Q1 2024 Lowe's Companies Inc Earnings Call

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Unknown Executive: Because Lowe's knows nothing feels better than free. Learn more about our new loyalty program at Lowes.com slash MyLowe's Rewards today. At Lowe's, it pays to be a pro. Find the paints you need to get the job done every day from top brands like HGTV Home by Sherwin-Williams and Valspar. And, as an MVP Pro Rewards member, you'll get up to 20% back in rewards on eligible liquid paint products.

Speaker Change: Okay.

Speaker Change: At Loews it pays to be a pro find the paints you need to get the job done every day from top brands like HGTV home by Sherwin, Williams, and Valspar and as an M. B piece pro rewards member, you'll get up to 20% back in rewards and eligible liquid paint products plus save time with free job site delivery lows.

Speaker Change: Those pros.

Speaker Change: Okay.

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Rob: Good morning, everyone. Welcome to Lowe's Companies' first quarter 2024 earnings conference call. My name is Rob, and I'll be your operator for today's call. As a reminder, this conference is being recorded. I'll now turn the call over to Kate Pearlman, Vice President of Investor Relations and Treasurer.

Speaker Change: Good morning, everyone and welcome to Lowe's Companies' first quarter 2024 earnings Conference call. My name is wrapping up your operator for today's call.

Speaker Change: As a reminder, this conference is being recorded.

Speaker Change: I'll now turn the call over to Kate Pearlman, Vice President of Investor Relations and Treasurer.

Kate Pearlman: Thank you and good morning. Here with me today are Marvin Ellison, Chairman and Chief Executive Officer, Bill Boltz, our Executive Vice President, Merchandising, Joe McFarland, our Executive Vice President, Stores, and Brandon Sink, our Executive Vice President and Chief Financial Officer. I would like to remind you that our notice regarding forward-looking statements is included in our press release this morning, which can be found on Lowe's Investor Relations website. During this call, we will be making comments that are forward-looking, including our expectations for fiscal 2024.

Kate Pearlman: Thank you and good morning here with me today are Marvin Ellison, Chairman and Chief Executive Officer, Paul <unk>, Our executive Vice President merchandising, Joe Mcfarland Executive Vice President stores and Brandon, Thank our executive Vice President and Chief Financial Officer.

Speaker Change: I would like to remind you that our notice regarding forward looking statements is included in our press release. This morning, which can be found on Lowe's Investor Relations website during.

Speaker Change: During this call we will be making comments that are forward looking including our expectations for fiscal 2020 for actual results may differ materially from those expressed or implied as a result of various risks uncertainties and important factors, including those discussed in the risk factors MD&A and other sections of our annual report on Form 10-K and our.

Kate Pearlman: Actual results may differ materially from those expressed or implied as a result of various risks, uncertainties, and important factors, including those discussed in the risk factors, MD&A, and other sections of our annual report on Form 10-K and our other SEC filings. Additionally, we'll be discussing certain non-GAAP financial measures. A reconciliation of these items to U.S. GAAP can be found in the Quarterly Earnings section of our Investor Relations website. Now, I'll turn the call over to Marvin.

Speaker Change: Other SEC filings.

Speaker Change: Additionally, we'll be discussing certain non-GAAP financial measures a reconciliation of these items to U S. GAAP can be found in our quarterly earnings section of our Investor Relations website.

Marvin R. Ellison: Now I'll turn the call over to Marvin.

Marvin R. Ellison: Thank you, Kate, and good morning to everyone, and thank you for joining us today. First quarter sales were $21.4 billion, with comparable sales down 4.1% from the same period last year. Despite the continued pressure and DIY bigger ticket discretionary spending across the industry, we delivered better than expected spring seasonal sales. Overall, we performed well in a challenging home improvement environment as we adjusted our strategy to win the early spring customer intake share in key categories with data-driven marketing campaigns and our compelling seasonal assortment, which includes our industry-leading outdoor power equipment lineup, strengthened by the launch of Toro.

Marvin R. Ellison: Thank you Kate and good morning to everyone and thank you for joining US today first quarter sales were $21 $4 billion with comparable sales down four 1% from the same period last year. Despite the continued pressure in DIY bigger ticket discretionary spending across the industry, we deliver better than expected spring seasonal.

Marvin R. Ellison: Sales overall, we performed well in a challenging home improvement environment as we adjusted our strategy to win the early spring customer and take share in key categories with data driven marketing campaigns and our compelling seasonal assortment, which includes our industry, leading outdoor power equipment lineup strengthened by the launch.

Speaker Change: A toll road.

Marvin R. Ellison: We also gained traction with our total home strategy, reflected in our positive Q1 growth in pro and online sales. In addition, we improved customer satisfaction while also maintaining a disciplined focus on our Perpetual Productivity Improvement, or PPI, initiatives across all functional areas of the business. Overall, we're excited about our spring strategy, and we're pleased with how our Springfest campaign resonated with customers, especially in smaller-ticket lawn and garden projects. The combination of the right brands, compelling offers, strong store execution, and more nimble marketing helped us capitalize on this key time of year. Bill and Joe will provide more detail on our spring and PPI efforts later in the call.

Speaker Change: We also gained traction with our total home strategy reflected in our positive Q1 growth in pro and online sales in.

Speaker Change: In addition, we improve customer satisfaction, while also maintaining a disciplined focus on our perpetual productivity improvement or PPI initiatives across all functional areas of the business.

Speaker Change: Overall, we're excited about our spring strategy and we're pleased with how our spring first campaign resonated with customers, especially in smaller ticket lawn and garden projects.

Speaker Change: The combination of the right brands compelling offers strong store execution and more nimble marketing helped us capitalize on this key time of year, Bill and Joe will provide more detail on our spring in PPI efforts later in the call.

Marvin R. Ellison: Now turning to Pro, as I mentioned earlier, we delivered positive pro comps in Q1 as our strategic investments to improve the Pro experience are driving increased sales and improved customer engagement. Specifically, investments to improve service levels, as well as our expanded brand portfolio that now includes client tools, are strengthening our relationships with this core customer. This customer has proven resilient, as reflected in the recent PRO survey, with healthy backlogs in line with last year.

Speaker Change: Now turning to pro as I mentioned earlier, we delivered positive pro comps in Q1, as our strategic investments to improve the pro experience are driving increased sales and improved customer engagement.

Specifically investments to improve service levels as well as our expanded brand portfolio that now includes <unk> Klein tools are strengthening our relationships with this core customer.

Speaker Change: This customer has proven resilient as reflected in the recent pro survey with healthy backlogs in line with last year.

Marvin R. Ellison: Our strategy continues to focus on taking share with small to medium-sized pros, such as repair and remodel contractors, property managers, and title people. We estimate these pros represent half of the $500 billion professional services market, which remains highly fragmented.

Speaker Change: Our strategy continues to focus on taking share with the small to medium sized pros such as repair and remodel contractors property managers and trace people. We estimate these probes represent half of the $500 billion pro market, which remains highly fragmented.

Marvin R. Ellison: We are striving to provide a high level of service to these small to medium-sized businesses as we continue to build trust and credibility. And we continue to invest in ProGrowth, which includes expanding our capabilities to handle larger order delivery to the job site while also opening new Lowe's ProSupply branches around the country. There is still a significant runway ahead of us to grow our sales with these customers while also leveraging our retail footprint to drive profitability. Now I am shifting to online.

Speaker Change: We are striving to provide a high level of service with the small to medium sized pros as we continue to build trust and credibility.

Speaker Change: And we continue to invest in pro growth, which includes expanding our capabilities to handle larger order delivery to the job site. While also opening new Lowe's pro supply branches around the country.

Speaker Change: There is still significant runway ahead of us to grow our sales with these customers while also leveraging our retail footprint to drive profitability.

Speaker Change: Now shifting to online in the first quarter online sales were up approximately 1%.

Marvin R. Ellison: In the first quarter, online sales were up approximately 1%. Our ongoing improvement in our conversion rates in Q1 offset continued pressure in bigger-ticket DIY categories. This quarter, Lowe's expanded its same-day delivery options by partnering with DoorDash and SHIP. Lowe's is the first home improvement retail partner on these platforms, and their members now have quick and convenient access to a wide assortment of home improvement products across the country. These new partnerships complement our existing same-day delivery options with Instacart in addition to our same-day delivery option on Lowes.com using our Last Mile Partner OneRail.

Speaker Change: Our ongoing improvement in our conversion rate in Q1 offset continued pressure in bigger ticket DIY categories.

Speaker Change: This quarter, we expanded our same day delivery options of our partnering with door dash and shipped.

Speaker Change: Lowe's has the first home improvement retail partner on these platforms and their members now have quick and convenient access to a wide assortment of home improvement products across the country.

Speaker Change: These new partnerships complement our existing same day delivery options with instant card. In addition to our same day delivery option on Lowes Dot com using our last mile part no one rail.

Marvin R. Ellison: The objective is simple, giving customers access to the home improvement products they need however they choose to shop, and we're tailoring our digital experience to support the unique needs of different customer shopping journeys based on the type of project. And we're also using virtual and mixed reality to make it easier for customers to explore and visualize different possibilities for their home. Another exciting step forward for Lowe's this quarter was the national rollout of our DIY loyalty program called MyLowe's Rewards.

Speaker Change: Our objective is simple, giving customers access to the home improvement products. They need however, they choose to shop.

Speaker Change: And we're tailoring our digital experience to support the unique needs of different customer shopping journeys based on the type of project.

Speaker Change: And we're also using virtual and mixed reality to make it easier for customers to explore and visualize different possibilities for their home.

Speaker Change: Another exciting step forward for loans. This quarter was the national rollout of our DIY loyalty program called <unk> rewards.

Marvin R. Ellison: This program is designed to reward customers for choosing Lowe's for their home improvement needs by earning points toward My Lowe's money, providing free standard shipping, as well as other offers and gifts. In addition, customers can also save 5% every day on eligible purchases with the MyLowe's Rewards credit card.

Speaker Change: This program is designed to reward customers for choosing lows for the home improvement needs by earning points toward Milo as money, providing free standard shipping as well as other offers and gifts and.

Speaker Change: In addition customers can also save 5% everyday on eligible purchases with the myeloma rewards credit card.

