Lowe's Q2 Earnings Beat on Tariff Refunds, FY'26 Outlook Moves Lower

LOW’s Earnings Get Help From Tariff Refunds

Reported earnings were $4.27 per share, unchanged from the year-ago quarter. Lowe’s recognized $96 million in pre-tax expenses tied to intangible asset amortization from the Artisan Design Group and Foundation Building Materials acquisitions.

The non-GAAP reconciliation added back a net 13 cents per share related to those acquisition expenses. In the prior-year quarter, acquisition-related items reduced earnings by a net 6 cents per share. Pre-tax earnings increased to $3.18 billion from $3.16 billion, while net interest expense rose to $374 million from $313 million.

Lowe’s Sales Mix Shows Pro & Home Services Strength

Comparable sales increased 0.2% year over year, which came below our estimate of 1% increase and marked the fifth consecutive quarter of positive comps. Pro and home services were key contributors, while discretionary DIY spending remained pressured by the macro environment. Management highlighted continued execution of the company’s Total Home strategy. 

The online business remained another source of momentum during the quarter. Management said sustained growth across Pro, online and home services supported positive comparable sales. As of July 31, 2026, Lowe’s operated 1,761 stores, representing 196.0 million square feet of retail selling space.

LOW’s Gross & Operating Margins Contract

Gross profit increased 5.9% year over year to $8.58 billion from $8.10 billion. Gross margin fell 80 basis points year over year to 33%, which beat our estimate of 32.4%.

Selling, general and administrative expenses increased 6.7% to $4.46 billion, although SG&A as a percentage of sales improved to 17.2% from 17.4%, marginally beating our projection of 17.1%. 

Depreciation and amortization rose to $572 million from $457 million. Operating income advanced 2.3% to $3.55 billion, but operating margin narrowed to 13.7% from 14.5%, beating our estimate of 13.1%.

Lowe’s Balance Sheet & Cash Flow Stay in Focus

Cash and cash equivalents was $3.17 billion at quarter-end compared with $4.86 billion a year earlier. Merchandise inventory increased to $17.7 billion from $16.3 billion, while long-term debt, excluding current maturities, rose to $35.2 billion from $30.6 billion. Total assets were $55.9 billion.

For the first six months of fiscal 2026, net cash provided by operating activities was $7.01 billion compared with $7.61 billion in the prior-year period. Capital expenditures were $1.06 billion. Cash dividend payments totaled $1.35 billion, and common-stock repurchases were $366 million. Net cash used in financing activities reached $4.06 billion.

LOW Narrows Fiscal 2026 Outlook to Lower End

Lowe’s expects fiscal 2026 total sales of $92 billion compared with its prior range of $92-$94 billion. Comparable sales are projected to be flat, versus the previous expectation of flat to up 2%. The revision reflects first-half operating results and current demand trends.

The company projects an operating margin of 11.2% versus the earlier 11.2-11.4% range and an adjusted operating margin of 11.6% compared with 11.6-11.8% previously. Earnings are expected to be about $11.75 per share compared with the prior expected range of $11.75 to $12.25 per share. Adjusted earnings are forecast at about $12.25 per share compared with the prior expected range of $12.25 to $12.75 per share. Capital expenditures remain targeted at up to $2.50 billion.

The outlook includes tariff refunds recognized in the second quarter but excludes potential additional tariff refunds in the second half. Lowe’s also expects net interest expense of about $1.60 billion and an effective tax rate of roughly 24.5%. Adjusted guidance excludes an expected 40-basis-point operating-margin impact and a 50 cents-per-share after-tax impact from acquisition-related intangible asset amortization.

Lowe’s Stock Price Performance

Shares of this this Zacks Rank #4 (Sell) have lost 1.9% over the past three months against the industry’s 7.6% growth.

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