LOWES COMPANIES INC

The following table sets forth the percentage relationship to net sales of each line item of the consolidated statements of earnings. This table should be read in conjunction with the following discussion and analysis and the consolidated financial statements, including the related notes to the consolidated financial statements.

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, including the related notes to the consolidated financial statements.

1 A comparable location is 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 have decided to close is no longer considered comparable as of the beginning of the month in which we announce its closing. Comparable sales include online sales, which positively impacted comparable sales in fiscal 2025, fiscal 2024, and fiscal 2023 by approximately 105 basis points, 50 basis points, and 25 basis points, respectively. Acquisitions are typically included in comparable sales after they have been owned for more than 12 months.

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 periods have been adjusted to align with the current period presentation.

3 Customer transactions and average ticket represent metrics used by management to evaluate performance of our retail locations.

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.

Fiscal 2025 Compared to Fiscal 2024

Net Sales – Net sales increased 3.1% to $86.3 billion in fiscal 2025, driven by sales associated with new acquisitions during the year, and an increase in comparable sales of 0.2% over the same period. The increase in comparable sales was driven by a 3.0% increase in comparable average ticket, partially offset by a decline in comparable customer transactions of 2.8%. Comparable sales change during each quarter of the fiscal year, as reported, were a decline of 1.7% in the first quarter, an increase of 1.1% in the second quarter, an increase of 0.4% in the third quarter, and an increase of 1.3% in the fourth quarter.

During fiscal 2025, we had comparable sales increases in five of 14 product categories, including Rough Plumbing, Appliances, Building Materials, Lawn & Garden, and Paint. Strength in these categories reflects continued growth with our Pro customer and online, as well as our broad assortment of appliances available next-day to our customers in the majority of zip codes in the United States.

Gross Margin – Gross margin as a percentage of sales for fiscal 2025 increased 16 basis points compared to fiscal 2024. The gross margin increase for the year was primarily driven by favorability from credit revenue and improvements in inventory shrink, partially offset by the operational cost structure of acquisitions during 2025.

SG&A – SG&A expense for fiscal 2025 deleveraged 72 basis points as a percentage of sales compared to fiscal 2024. This was primarily driven by employee compensation and benefits, along with cycling prior year realized gains on contingent consideration associated with the 2022 sale of the Canadian retail business, partially offset by the operational cost structure of acquisitions during 2025.

Depreciation and Amortization – Depreciation and amortization expense deleveraged 18 basis points for fiscal 2025 as a percentage of sales compared to fiscal 2024, primarily due to amortization of intangible assets of acquired businesses in 2025.

Interest – Net – Net interest expense is comprised of the following:

Net interest expense in fiscal 2025 deleveraged six basis points.

Income Tax Provision – Our effective income tax rate was 23.9% in fiscal 2025 compared to 24.0% in fiscal 2024.

Fiscal 2024 Compared to Fiscal 2023

For a comparison of our results of operations, financial condition, liquidity, and capital resources for the fiscal years ended January 31, 2025, and February 2, 2024, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended January 31, 2025, filed with the SEC on March 24, 2025.

Non-GAAP Financial Measures

Adjusted Diluted Earnings Per Share

Adjusted diluted earnings per share is considered a non-GAAP financial measure. The Company believes this non-GAAP financial measure provides useful insight for analysts and investors in understanding the comparison of operational performance for fiscal 2025 and fiscal 2024. Adjusted diluted earnings per share excludes the impact of certain items, further described below, not contemplated in the Company’s business outlook for fiscal 2025 and fiscal 2024.

Fiscal 2025 Impacts

•In fiscal 2025, the Company recognized pre-tax expenses of $321 million consisting of transaction costs and intangible asset amortization related to the acquisitions of Artisan Design Group and Foundation Building Materials (Acquisition of businesses).

Fiscal 2024 Impacts

•In fiscal 2024, the Company recognized pre-tax income of $177 million consisting of realized gains on the contingent consideration associated with the fiscal 2022 sale of the Canadian retail business (Canadian retail business transaction).

Adjusted diluted earnings per share should not be considered an alternative to, or more meaningful indicator of, the Company’s diluted earnings per common share as prepared in accordance with GAAP. The Company’s methods of determining this non-GAAP financial measure may differ from the method used by other companies and may not be comparable.

1 Represents the tax benefit or expense related to the item excluded from adjusted diluted earnings per share.

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:

1 Income tax adjustment is defined as net operating profit multiplied by the effective tax rate, which was 23.9%,24.0%, and 24.1% for fiscal 2025, fiscal 2024, and fiscal 2023, 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.