Marvin R. Ellison: As my Lowe's Rewards Program matures, the purchase data will allow us to better understand the specific needs of each customer and tailor offers to their individual preferences. We're pleased with the early customer adoption and the successful launch both in-store and online. And our frontline associates have also rallied around this campaign, and I'd like to thank them for their successful efforts to promote Marlowe's rewards and educate our customers on the benefits. Now speaking of teams, we're excited to welcome the best soccer player in the world, Lionel Messi, to our Lowe's home team lineup.

Speaker Change: As Mallows rewards program matures the purchase data will allow us to better understand the specific needs of each customer and tailor offers to their individual preferences.

Speaker Change: We're pleased with the early customer adoption and the successful launch both in store and online and our frontline associates have also rallied around this campaign and I'd like to thank them for their successful efforts to promote <unk> rewards and educate our customers on the benefits.

Speaker Change: Now speaking of team we're excited to welcome the best Soccer player in the World <unk> messy to our Lowes home team lineup.

Marvin R. Ellison: We're also extending our reach to more sports fans, beyond the football fans we connect with as the official home improvement retailer of the NFL. We're now striving to reach the 34 million soccer fans in the U.S. who are not NFL fans, and we're excited by the rapid growth of soccer fans in the U.S.

Speaker Change: We're also extending our reach to more sports fans beyond the football fans, we connect with as the official home improvement retailer of the NFL.

Speaker Change: We're now driving the reached a 34 million soccer fans in the U S who are not NFL fans and we're excited by the rapid growth of soccer fans in the U S.

Marvin R. Ellison: This exciting alliance, along with our partnership with MLS Club, Inter Miami CF, and the Copa America 2024 USA Tournament, gives us the opportunity to build trust and credibility with a broader customer base. These partnerships will help us bring new customers to Lowe's and offer some unique experiences and rewards for these very passionate fans. Now, I'd like to provide a quick update on our view of the macro.

Speaker Change: This exciting alliance along with our partnership with MLS Club Inner Miami, CEO and the Copa America 2020 for USA tournament gives us the opportunity to build trust and credibility with a broader customer base. These.

Speaker Change: These partnerships will help us bring new customers to lowes and offer some unique experiences and rewards for these very passionate fans.

Speaker Change: Now I'd like to provide a quick update on our view of the macro.

Marvin R. Ellison: Uncertainty around interest rate cuts, stubborn inflationary pressures, and a consumer still showing a preference for spending on discretionary services and experiences continues to weigh on DIY home improvement demand, and the outlook for lower mortgage rates and improved housing turnover remains uncertain. Real wage growth and home price appreciation are solid, but the home improvement customer is still on the sidelines, expressing concerns about the higher cost of living and the state of the overall economy.

Speaker Change: Uncertainty around interest rate cuts stubborn inflationary pressures and a consumer still showing a preference towards spending on discretionary services and experiences continue to weigh on the DIY home improvement demand.

Speaker Change: And the outlook for lower mortgage rates and improved housing turnover remains uncertain.

Speaker Change: Real wage growth and home price appreciation are solid, but the home improvement customers still on the sidelines expressing concerns about higher cost of living in the state of the overall economy.

Marvin R. Ellison: And while the near term is still challenging to read, we remain confident in the medium to long term outlook for our industry, as our core demand drivers are all supportive of growth. Our continued commitment to our PPI initiatives, combined with our ongoing investments in our Total Home Strategy, not only allows us to perform efficiently in this challenging macro environment, but it also positions Lowe's for accelerated market share growth when the home improvement market recovers.

Speaker Change: And while the near term is still challenging to read we remain confident in the medium to long term outlook for our industry as our core demand drivers are all supportive of growth.

Speaker Change: Our continued commitment on our PPI initiatives combined with our ongoing investments in our toll home strategy not only allow us to perform efficiently in this challenging macro environment. It also position Lowe's for accelerated market share growth when the home improvement market recovers.

Marvin R. Ellison: Before I close, I'd like to extend my appreciation to our frontline associates for their continued hard work and commitment to Lowe's and to our community. I visited stores in 8 of our 15 geographic regions in the first quarter, and our frontline associates are simply outstanding. And with that, I'll turn the call over to Bill. Thanks, Marvin, and good morning everyone.

Speaker Change: Before I close I'd like to extend my appreciation to our frontline associates for their continued hard work and commitment to lowes and to our communities.

Speaker Change: I visited stores in eight of our 15 geographic regions in the first quarter and our frontline associates are simply outstanding and with that I'll turn the call over to bill. Thanks.

Bill: Thanks, Marvin and good morning, everyone and.

William P. Boltz: In spite of a challenging home improvement backdrop in Q1, we are pleased with our early spring sales as customers responded to our strong spring assortment and compelling offer, and our approved brand and service offerings resonated with our pro-customers, which led to positive broad-based pro-comps across all three geographic divisions. This year, our SpringFest strategy went more local than ever by using weather-triggered digital marketing as the spring season broke across different regions.

Bill: In spite of a challenging home improvement backdrop in Q1, we are pleased with our early spring sales as customers responded to our strong spring assortment and compelling offers.

Bill: And our approved brand and service offerings resonated with our pro customers, which led to positive broad based pro comps across all three geographic divisions.

Bill: This year, our spring first strategy went more local than ever by using weather triggered digital marketing as the spring season broke across different regions in.

William P. Boltz: In Q1, we also introduced sneak peeks for Springfest, featuring doorbusters that were focused on driving traffic into our stores and online, with targeted offers in seasonally relevant categories such as soils, mulch, and live goods. Winning the customer with these early seasonal purchases is important as they will often come back multiple times throughout the spring for the remainder of their outdoor project needs. Now, turning to our results in Hardline.

Bill: In Q1, we also introduced sneak peeks for spring first featuring door Busters that we're focused on driving traffic into our stores and online with targeted offers which seasonally relevant categories, such as soils mulch and live goods.

Bill: Winning the customer with these early seasonal purchases as important as they will often come back multiple times throughout the spring for the remainder of their outdoor project needs.

Bill: Now turning to our results in hard lines. These marketing efforts paired with the right brands and strong execution helped us deliver positive comp sales on a one year and two year basis in lawn and garden.

William P. Boltz: These marketing efforts, paired with the right brands and strong execution, helped us deliver positive comp sales on a one-year and two-year basis in Lawn & Garden. Growth was driven by smaller-ticket projects in landscape products and live goods, which resulted in increases in both comp sales and transactions in these categories. We are also pleased to be gaining traction with our own Stay Green private brand as customers have responded to the quality and the value offered by these lawn care products, and Stay Green helps provide the consumer with a beautiful lawn that they can be proud of at a price that won't break the bank.

Bill: Growth was driven by smaller ticket projects and landscape products and live goods, which resulted in increases in both comp sales and transactions in these categories.

We are also pleased to be gaining traction with our own stay green private brand as customers have responded to the quality and the value offered in these lining care products.

Bill: And stay Green helps provide the consumer with a beautiful one that they can be proud of at a price that won't break the bank.

William P. Boltz: For the first time this spring, customers can also purchase select plants and live goods online and have them delivered through Lowes.com. Garden products are already some of the most searched items on our website, and now customers can conveniently shop for what they need and even order them from their backyard. And as Marvin mentioned, we are excited about our powerful new spring outdoor power equipment lineup as we introduce Toro to our lineup this year.

Bill: For the first time this spring customers can also purchase select plants and live goods online and have them delivered through lowes Dot com.

Bill: Garden products are already some of the most searched items on our website and now customers can conveniently shop for what they need and even order them from their backyard.

Speaker Change: And as Marvin mentioned, we are excited about our powerful new spring outdoor power equipment lineup as we introduce <unk> to our lineup this year.

William P. Boltz: Lowe's now offers the largest selection of Toro products of any national retailer, with innovations like SmartStow, which allows owners to store their mower upright, reducing the storage footprint by up to 70%, including patented Briggs & Stratton technology so it doesn't leak oil when stored in this position, and with Personal Pace, a best-in-class self-propelled system that propels the mower at the speed the user is We added these innovative Toro products to an already unmatched brand arsenal that included Ego, Skill, Cobalt, Husqvarna, Craftsman, and John Deere. These strong brands helped us deliver positive comp sales in both gas and battery-powered walk-behind lawnmowers, as well as handheld outdoor power equipment. Now I'm shifting gears to building products.

Speaker Change: Lowe's now offers the largest selection of Toro products of any national retailer with innovations like smart Stowe, which allows owners to store their mower upright, reducing the storage footprint by up to 70%, including patented Briggs <unk> Stratton technology. So it doesn't leak oil and stored in this position and.

Speaker Change: Personal pace a best in class self propelled system that propels the mower at the speed the user is walking.

Speaker Change: We added these innovative core products to an already unmatched brand Arsenal, which included ego skill cobalt Husqvarna Craftsman and John Deere.

Speaker Change: These strong brands helped us deliver positive comp sales in both gas and battery powered walk behind lawn mowers as well as handheld outdoor power equipment.

Speaker Change: Now shifting gears to building products.

William P. Boltz: Our pro-customers remained busy, which supported positive comps in building materials with strength in roofing, concrete, and block, drywall, and insulation, all helping to fuel that growth. Our added focus on inventory depth and improved in-stocks, along with our localization efforts with tailored assortments to the market, continue to give pro-customers the confidence that Lowe's will have what they need to complete the job. Repair and maintenance categories such as water heaters also continue to perform well, especially with innovative products like A.O.

Speaker Change: Our pro customers remain busy which supported positive comps in building materials with strength in roofing concrete block drywall and installation all helping to fuel that growth.

Speaker Change: Our added focus on inventory depth and improved in stocks along with our localization efforts with tailored assortments to the market continue to give pro customers the confidence that Lowe's will have what they need to complete the job.

Speaker Change: Repair and maintenance categories, such as water heaters also continued to perform well.

William P. Boltz: Smith's 120-volt plug-in heat pump water heater. These ENERGY STAR certified models plug into a standard wall outlet for easy installation and can save homeowners over $600 a year in utility bills compared to a standard electric water heater.

Speaker Change: Especially with innovative products like a O Smith 120 volt plug in heat pump water heaters. These.

Speaker Change: These energy Star certified models plug into our standard wall outlet for easy installation and can save homeowners over $600 a year in utility bills compared to a standard electric water heater.

