Lowe's Pro Growth Is Lifting Sales, but Margins Still Lag

Lowe's second-quarter sales rose 8.3% to $26.0 billion, but the quarter exposed the tradeoff behind that growth. The company is gaining business from professional contractors and online shoppers while do-it-yourself demand remains soft, yet reported earnings were unchanged at $2.4 billion.

The strongest operating signals came from Pro, online and home services. Management said Pro delivered another quarter of growth, while online sales increased 15.7%. Those businesses helped Lowe's post its fifth consecutive quarter of positive comparable sales. The gains also support the strategy behind the acquisitions of Foundation Building Materials and Artisan Design Group, which expand Lowe's reach with larger professional customers and residential construction projects.

Still, the headline sales increase overstates the health of the existing store base. Comparable sales rose only 0.2%, and comparable transactions fell 2.1%. Weather-sensitive outdoor and seasonal categories were weak, while management continued to describe discretionary DIY spending as pressured. The acquired businesses also face a new-home construction market that Lowe's expects to remain soft for longer.

Profitability is the harder test. Lowe's reported diluted earnings per share of $4.27, unchanged from a year earlier. Adjusted EPS rose 1.6% to $4.40, but both figures included an $0.11 benefit from tariff refunds. The quarter also contained $96 million of pretax acquisition-related costs. Management lowered its full-year 2026 outlook to $92.0 billion of sales, flat comparable sales, an 11.2% reported operating margin and about $11.75 of diluted EPS.

The official release makes an important distinction between reported and adjusted profitability. Lowe's expects a full-year adjusted operating margin of 11.6%, compared with 11.2% on a reported basis, because the adjusted measure excludes acquisition costs and related accounting charges. Investors should not treat the two figures as interchangeable.

The central question is whether Pro growth can improve returns rather than simply add lower-margin revenue. Strong online growth and contractor demand are useful offsets to weak DIY traffic, but the company must integrate FBM and ADG while protecting pricing and controlling costs. If comparable transactions remain negative and housing activity stays weak, purchased revenue may continue to dilute the margin.

Lowe's has shown that it can grow sales in a difficult home-improvement market. The next proof point is operating leverage. A sustained recovery would require the acquired Pro businesses to support profit growth, not merely keep total revenue moving while the core customer remains cautious.