consolidated financial statements presented in the Annual Report. Our critical accounting policies and estimates are described in “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report. Our significant and critical accounting policies and estimates have not changed significantly since the filing of the Annual Report.