William P. Boltz: In the electrical field, we are pleased with the performance of Klein Tools, the number one tool brand for the electrical and HVAC profession. New products like the Klein Circuit Breaker Finder make it easy for electricians to quickly identify which breakers and outlets are connected to the breaker panel without turning the breaker on and off. The introduction and expansion of brands like Kleintools not only drive sales but also allows us to rebuild credibility with our ProCustomers.

Speaker Change: In electrical we are pleased with the performance of Klein tools. The number one tool brand for the electrical and HVAC professional.

Speaker Change: New products like decline circuit breaker finder make it easy for electricians to quickly identify which breakers and outlets are connected to the breaker panel without turning to breaker on and off.

Speaker Change: The introduction and expansion of brands like client tools, not only drive sales, but also allows us to rebuild the credibility with our pro customers.

William P. Boltz: Turning to home decor, where softer demand and DIY bigger ticket interior categories like flooring, kitchens, bath, and appliances persist, trends in these categories were largely in line with the results we saw in the second half of last year.

Speaker Change: Turning to home decor were softer demand in DIY bigger ticket interior categories, like flooring kitchens, and Bath and appliances persisted.

Speaker Change: Trends in these categories were largely in line with the results we saw in the second half of last year.

William P. Boltz: Our customers continue to look for value, especially given the persistence of our customers. The Harlow Kitchen Faucet, which is simple to install with three easy steps. And what is really unique, you don't have to go below the sink to install it. Our stain master pet protect carpet with leak defense backing helps prevent spills and keeps pet accidents from seeping through to the rug pad or subfloor.

Speaker Change: Our customers continue to look for value, especially given the precision.

Speaker Change: Harlow kitchen faucet.

Speaker Change: Which is simple to install with three easy steps and what is really unique you don't have to go below the sink to install at our stainmaster pet protect carpet with leak defense backing helps prevent spills and keeps pet accidents from seeping through to the rug pad or sub floor.

William P. Boltz: Stainmaster is the most trusted brand in carpet and is exclusive to Lowe's. Turning to Appliance, We are expanding our market share as we continue to lead the industry with the broadest assortment, compelling values, and fast and convenient delivery, supported by our market delivery model, which creates a best-in-class fulfillment solution, including next-day delivery in most markets, which is an important option for a customer replacing a broken appliance. Average selling prices remain pressured as we cycle the reintroduction of pre-pandemic promotions across the industry, as well as the continued slowdown in discretionary demand.

Speaker Change: <unk> is the most trusted brand in carpet and is exclusive to Lowe's.

Speaker Change: Turning to appliances, we are expanding our market share as we continue to lead the industry with the broadest assortment compelling values and fast and convenient delivery supported by our market delivery model, which creates a best in class fulfillment solution, including next day delivery in most markets, which is an important option for a customer replace.

Speaker Change: And a broken appliance.

Speaker Change: Average selling prices remain pressured as we cycled the reintroduction of pre pandemic promotions across the industry as well as the continued slowdown in discretionary demand.

William P. Boltz: Despite these near-term challenges, our appliance suppliers continue to improve selection with innovation and amazing new products. A great example is the Lowe's exclusive GE freestanding range with EasyWash, a range with a first-of-its-kind removable oven liner that is dishwasher safe, making for easy clean-up.

Speaker Change: Despite these near term challenges our appliance suppliers continue to improve selection with innovation and amazing New products. A great example is the Lowe's exclusive GE freestanding range with easy wash a range with a first of its kind removable oven liner that is dishwasher safe, making for easy cleanup.

William P. Boltz: Moving on to Merchandising Productivity, our teams are continuing to execute against our extensive Perpetual Productivity Improvement, or PPI, roadmap. This quarter, I'd like to highlight the productivity benefits of one initiative, the progress we've made in expanding our private brand penetration. The core focus of our private brand strategy is to offer our brand-agnostic DIY customers style and quality at a great value. Not only do these products provide this for our customers, but the product margin rates for our private branded products are typically significantly higher on average compared to the national brand counterpart, as we build out a compelling private brand portfolio from Allen & Roth for core products and Stainmaster Products within flooring and paint. From Stay Green Lawn Care Products to Cobalt Tools, Outdoor Power Equipment, and Storage Solutions, we are delivering value to the DIY customer and productivity to the bottom line.

Speaker Change: Moving on to merchandising productivity, our teams are continuing to execute against our extensive perpetual productivity improvement or PPI roadmap.

Speaker Change: This quarter I'd like to highlight the productivity benefits of one initiative the progress we've made in expanding our private brand penetration.

Speaker Change: Core focus of our private brand strategy is to offer our brand agnostic DIY customers with style and quality at a great value.

Speaker Change: Not only do these products provide this for our customers the product margin rates for our private branded products are typically significantly higher on average compared to the national brand counterparts.

Speaker Change: As we build out a compelling private brand portfolio from <unk> core products in stainmaster products within flooring and paint to stay green lawn care products to Kobalt tools outdoor power equipment in storage solutions, we are delivering value to the DIY customer and productivity to the bottom line.

William P. Boltz: As I close, I'd like to extend my appreciation once again to our vendors for their ongoing partnership, in particular their support of our Merchandising Services team; our 30,000 MST associates keep our shelves stocked, execute resets, and enable our Red Vest Associates to spend more time serving our customers. We allocate 100% of our MST funds to this program and are pleased with the impact it is having on our customer experience and associate productivity. And I'd also like to thank our merchants for their hard work and dedication as they navigate this dynamic macro environment. Thank you, and I'll now turn the call over to you.

Speaker Change: As I close I'd like to extend my appreciation once again to our vendors for their ongoing partnership in particular their support of our merchandising services team.

Speaker Change: Our 30000, MSP associates keep our shelf stocked execute resets and enable our red vest associates to spend more time, serving our customers.

Speaker Change: We allocate 100% of our MST funds into this program and are pleased with the impact it is having on our customer experience and associate productivity.

Speaker Change: And I would also like to thank our merchants for their hard work and dedication as they navigate this dynamic macro environment. Thank.

Speaker Change: Thank you and I'll now turn the call over to Joe.

Unknown Executive: Thank you, Bill. Good morning, everyone.

Joseph Michael McFarland: Thank you Bill good morning, everyone. Let me begin by thanking our frontline associates for their hard work this quarter.

Unknown Executive: Let me begin by thanking our frontline associates for their hard work this quarter. Customer satisfaction scores were up 100 basis points over last year as we continue to improve our shopping experience for homeowners and pros, while at the same time driving productivity across our company. As we improve our customers' experience, we also remain focused on our associates' experience and our journey to become the employer of choice in retail. An example of our commitment to our associates was our decision to close our stores on Easter for the fifth consecutive year, giving our associates a well-deserved day off to spend with their loved ones, one of many ways we work to show our appreciation.

Satisfaction scores were up 100 basis points over last year as we continued to improve our shopping experience for homeowners and pros.

Joseph Michael McFarland: Same time driving productivity across our company as.

Joseph Michael McFarland: As we improve our customers' experience. We also remain focused on our associates experience and our journey to become the employer of choice in retail and.

Joseph Michael McFarland: An example of our commitment to our associates was our decision to close our stores on Easter for the fifth consecutive year, giving our associates are well deserved day off to spend with their loved ones. One in many ways, we work to show our appreciation.

Unknown Executive: We are seeing strong spring staffing levels and higher retention as we continue to invest in wages, associate development, and internal mobility. And we have a best-in-class leadership development training program, including a store replica at our Lowe's University Training Center, which gives store leaders hands-on leadership practice and coaching. We have also implemented new weekly routines that help our department supervisors strengthen the selling culture and skill set in their stores and prepare these leaders for the next step in their careers.

Joseph Michael McFarland: We are seeing strong spring staffing levels and higher retention as we continue to invest in wages associated development and internal mobility and we have a best in class leadership development training program, including a store replica or lows University training Center, which gives store leaders hands on leadership practice and coaching.

Joseph Michael McFarland: We have also implemented new weekly routines that help our department supervisors strengthened selling culture and skill set and their stores and prepare these leaders for the next step in their career.

Unknown Executive: As a reminder, more than 80% of our store leadership positions were filled internally last year, and nearly 90% of our store leaders started an hourly role. Another way we are strengthening our selling culture is through our modernized store operating system, which is enabling our associates to close omnichannel sales from within our stores and help customers get everything they came for. So when a customer is looking for something out of stock or can't find the specific style they want in store, our associates can search our online assortment to find what they need and help them seamlessly check out an order that combines in-store and online.

As a reminder, more than 80% of our store leadership positions were filled internally last year and nearly 90% of our store leaders started an hourly roles.

Joseph Michael McFarland: Another way, we're strengthening our selling culture is through a modernized store operating system, which is enabling our associates to close omnichannel sales from within our stores and help customers get everything they came for <unk>.

Joseph Michael McFarland: So when a customer is looking for something out of stock or can't find the specific style. They want and store our associates can search our online assortment to find what they need and help them seamlessly checkout in order that combines in store and online items.

Unknown Executive: Beyond supporting sales, our store teams remain laser focused on driving productivity. A common misconception that we hear is that Lowe's must be nearing the end of our productivity journey given how much progress we've made in the last five years. This couldn't be further from the truth.

Joseph Michael McFarland: Beyond supporting sales our store teams remain laser focused on driving productivity.

Joseph Michael McFarland: A common misconception that we are hearing is that Louis must be nearing the end of our productivity journey given how much progress we've made in the last five years. This couldn't be further from the truth since it can be hard to see from the outside looking in let me share some examples.

Unknown Executive: Since this can be hard to see from the outside looking in, let me share some examples. First, we are only one-third of the way through our multi-year transformation of the front end of our stores, which includes our proprietary self-checkout registers, a significantly improved buy-on-line pickup and store experience, a streamlined returns process, and an optimized front-end selling space. Second, we have significantly reduced our return and cancellation rate through improved vendor partnerships, decreased damages, and a clear and consistent returns process that's now systematically applied through enhanced technology.

Unknown Executive: Third, we are also enhancing our shrink prevention ecosystem to maintain our best in class shrink performance, including new AI technology in partnership with NVIDIA that prompts customers to scan missed items during self-checkout. We are also piloting new product protection, with a product security door that unlocks with the customer's phone number, instead of needing to find an associate with the traditional key. These are just a few examples from our extensive roadmap of PPI initiatives.

Joseph Michael McFarland: We are only one third of the way through our multi year transformation of the front end of our stores, which includes our proprietary self checkout registers are significantly improved buy online pickup in store experience a streamlined returns process and an optimized front end selling space.

Joseph Michael McFarland: We have significantly reduced our return in cancellation rate through improved vendor partnerships decreased damages and a clear and consistent returns process. That's now systematically applied through enhanced technology.

Joseph Michael McFarland: Third we are also enhancing our shrink prevention ecosystem to maintain our best in class shrink performance, including a new AI technology in partnership with Nvidia that prompt customers to scan missed items during the self checkout. We're also piloting new product protection with the product security door unlocked with the customer's phone number.

Joseph Michael McFarland: Instead of needing to find an associate with the traditional key.

Joseph Michael McFarland: These are just a few examples from our extensive roadmap of PPI initiatives.

Unknown Executive: Given the strong performance of our frontline associates this quarter, 93% of our stores qualified for our Winning Together quarterly bonus, which is designed specifically for our hourly associates. As we approach Memorial Day weekend, I want to thank our veterans. As a Marine, I'm proud of our company's longstanding commitment to supporting our military community. Lowe's ranks among the top military-friendly brands in the U.S. with a 10% off everyday military discount, dedicated veteran parking spots, and nearly 26,000 associates from the military.

Joseph Michael McFarland: Given the strong performance of our frontline associates this quarter, 93% of our stores qualified for our winning together quarterly bonus which is designed specifically for our hourly associates.

Speaker Change: As we approach Memorial day weekend I want to thank our veterans as a marine I'm proud of our company's long standing commitment to supporting our military community.

Speaker Change: <unk> ranks among the top military friendly brands in the U S with a 10% op everyday military discount dedicated better and parking spots and nearly 26000 associates from the military community. We work with the department of defense to Brown jobs directly to transitioning service members and military spouses and of a program to provide training.

Unknown Executive: We work with the Department of Defense to bring our jobs directly to transitioning service members and military spouses, and we have a program to provide training and work experience with Lowe's during their last months of service. We value the skills, dedication, and courageous leadership we see in our veterans. And this Memorial Day, I hope you'll join us in thanking our associates in camouflage vests for their service. In closing, we are executing to deliver an even better experience for our customers and associates, while unlocking even more productivity across our stores. With that, I'll turn it over to Brandon.

Speaker Change: And work experience with Lowe's during their last months of service.

Speaker Change: We value the skills dedication and courageous leadership, we see in our veterans and this memorial day, I Hope Youll join us and thanking our associates in camouflage vest for their service.

Speaker Change: In closing, we are executing to deliver an even better experience for our customers and associates, while unlocking even more productivity across our stores with that I will turn it over to Brandon.

Brandon: Thank you Joe <unk>.

Brandon J. Sink: Starting with our first quarter results, we generated GAAP diluted earnings per share of $3.06. Please note that in Q1 last year, we recognized a gain of $63 million associated with the sale of our Canadian retail business. As a result, my comments today will include comparisons to certain non-GAAP measures from last year. First quarter sales were $21.4 billion, with comparable sales down 4.1% as improved seasonal weather combined with strong spring execution drove better than expected results.

Brandon: Starting with our first quarter results, we generated GAAP diluted earnings per share of $3 <unk>.

Brandon: Please note in Q1 last year, we recognized a gain of $63 million associated with the sale of our Canadian retail business.

Brandon: As a result my comments today will include comparisons to certain non-GAAP measures from last year.

Brandon: First quarter sales were $21 4 billion with comparable sales down four 1%.

Brandon: As improved seasonal weather combined with strong spring execution drove better than expected results.

Brandon: Comparable transactions declined three 1% as homeowners continue to delay larger discretionary projects.

Brandon J. Sink: Comparable transactions declined 3.1% as homeowners continued to delay larger discretionary projects, and Comparable Average Ticket was down 1%, with Strength and Pro partly offsetting the impacts of lower DIY bigger ticket sales and ongoing appliance pricing pressure.

Brandon: In comparable average ticket was down 1% with strength in pro partly offsetting the impacts of lower DIY bigger ticket sales and ongoing appliance pricing pressure.

Brandon J. Sink: Our monthly comps were down 6.7% in February, 4.9% in March, and 1.1% in April. Keep in mind that our monthly comp cadence was impacted by the earlier timing of Easter, which fell in March this year, while it was in April last year. Because we closed our stores on Easter, this pressured our March results by approximately 300 basis points and benefited April by the same amount. Gross margin was 33.2% of sales in the first quarter, down 49 basis points from last year, largely driven by ongoing supply chain investment, early spring traffic driving promotions, and a modest decline in credit revenue.

Brandon: Our monthly comps were down six 7% in February four 9% in March and one 1% in April.

Brandon: Yes.

Brandon: Keep in mind, our monthly comp cadence was impacted by the earlier timing of Easter, which fell in March this year, while it was in April last year.

Brandon: Because we closed our stores on Easter This pressured our March results by approximately 300 basis points and benefited April by the same amount.

Brandon: Yeah.

Brandon: Gross margin was 33, 2% of sales in the first quarter down 49 basis points from last year, largely driven by ongoing supply chain investments.

Brandon: Early spring traffic driving promotions and a modest decline in credit revenue.

Brandon J. Sink: This was partly offset by lower transportation costs and ongoing PPI issues. SG&A was 18.8% of sales, down 137 basis points versus last year's adjusted SG&A, driven by sales de-leverage, as well as the impact of a favorable legal settlement. These pressures were partly offset by PPI initiatives delivered by each functional team across the country.

Brandon: This was partly offset by lower transportation costs and ongoing PPI initiatives.

Brandon: SG&A was 18, 8% of sales down 137 basis points versus last year's adjusted SG&A, driven by sales deleverage as well as the cycling of a favorable legal settlement.

Brandon: These pressures were partly offset by PPI initiatives delivered by each functional team across the company.

Brandon J. Sink: Operating margin of 12.4% declined 201 basis points versus prior year adjusted operating margin. The effective tax rate was 23.7%, largely in line with last year's adjusted effective tax rate. Inventory ended the quarter at $18.2 billion, $1.3 billion lower than last year as we continue to optimize replenishment to align with sales patterns and improve the efficiency of spring product flow. Turning to Capital Allocation, In the first quarter, we generated $3.9 billion in free cash.

Brandon: Operating margin of 12, 4% declined 201 basis points versus prior year adjusted operating margin.

Brandon: The effective tax rate was 23, 7% largely in line with last year's adjusted effective tax rate.

Brandon: Inventory ended the quarter at $18 2 billion $1 3 billion lower than last year as we continue to optimize replenishment to align with sales patterns and improve the efficiency of spring product flow.

Brandon: Turning to capital allocation.

Brandon: In the first quarter, we generated $3 9 billion and free cash flow.

Brandon J. Sink: Capital expenditures total $382 million as we continue to invest in our strategic growth initiative. We paid $633 million in dividends at $1.10 per share and repurchased 3 million shares for $743 million, returning $1.4 billion to our shareholders. We ended Q1 at an adjusted debt to EBITDAR of 2.93 times, and we delivered a return on invested capital above 32%. Looking forward to the remainder of the year.

Brandon: Capital expenditures totaled $382 million as we continue to invest in our strategic growth initiatives.

Brandon: We paid $633 million in dividends and $1 10 per share and.

Brandon: And repurchased 3 million shares for $743 million, returning $1 4 billion to our shareholders.

Brandon: We ended Q1 at adjusted debt to EBITDAR of 293 times, and we delivered a return on invested capital above 32%.

Brandon J. Sink: Today we are affirming our full year 2024 outlook. We continue to expect sales ranging from $84 to $85 billion and comparable sales in a range of down 2% to down 3% with professional sales outpacing DIY. We expect operating margin in the range of 12.6% to 12.7% and full-year earnings per share of approximately $12 to $12.30. To assist with your modeling, here are a few points to keep in mind for the cadence of the. First, based on the trends we are seeing in the business, we expect second quarter comparable sales to be roughly in line with the first quarter.

Brandon: Looking forward to the remainder of the year today, we are affirming our full year 2020 for outlook.

Brandon: We continue to expect sales ranging from 84 to 85 billion and comparable sales in a range of down 2% to down 3% with pro sales outpacing DIY.

Brandon: We expect operating margin in the range of 12, 6% to 12, 7%.

Brandon: And full year earnings per share of approximately $12 to $12 30.

Brandon: To assist with your modeling here are a few points to keep in mind for the cadence of the year.

Brandon: First based on the trends, we're seeing in the business, we expect second quarter comparable sales to be roughly in line with the first quarter.

Brandon J. Sink: We continue to expect second half comp sales to improve, as we cycle over easier compares from the DIY pullback that intensified in the third quarter of 2023. As I mentioned on our last call, this is not because we are forecasting an improvement in demand trends this year; it's just that the comparisons are easier in the second half. In terms of flow-through, we expect operating margin to remain under pressure in Q2, largely due to sales deleverage and the cyclical favorable legal settlement. Taking these factors into account, we expect Q2 operating margin to be approximately 150 basis points below the prior year rate, and flow-through of productivity to improve in the second half of the year.

Brandon: We continue to expect second half comp sales to improve as.

Brandon: As we cycle over easier compares from the DIY pullback that intensified in the third quarter of 2023.

Brandon: As I mentioned on our last call. This is not because we are forecasting an improvement in demand trends. This year. It's just that the compares are easier in the second half.

Brandon: In terms of flow through we expect operating margin to remain under pressure in Q2, largely due to sales deleverage and cycling a favorable legal settlement.

Brandon: Taking these factors into account, we expect Q2 operating margin rate to be approximately 150 basis points below the prior year rate and flow through of productivity to improve in the second half of the year.

Brandon J. Sink: Before I close, I'd like to reiterate that our capital allocation strategy remains intact. First, we reinvest in the business. Second, target a 35% dividend payout ratio. And third, return excess cash to shareholders through share repurchase. In 2024, we plan to use our free cash flow to repay a 450 million bond maturity and then return the remaining cash to shareholders through share repurchase. In closing, we remain focused on investing in our total home strategy.

Brandon: Before I close I'd like to reiterate that our capital allocation strategy remains intact.

Brandon: First reinvest in the business.

Brandon: Target of 35% dividend payout ratio.

Brandon: And third return excess cash to shareholders through share repurchases.

In 2024, we plan to use our free cash flow to repay a $450 million bond maturity and then return the remaining cash to shareholders through share repurchases.

Brandon: In closing we remain focused on investing in our total home strategy.

Brandon J. Sink: As Marvin mentioned, we are also executing against a multi-year roadmap of PPI initiatives that will continue to unlock productivity well beyond 2024. We are well positioned to capitalize on home improvement demand when the market recovers and continue to deliver sustainable shareholder value. And with that, we'll open it up to your questions.

Speaker Change: As Marvin mentioned, we are also executing against a multiyear road map of PPI initiatives, which will continue to unlock productivity well beyond 2024.

Speaker Change: We are well positioned to capitalize on home improvement demand when the market recovers and continue to deliver sustainable shareholder value.

Speaker Change: And with that we'll open it up for your questions.

Unknown Executive: Thank you. We are now ready for questions. If you would like to ask a question, press star 1 on your telephone keypad. To throw your question, press star 2. In order to allow questions for as many individuals as possible, please limit yourself to one question and one follow-up. Our first question today comes from Chris Horvers with J.P. Morgan. Please proceed with your question.

Speaker Change: Thank you.

Speaker Change: We are now ready for questions.

Speaker Change: Ask a question press star one on your telephone keypad to Terry a question press Star two.

Speaker Change: No questions from as many individuals as possible. Please limit yourself to one question and one follow up.

Speaker Change: Our first question today comes from line of Chris <unk> with Jpmorgan. Please proceed with your question.

Unknown Executive: Hi, good morning; it's Christian Carlino on for Chris. Just to dig in on gross margin, can you help us understand some of the drivers there and are you seeing the full run rate of vendor clawbacks at this point, or is that building over the year? And just broadly, how should we think about the phasing of gross margin expansion over the year relative to the flat gross margin guide?

Christian: Hi, Good morning, it's Christian <unk> on for Chris.

Christian <unk>: Just to dig in on the gross margin can you could you help us understand.

Christian <unk>: Some of the drivers there and are you seeing the full run rate of vendor claw back at this point or is that build over the year and just broadly how should we think about the phasing of gross margin expansion over the year.

Christian <unk>: And relative to that flat gross margin guide.

Brandon J. Sink: Yeah, sure. This is Brandon.

Brandon: Yes sure. This is Brandon thanks for the question so as it relates to gross margins and we look out for the full year, we are still expecting gross margins to be flat or improvements mainly PPI, we expect those to be more back half weighted.

Brandon J. Sink: Thanks for the question. As it relates to gross margins, and looking ahead for the full year, we are still expecting gross margins to be flat. Our improvements, mainly PPI, we expect those to be more back half-weighted. The headwinds, we had many of these in Q1, ongoing investments in our supply chain as we finalize the rollout of market delivery, early investments in our pro-fulfillment initiatives, and spring promos as we continue to execute on our everyday competitive pricing strategy.

Brandon: The headwinds we had many of these in Q1 ongoing investments in our supply chain as we finalize the rollout of market delivery early investments in our pro fulfillment initiatives.

Speaker Change: And spring promos as we continue to execute on our everyday competitive pricing strategy and then the tailwind of number of PPI efforts that we continue to execute against Bill mentioned momentum that we're seeing in private brands ongoing pricing initiatives and then as it relates to the claw back, we're making really nice progress there.

Brandon J. Sink: And then, the tailwinds, a number of PPI efforts that we continue to execute against. Bill mentioned the momentum that we're seeing in private brands and ongoing pricing initiatives. And then, as it relates to the clawback, we're making really nice progress there. Driving sales now, we're making some of that investment in price, and there's going to be a bit of a lagged effect as the new cost turns through inventory here over the next three quarters.

Speaker Change: Living sales now, we're making some of that investment in price and theres going to be a bit of a lagged effect as the new cost terms through inventory here over the next three quarters and then also continuing to bear.

Brandon J. Sink: And then, also continuing to benefit from lower transportation costs as we leverage our scale to drive rates with our carriers. So, we also mentioned credit is some first-half pressure related to higher borrowing costs and delinquencies as it relates to our private label credit portfolio. But we expect to be able to manage that roughly flat for the year. And then we have great performance on the shrink side. We continue to expect it to be roughly flat year there.

Speaker Change: Benefit from lower transportation costs, as we leverage our scale to drive rates with our carriers. So we also mentioned credit as some first half pressure there related to higher borrowing costs and delinquencies as it relates to our private label credit portfolio, but we expect to be able to manage that roughly flat to the year and then great performance on the shrink side we.

Speaker Change: And you'd expect roughly flat on the year there.

Brandon J. Sink: Got it, that's really helpful. And I appreciate the color and the prepared remarks, but I guess, how would you disaggregate some of the bigger ticket trends between more remodeling-oriented categories that are more likely financed versus others like big ticket seasonal and appliances? And how are you thinking about the recovery path for maybe these two sides of big ticket broadly?

Speaker Change: Got it that's really helpful and I appreciate the color in the prepared remarks, but.

Speaker Change: How would you disaggregate some of the bigger ticket trends between more remodeling oriented categories that are more likely finance versus others like big ticket seasonal in appliances, and how are you thinking about the recovery path or maybe inside the big ticket broadly.

Brandon J. Sink: Yeah, I think when we look at big ticket items, in particular, we continue to see pressure, right? We called out large tickets greater than 500 down 7.6% for the quarter. Most of that right now is still related to DIY.

Speaker Change: Yes, I think when we look at big ticket in particular, we continue to see pressure right we called out.

Speaker Change: Large ticket is greater than 500 down seven 6% for the quarter. Most of that right now is still related to DIY and we're continuing with the Q4 trends that we saw there were big ticket was down eight 8% I think a lot of that as we look at discretionary there is some seasonal impact there as we continue to see.

Speaker Change: Some level of pressure from patio from Grilles with multi year replacement cycles, we are continuing to see pressure from appliances as we normalize.

Brandon J. Sink: And we're continuing with the Q4 trends that we saw there, where big ticket items were down 8.8%. I think a lot of that as we look at, you know, discretionary, there is some seasonal impact there as we continue to see some level of pressure from patio, from grills with multi-year replacement cycles; we are continuing to see pressure from appliances as we normalize against the promotional environment, and we get back to more 2019 levels.

Speaker Change: Against the promo environment, we get back to more 2019 levels and then also the emerging dynamic.

Speaker Change: With a lock in effect and higher rates continues to pressure big ticket categories like kitchen, and Bath the core in flooring.

Speaker Change: And those are categories that are sensitive to higher interest rates and the new home occasion, so very much working through that we're seeing offsets to that with as we continue to drive the pro business and that helps boost some of our big ticket. We expect that average ticket for the full year to continue to be roughly flat, but definitely continuing to work through some of the DIY pressures that we're experiencing.

Brandon J. Sink: And then, you know, also the emerging dynamic, you know, with the lock-in effect and higher rates, continues to pressure big ticket categories like kitchen and bath decor and flooring. And those are categories that are sensitive to higher interest rates and the new home occasion. So, you know, very much working through that. As we continue to drive the pro business, and that helps boost some of our big ticket items, we expect that average ticket for the full year to continue to be roughly flat, but definitely continuing to work through some of the DIY pressures that we're experiencing.

Speaker Change: <unk>.

Unknown Executive: Got it. Thank you very much. Best of luck.

Speaker Change: Got it. Thank you very much best of luck.

Unknown Executive: Our next questions are from the line of Steven Forbes with Guggenheim Securities. I'm pleased to see you with your questions.

Speaker Change: Our next question is from the line of Steven Forbes with Guggenheim Securities. Please proceed with your question.

Unknown Executive: Good morning, Marvin. Maybe a question for Joe on the front-end transformation. I was really curious if you could just update us on how you're sort of thinking about the ROI of that initiative. It sounds like it's progressing, and we're only one third of the way through, but any color on sort of what the comp lift is or the waterfall benefit we should sort of think through as we work through the whole transformation here?

Steven Paul Forbes: Good morning.

Speaker Change: Marvin maybe a question for Joe actually on.

Speaker Change: The front end transformation.

Steven Paul Forbes: I'd be curious if you could just update us on how.

How you're sort of thinking about the ROI of that initiative. It sounds like it's progressing and we're only one third of the way through but any color on sort of what the comp lift as are the waterfall benefit we should sort of think through as we worked through the whole the whole transformation here.

Unknown Executive: Yeah, and so thanks for the question, Steve. I won't give you the comp benefit, but there are several things that we're seeing.

Speaker Change: Yes, so thanks for the question Steve.

Speaker Change: Give the comp benefit, but there are several things that we're seeing we have a detailed roadmap as we've laid out we're a third of the way through and when I think about the proprietary self checkout systems, we've talked about in the past you user friendly for the home improvement customer along with the partnership we have with our tech team.

Unknown Executive: We have a detailed roadmap, as we've laid out. We're a third of the way through. And when I think about the proprietary self-checkout systems we've talked about in the past, the user-friendly for the home-approved customer, along with the partnership we have with our tech team under Symantec's leadership, the teams work hand-in-hand. So we're incorporating the technology that we spoke about in NVIDIA, our assisted self-checkout. And in addition, we just finished launching the ability for our gig drivers to pick up from our enhanced buy online pickup and store and all of our gig delivery networks. So we're really pleased. And again, a third of the way through, customer satisfaction scores have improved, and associate engagement has improved. And I'm very pleased with where we're at. And Steve.

Speaker Change: Under <unk> leadership teams work hand in hand, so we're incorporating the technology that we spoke about the video.

Speaker Change: Our assisted self checkout and in addition, we just finished launching the ability for our gig drivers to pick up from our enhanced buy online pickup in store and all of our gig delivery network. So we're really pleased again third of the way through customer satisfaction scores have improved the associate engagement has improved and very pleased.

Speaker Change: With where we're at.

Unknown Executive: And Steve, I'll just add, you mentioned we're only a third of the way through, but we're really pleased with the benefits that we're seeing. We're not going to call out the comps, but just financially speaking, seeing higher sales as we're opening up space on the front end, lower payroll costs, improved returns as we've increased or improved that experience, and then the customer experience with the improved front end and BOPA. So just as we look at all of our KPIs there, a third of the way in, we're pleased with the progress there.

Speaker Change: <unk>.

Speaker Change: Ill just add you mentioned were only a third of the way through but we're really pleased with the benefits that we're seeing we're not going to call out the comps, but just financially speaking seeing higher sales as we are opening up space on the front end lower payroll cost.

Speaker Change: Prove returns as we've increased our improve that experience and then the customer experience with the <unk>.

Speaker Change: Improved front end and both of US So just as we look at all of our Kpis there.

Third of the way and we're pleased with the progress there.

William P. Boltz: And maybe just a follow-up as we approach Memorial Day here and think through categories like appliances and the change in the promotional sort of strategy away from bundles and sort of to a buy more, save more strategy. What are you sort of expecting from the consumer in terms of engagement and conversion? Is there any early reads that you're seeing or any way to sort of talk through how you sort of expect the consumer to engage here over the coming weeks? Yeah, Steve.

Speaker Change: And maybe just a follow up as we approach Memorial day here and think through categories like appliances.

Speaker Change: The change in the promotional sort of strategy away from bundling in sort of.

Speaker Change: A buy more save more strategy.

Speaker Change: Are you sort of expecting.

Speaker Change: From the consumer in terms of engagement and conversion is like is there any early reads that you are seeing or anywhere any way to sort of talk through how you sort of expect the consumer to engage here over the coming coming weeks.

William P. Boltz: Yeah, Steve, this is Bill. And so, the trends we're seeing with appliances are very similar to what we've been seeing, really, over the last 6 to 12 months, in that we've seen the consumer shift from buying multiple pieces to now single-item pieces, really, in that distressed market. And so that's where we've pivoted our, you know, our efforts to make sure that we're meeting her where she wants to be met.

Bill McCanless: Yes, Steve This is bill and so the trends Youre seeing with appliances is very similar to what we've been seeing really over the last six to 12 months and that we've seen the consumer shift from buying multiple pieces to now single item pieces really in that direct market and so that's why we've pivoted our our efforts to make.

William P. Boltz: And we're really pleased that we've continued in a down market to be able to drive units and pick up unit share during that timeframe. And so that's, you know, that's the effort that you're going to see us drive as we go through Memorial Day and, you know, throughout the remainder of the year. And when you look at, you know, what the appliance team is doing, we're also seeing, you know, great innovation, as I called out in my preparation remarks with, you know, a GE oven that I talked about.

Sure that were meeting her where she wants to be met and we are really pleased that we've continued in a down market to be able to drive units and pick up unit share during that timeframe and so that's that's the efforts that youre going to see us drive as we go through Memorial day.

Bill McCanless: Throughout the remainder of the year.

Bill McCanless: When you look at what the appliance team is doing we're also seeing great innovation as I called out in my prepared remarks with.

Bill McCanless: Jay oven that I that I talked about but we've also talked about it before youre seeing wherever we're putting innovation on the floor youre seeing her respond to that type of product and that's really the difference thats going on today, you've got a value conscious consumer that is.

William P. Boltz: But we've also talked about it before. You see, wherever we're putting innovation on the floor, you're seeing her respond to that type of product. And that's really the difference that's going on today. You've got a value-conscious consumer that is, you know, opting in, and you've got a consumer that's not afraid to pay for innovation when that's offered to her as well. So we want to make sure that we meet her where she wants to be met.

Bill McCanless: Opting in and you've got a consumer that's not afraid to pay for innovation win that's offered door as well. So we want to make sure that we meet her where she wants to be met.

Speaker Change: Thank you.

Unknown Executive: Our next question is from the line of Simeon Gutman with Morgan Stanley.

Speaker Change: Youre welcome. Our next question is from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.

Unknown Executive: Good morning everyone. I want to talk about the background and any signs of normalization. If you can talk about traffic versus 19, I know a big ticket is part of it. This is the third year of negative comms, and I guess the model says we're going to see a turn by the end of the year, but Brandon you mentioned that's not macro-dependent; that's more business-dependent. So curious, and also, by the way, part of that is if there's a category that you're paying attention to that gives you a leading indicator of anything that's turning. Thanks.

Good morning, everyone I want to talk about the backdrop and any signs of normalization. If you can talk about traffic versus <unk> 19 in big ticket as part of their.

Speaker Change: Third year of negative comps and I guess, we are just going to I guess the model says we're going to see a turn by the end of the year, but Brandon you mentioned thats not macro dependent that's more business dependent so curious and also by the way part of that is if there is a category that you are paying attention to and it gives you.

Tony: A leading indicator of anything Thats Tony Thanks.

Brandon J. Sink: Yes, I mean, just, you know, as it relates to the macro, first, we ultimately need to see customers and consumers re-engage for us to have confidence that home improvement is inflecting. You know, we're watching for an uptick, specifically on discretionary bigger ticket projects, I mentioned earlier. What we're seeing, we're not seeing that, you know, at the moment. I think we're watching consumers continue to digest and adjust to the monetary tightening, which is working its way through the system.

Speaker Change: Yes, I mean, just as it relates to the macro first.

Speaker Change: Ultimately need to see customers consumers reengage.

Speaker Change: For us to have confidence that home improvement is inflicting we're watching for an uptick specifically on discretionary bigger ticket projects I mentioned earlier.

Speaker Change: What we're seeing we're not seeing that at the moment.

Speaker Change: I think we're watching consumers continue to digest and adjust to the monetary tightening which is working its way through the system and that continues to have an outsized impact on housing.

Brandon J. Sink: And that continues to have an outsized impact on housing, you know, where we see affordability challenges and historically low turnover. So, you know, again, we're not seeing that inflection point, consumers continue to kind of remain on the sidelines, as Marvin mentioned, and we're waiting on that catalyst; we don't necessarily expect or understand the timing of that. But just as it relates to the comp cadence, you know, we look at the second half; this is about the improvement in the second half, not an improving macro, as I said in my prepared remarks. It's just easier year over year comparisons.

Speaker Change: We see affordability challenges in historically low turnover. So again, we're not seeing that inflection point that consumers continue to kind of remain on the sidelines as Marvin mentioned and we're waiting on that catalysts, we don't necessarily expect.

Speaker Change: They're understanding the timing of that but just as it relates to the comp cadence.

Speaker Change: When we look at the second half this is about the improvement in second half not an improving macro as I said in my prepared remarks, it's just easier year over year comparisons and we looked at this a number of different ways top down bottoms up across multiple time frames, we've looked at DIY pro.

Brandon J. Sink: And we looked at this a number of different ways, tops down, bottoms up across multiple timeframes; we've looked at DIY pro categories and geographies, and we feel comfortable, you know, with sort of the down four over the first half and moving back to more, you know, a more historical mix of transactions and tickets as we start getting into the back half of the year.

Speaker Change: Categories, and geographies and we feel comfortable with sort of the down four over the first half and moving back to more.

Speaker Change: A more historical mix of transactions and ticket as we start getting into the back half of the year.

Marvin R. Ellison: Hey Simeon, this is Marvin. The only thing I'd add is more of a broader theme that we're focused on, and that is managing through any unique challenges we're facing today, and I think Q1 reflects that we're executing at a high level, you know, in spite of some of the macro headwinds that we're dealing with. But we're really positioning ourselves to really come out of this downturn as a much better company. We've invested billions of dollars in the supply chain, IT infrastructure, our digital platform, our Omni systems, a store environment, and merchandising assortments.

Marvin R. Ellison: Simeon This is Marvin the only thing I'll add is more of a more of a broader theme that we're focused on and that is managing through any unique challenges. We're facing today and I think Q1 reflects that we're executing at a high level in spite of some of the macro headwind that we're dealing with.

Marvin R. Ellison: But we're really positioning ourselves to really come out of this downturn is a much better company, we've invested billions of dollars in supply chain infrastructure.

Marvin R. Ellison: <unk>, our digital platform, our omni systems, our store environment merchandising assortments in the other words whenever the macro decides to turn we're going to come out of it as a much stronger more productive company and so although we can't predict when that's going to happen.

Marvin R. Ellison: In other words, whenever the macro decides to turn, we're going to come out of it as a much stronger, more productive company. And so, although we can't predict when that's going to happen, Brandon outlined our commitment to our capital allocation strategy. We're going to continue to invest. We're going to continue to make sure we prepare ourselves. And whenever the positive trends start to show up, we're going to be ready for them, and we're going to take full advantage of them.

Speaker Change: Brandon outlined our commitment to our capital allocation strategy, we're going to continue to invest we're going to continue to make sure we prepare ourselves.

Speaker Change: And whenever the positive trends start to show up we're going to be ready for it and we're going to take full advantage of it.

Marvin R. Ellison: Thanks for that. Related to that, Marvin or Brandon, incremental margins when the business turns. Is there a case to be made that you spend more in an upturn than you are spending now? Are there places that you've held back on such that incremental margins aren't like a typical cycle coming out of a housing recovery? Now, Simeon, I would say we've been...

Speaker Change: Thanks for that related to that Marvin or Brandon incremental margins when the business turns or is there a case to be made that you spend into an upturn faster than what you are spending now are there places that you've held back on such that incremental margins arent.

Speaker Change: It's typical cycle coming out of <unk> into a housing recovery.

Brandon J. Sink: No, Simeon, I would say we've been fully committed to our long-term roadmap in terms of capital, major projects, and PPI and top line growth initiatives. We haven't pulled back at all. And as Marvin mentioned, we're investing in the business for the long term, committed to the long-term trajectory, and, you know, looking forward to comp starting to turn whenever that may be. And we believe that kind of long-term algorithm holds in place once that happens.

Speaker Change: So I would say we've been fully committed to our long term roadmap in terms of capital major projects in PPI and top line growth initiatives still been fully committed to that we haven't pulled back at all and as Marvin mentioned, we're investing in the business for long term committed to the long term trajectory and.

Speaker Change: Looking forward to comp starting to turn whenever that may be and we believe kind of long term algorithm holds in place once that happens.

Speaker Change: Thanks, Good luck.

Amy: Thanks Amy.

Unknown Executive: The next questions are from the line of Michael Lasser with UBS. Please proceed with your questions.

Speaker Change: Next question is from the line of Michael Lasser with UBS. Please proceed with your question.

Unknown Executive: Good morning. Thank you so much for taking my question. Given the state of the home improvement cycle, how are you currently looking at the tradeoff between driving sales and market share versus sacrificing gross margin? Understanding that you expect your gross margin to improve over the course of the year, are you more willing to make this tradeoff now with the view that it'll be a benefit as the cycle recovers?

Good morning. Thank you so much for taking my question given the state of the home improvement cycle. How are you currently looking at the trade off between driving sales and market share first is sacrificing gross margin understanding that you expect your gross margin.

Speaker Change: Improve over the course of the year are you more willing to make this trade off now with the view that it will be a benefit as the cycle recovers.

Marvin R. Ellison: Michael, I'll take the first part of that. This is Marvin, and I'll let Brandon give some additional perspective. You know, I think Bill said it best.

Marvin R. Ellison: Michael I'll take the first part of that this is Marvin and I'll I'll, let Brandon.

Some additional perspective.

Speaker Change: Hey, Bill said it best we're trying to meet the customer where the customer currently is at.

Marvin R. Ellison: We're trying to meet the customer where the customer is currently at. And if the customer is looking for value, value does not always equate to a low price. It equates to a great return for the dollar you spend. And so we feel really fortunate that we can make an early investment in the customer with events and activities to win that early spring customer and still have an opportunity to outperform earnings per share and the operating market.

Speaker Change: And if the customer is looking for value value does not always equate to low priced.

Speaker Change: It equates to.

Speaker Change: A great return for the dollar you span and so we feel really fortunate that we can make early investments in the customer would events and activities to win at early spring customer.

Speaker Change: Still have an opportunity to outperform earnings per share and operating margin.

Marvin R. Ellison: And then, as Brandon mentioned, we have initiatives in place that give us confidence that we'll roughly recover any gross margin decrement in the back half and in the year relatively flat. So we're going to be able to pull all the levers we have to make sure that we can aggressively serve the customer well. And we believe in a very simple philosophy: during the spring season, if you win the customer early, you get multiple shopping occasions throughout the spring and the year. And Bill and his team, along with great execution in the stores and the supply chain, allowed us to do that. And so that's the overreaching philosophy.

Speaker Change: And then as Brandon mentioned, we have initiatives in place that give us confidence that we will roughly recover.

Speaker Change: <unk> gross margin decrement in the back half and in the year relatively flat.

Speaker Change: So we're going to be able to pull all the levers we have to make sure that we can aggressively serve the customer well and we believe in a very simple philosophy and that is during the spring season. If you win the customer early you get multiple shopping occasions throughout the spring and the year and bill and his team along with great execution in the store.

Speaker Change: <unk> and the supply chain allowed us to do that and so thats. The overreaching philosophy, then I'll, let Brian to give you more specifics on how we think about it for the balance of the year, Yes, Michael I would just add as Marvin said, we're really pleased with our ability to pivot our go to market strategy, especially as we saw customer behavior start to change over the back half of last year and our.

Brandon J. Sink: Then I'll let Brandon give you more specifics on how we think about it for the balance of the year. Michael, I would just add, as Marvin said, we were really pleased with our ability to pivot our go-to-market strategy, especially as we saw customer behavior start to change over the back half of last year. And our execution, our marketing approach, how we highlighted value, we believe helped us win Q1. And we did see a little bit of margin pressure from those actions, but we are really pleased that we were able to manage that and offset that within SG&A and still deliver the bottom line number.

Brian: Execution in our marketing approach.

We highlighted value we believe helped US win Q1, and we did see a little bit of margin pressure from those actions, but really pleased that we were able to manage that and offset that within SG&A and still deliver the bottom line number and I think confident that we can manage the portfolio as we move through the balance of the year. You mentioned, we do expect some of these gross margin pressure.

Brandon J. Sink: And I think we're confident that we can manage the portfolio as we move through the balance of the year. As you mentioned, we do expect some of these gross margin pressures to start to tail off as we move through the year and PPI to start to accelerate. So we're committed to delivering both the top line and the bottom line in line with our guide.

Brian: <unk> to.

Brian: To start to tail off as we move through the year and PPI to start to accelerate so we're committed to delivering.

Brian: Delivering both the topline and the Bottomline in line with our guidance.

Unknown Executive: My follow-up question is on the DIY loyalty program. What has been the lift that you've experienced from rolling that out so far, and what do you expect to see over the course of the year? It seems like given the performance in the first half, while there are easier comparisons in the back half, you're probably embedding some contribution from this factor in order to get to the full year goal.

Brian: Okay.

Speaker Change: Follow up question is on the DIY loyalty program, what is been the lift that you've experienced from from that from rolling that out so far and what do you expect.

Speaker Change: To see over the course of the year seems like given the performance in the first half.

Speaker Change: While there are easier comparisons in the back half you probably embedding some.

Speaker Change: Contribution from from the factory in order to get to the full year guidance.

Marvin R. Ellison: Well, Mark, this is Marvin. We're not going to get into the specifics of the lift.

Marvin R. Ellison: Well Mark this is Marvin we're not going to get into the specifics of the lift but as I'll remind you and everyone. We launched the program in March but the initial focus was on enrollment getting active members engage your app downloads and we're really pleased with how well it's going.

The smaller the rollout was very smooth.

Marvin R. Ellison: And it really spotlights the benefits of really modernizing our store operating system, we could not have rolled this loyalty program out a year ago, because we were still in the process of retired 30, <unk> operating system, which is now for all intents and purposes behind us and the store sauces engagement with simply tremendous.

Marvin R. Ellison: But, as I remind you and everyone, we launched the program in March. The initial focus was on enrollment, getting active members engaged, and your app downloads, and we're really pleased with how well it's going. The rollout was very smooth.

Marvin R. Ellison: And educating the customer and making sure that they were articulating the value.

Marvin R. Ellison: So our objective is just to simply take the data to serve our customers more effectively data is the new currency, but is only beneficial if you use it to benefit the customer experience.

Marvin R. Ellison: And it really spotlights the benefits of really modernizing our operating system. We could not have rolled this loyalty program out a year ago because we were still in the process of retiring a 30 year old operating system, which is now, for all intents and purposes, behind us. And these store sources' engagement was simply, you know, tremendous in educating the customer and making sure that they were articulating the value. So our objective is just to simply take the data to serve our customers more effectively.

Marvin R. Ellison: They will be able to do that and we're also believing that we will be able to get additional trips from the customer throughout the year is early but we're pleased with the results and we'll look forward to updating you in the external community throughout the year on the progress we're making.

Speaker Change: Thank you very much and good luck with the rest of the spring.

Speaker Change: Thank you.

Marvin R. Ellison: You know, data is a new currency, but it's only beneficial if you use it to benefit the customer experience. We think we'll be able to do that. We're also believing that we'll be able to get additional trips from the customer throughout the year. It's early, but we're pleased with the results. And we'll look forward to updating you and the external community throughout the year on the progress we're making.

Speaker Change: Our next question is from the line of Greg <unk> with Evercore ISI.

Speaker Change: To your question.

Unknown Executive: Thank you very much and good luck with the rest of the spring.

Speaker Change: Hi, Thanks.

Speaker Change: Wanted to follow up on the comp cadence it sounds like still some macro pressures. If you look at the comp you just reported the negative four and Youre doing negative two to three for the year how.

Speaker Change: How much of that improvement is coming from ticket.

Speaker Change: Cycling, what was happening a year ago versus traffic improvement.

Unknown Executive: Our next question is from the line of Greg Mellick with Evercore ISI.

Brandon: Yeah. Greg. This is Brandon majority of that is going to be traffic related I think as I look at the breakdown across the year on ticket and transactions were for the most part expecting average ticket to hold consistent over the course of the remainder of the year just as we saw here in Q1.

Brandon: Slight pressure ticket related as we've shifted down into smaller ticket seasonal projects, which has boosted transactions and then we're also seeing continued ticket pressure.

Brandon: As I mentioned from the DIY Big ticket discretionary and that includes some of the appliance promo pressure, but the flipside is pro growth continues to run strong force, which is helping mix ticket up.

Brandon: And then as we look at really the second half of the year and that cadence improve again, it's a function of really what we're cycling and we expect the transactions to start to pick up as we accelerate into the second half of the year and we're going to see them again, a much more historical relationship between ticket and transaction over the course of the second half of the year.

Speaker Change: Got it and then a follow up on the gross margin, it's still flat for the year.

Speaker Change: But you would expect it to be down in the second quarter similar to <unk> and then up 50 bps in the back half is that the right way to model that.

Speaker Change: I won't put a specific number.

Speaker Change: On Q2, but we do expect Q2 to be similarly, pressured with supply chain investments and some of the credit pressure.

Speaker Change: We're continuing to see but for sure as we get into the second half.

Speaker Change: We're seeing the improve the acceleration of the PPI flow through.

Speaker Change: With some of the supplier claw back cost out Theres, some timing benefits that will come through in the second half of the year.

Speaker Change: And then some of the credit pressures just start to ease.

Speaker Change: Again, Thats a cycling a timing issue as we started to see some of the interest rate pressures and delinquency started to pressure in the second half of last year. So.

Speaker Change: So we expect that to smooth out as well so that's sort of the shape of the curve there.

Speaker Change: I may have missed it but was the new reward program part of the gross margin pressure and <unk> are now.

Speaker Change: Not significant at this point just given the timing of when we scale that.

Speaker Change: That's awesome, thanks, guys and good luck.

Greg: Thanks, Greg.

Greg: Our next question is from the line of Seth Sigman with Barclays. Please proceed with your question Hey, Good morning, everyone. I wanted to talk about how the quarter played out so the quarter started off weaker as you reported originally and then you did see an improvement came in ahead of forecast how do you think about how much of that was driven by seasonal versus maybe some other areas that could have.

Unknown Executive: Hi, thanks. I wanted to follow up on the comp cadence. Sounds like there are still some macro pressures. If you look at the comp, you just reported a negative four, and you're doing negative two to three for the year. How much of that improvement is coming from ticket cycling versus what was happening a year ago versus traffic improvement?

Brandon J. Sink: Yeah, Greg, this is Brandon. The majority of that's going to be traffic-related. I think as I look at the breakdown across the year on ticket and transactions, we're, for the most part, expecting average ticket prices to hold consistent over the course of the remainder of the year, just as we saw here in Q1. We're seeing some slight pressure on ticket prices as we've shifted down into smaller ticket seasonal projects, which has boosted transactions. And then we're also seeing continued ticket pressure, as I mentioned from the DIY big ticket discretionary, and that includes some of the appliance promo pressure.

Brandon J. Sink: The flip side is pro-growth continues to run strong, which is helping mix ticket prices up. And then as we look at really the second half of the year and the cadence improves, again, it's a function of really what we're cycling, and we expect the transactions to start to pick up as we accelerate into the second half of the year. And we're going to see, again, a much more historical relationship between ticket and transaction over the course of the second half of the year.

Speaker Change: Comment a little bit better thanks.

Speaker Change: I'll take the first part then I'll hand, it over to Bill I mean this was.

Bill: This was broadly a weather dynamic from a standpoint of how the sales float we feel really good about the execution feel great about some of the initiatives with spring fast and how the customers respond to.

Bill: But the cadence for US was really driven by the impact of weather to the initiatives I'll, let bill to kind of walk through some of the specific initiatives and how it played out in Q1, yes, Thanks, Marvin and Seth I think the big difference for US. This year is that we took a slightly different approach to our marketing we as I said in my prepared remarks would have been geo targeted approach, which was <unk>.

Brandon J. Sink: Got it. And then a follow-up on gross margin. It's still flat for the year, but you'd expect it to be down in the second quarter, similar to 1Q, and then up 50 bps in the back half. Is that the right way to model that?

Brandon J. Sink: I won't put a specific number on Q2, but we do expect Q2 to be similarly pressured with supply chain investments and some of the credit pressure that we're continuing to see. But for sure, as we get into the second half, we're seeing the improved, the acceleration of PPI flow through with some of the supplier callback cost out. There are some timing benefits that will come through in the second half of the year, and then some of the credit pressures will just start to ease.

Brandon J. Sink: Again, that's a timing issue as we started to see some of the interest rate pressures and delinquency started to rise in the second half of last year. So we expect that to smooth out as well. So that's sort of the shape of the curve there.

Bill: Really going south to north with our spring first campaign and we put some offers out there that were seasonally relevant we were able to target those south to north and then we got a little bit of way that weather favorability that happened in March and then we carry that into April we were able to navigate some storm.

Bill: Some storm, whether we took advantage of that but the teams did a really nice job of making sure that we had new products new brands. We saw Toro really respond well for US we continue to see igo performed well we continue to see anything that we've done as I said earlier in a question that was asked earlier around innovative products.

Bill: Perform well we've seen the consumer respond now that with the weather advantages. The grass is growing so they are out there buying zero turn riding mowers, they're buying full sized gas grills. So we're seeing that work and now we've got as we go into Q2, We've got Memorial Day July 4th father's day in front of US. So we've got to take.

Bill: Are those events as we finish out the quarter. So those are really the results and where we've had weather we've seen it play in our advantage in the lawn and garden team as I said had really nice results in the first quarter driving that with traffic driving events with one with with soils and mulch live goods and they took advantage of that.

Bill: Customer that was out there getting their yard ready early in spring so that was really the drivers.

Unknown Executive: I may have missed it, but was the new reward program part of the gross margin pressure in 1Q or not?

Unknown Executive: Not significant at this point, just given the timing of when we scaled that. That's awesome.

Bill: And then just one more thing just as you recall at the beginning of the year. We did plan Q1 for a much more normal spring season, and we had called out last two years about a $400 million drag.

Unknown Executive: That's awesome. Thanks guys, and good luck!

Bill: Related to unfavorable weather the last two years, so cycling against that.

Bill: Some of that recovery moved into Q2 over the last couple of years. So that's also embedded into our outlook as we're looking at Q2 for this year.

Speaker Change: Okay got it that makes sense.

Speaker Change: Just a related question on the improvement that you saw in the pro business going back to positive this quarter, obviously theres a lot that you're doing to drive that but any sense, whether that reflects market share gains or just broader improvement in some of those pro oriented categories and I guess any perspective on if your performance is coming from customer growth our wall.

Sure and just any context there thanks.

Speaker Change: Well I think I think overall, we are very pleased with the performance of our pro strategy. As you know has been a five year investment journey on things like investment in job lot quantities for inventory improving service levels.

Speaker Change: Adding national brands building out both mentioned the great performance of Klein tools I mean, the number one brand for electricians and HVAC professionals, bringing brands like that to the assortment. It just adds to the credibility.

Speaker Change: Of the turnaround that we've been on and trying to win some of these customers back from from years past. In addition to a stronger digital platform a great loyalty program is resonating with the customers and from the survey results that we share. It I mean this is a resilient customer that youll continues to fight through the economic headwind.

Speaker Change: And their backlog is relatively equal to last year. So overall, that's driving it whether or not we're taking share or not is look we don't want to determine that as much as we were just looking internally at just much improved execution.

Speaker Change: Execution and results I'll, let Joe talk a little bit about somebody the other initiatives that we're driving that we think is really resonating that allowed us to get this business back to positive.

Speaker Change: Yes, Thanks, Marvin Seth as you think about some of the investments that we've made marvin's called him up bills called them out.

Joseph Michael McFarland: Job lot quantities and safety stock, but also our enhancement and our job site delivery for larger orders you could think about the maturity of our loyalty program and pro our CRM program, our growing share of wallet.

Joseph Michael McFarland: We continue to expand our Lowe's pro supply.

Speaker Change: And then from the survey that Marvin had mentioned the dimensions of the health, we look at backlogs materials credit flavor and the project type.

Speaker Change: Pros have been stable and steady there and so we're pleased with the gains we're making with this customer both in store from a product wise and online.

Speaker Change: So if I disclose the pro discussion with just one additional point, we're really focused on the customer that we can serve at a very high level NSS smaller to medium pro and we estimate that the $201 billion market opportunity and so we're focused squarely on that customer that customer still levered.

Joseph Michael McFarland: As the store fulfill in we can leverage the productivity of our existing real estate footprint to serve that customer well, we can do it without having to make dramatic investments in operating expense. In addition to the fulfillment capabilities of Joe talked about so we are very confident that our strategy is working.

Joseph Michael McFarland: And that is reflected in our results we still have other investments to make we'll make them and we hopefully will continue to see this business head in the right direction in spite of a very difficult macro.

Speaker Change: Great. Thanks very much.

Unknown Executive: Our next question is from the line of Seth Sigman with Barclays. Please proceed with your questions.

Speaker Change: Thank you. Our next question is from the line of Peter Benedict with Baird. Please proceed with your question.

Unknown Executive: Hey, good morning everyone. I want to talk about how the quarter played out. So, the quarter started off weaker, as you reported originally, and then you did see an improvement that came in ahead of forecast. How do you think about how much of that was driven by seasonality versus maybe some other areas that could have come in a little bit better? Thanks.

Peter Sloan Benedict: Hey, good morning, guys.

Peter Sloan Benedict: I guess just on the DIY loyalty program and didn't have much of an impact on the P&L here in the first quarter I'm just curious how we should think about that longer term as it scales.

Peter Sloan Benedict: And maybe a comment also on the associated lift in the private label credit sign ups.

Speaker Change: What youre seeing there.

Speaker Change: What that means I guess going forward any perspective on kind of <unk>.

Speaker Change: Private level credit has been for you guys historically and what's maybe possible here with this new program.

Marvin R. Ellison: I'll take the first part, then I'll hand it over to Bill. I mean, this was... This was broadly a weather dynamic from a standpoint of how the sales flowed. You know, we feel really good about the execution, and we feel great about some of the initiatives with SpringFest and how the customers responded. But the cadence for us was really driven by the impact of weather on the initiatives. I'll let Bill kind of walk through some of the specific initiatives and how they played out in Q1. Yeah,

Brandon: Yeah, Hey, Peter Thanks for the question. This is Brandon just again Marvin hit on this a bit but our goals overall with the loyalty program or to create further stickiness with our DIY drive repeat visits and spend over time, our ability to get the data and drive more personalized marketing Super pleased with what we are.

William P. Boltz: Yeah, thanks, Marvin. And Seth, I think the big difference for us this year is that we took a slightly different approach to our marketing. As I said in my prepared remarks, we took a geo-targeted approach, which was really going south to north with our SpringFest campaign. And we put some offers out there that were seasonally relevant, and we were able to target those south to north.

Brandon: Seeing with engagement from the customer standpoint, and our associates, we're managing the enrollments to membership points redemptions.

Speaker Change: You mentioned sort of financially we're targeting effectively one more trip annually from our DIY customers. That's the revenue upside as we see it and it's going to take some time to gauge success of that so we're going to have to watch that play out over the course of the year and then in terms of the overlay with the credit program. I mean, we are bundling in building.

Speaker Change: On top of a 5% credit offer that we believe is best in class.

Speaker Change: It's going to continue to drive increased penetration there and we think that that value really resonates with the customer and we're able to make that work financially. So we think it's a win win there Peter.

William P. Boltz: And then we got a little bit of weather favorability that happened in March, and then we carried that into April. We were able to navigate some storm weather. We took advantage of that. But the teams did a really nice job of making sure that we had new products, new brands. We saw Toro really respond well for us, and we continue to see Ego perform well.

Speaker Change: Peter.

William P. Boltz: We continue to see anything that we've done, as I said earlier in a question that was asked earlier around innovative products performing well. We've seen the consumer respond now with the weather advantages. The grass is growing, so they're out there buying zero-turn riding mowers. They're buying full-size gas grills.

Speaker Change: Add on the brand and quickly.

Speaker Change: We're pleased with the first.

William P. Boltz: So we're seeing that work. And now, as we go into Q2, we've got Memorial Day, July 4th, and Father's Day in front of us. So we've got to take advantage of those events as we finish out the quarter. So those are the results. And where we've had weather, we've seen it play to our advantage. And the lawn and garden team, as I said, had really nice results in the first quarter driving that with traffic driving events, with soils, mulch, and live goods. And they took advantage of that customer that was out there getting their yard ready early in spring. So that was really the driver.

Speaker Change: Loyalty perk that we rolled with mothers' day engagement, we had with the members and new members as well as our associates and our ability to.

Brandon J. Sink: Brandon just one more thing just as you recall at the beginning of the year we did plan Q1 for a much more normal spring season and we had called out the last two years about a four hundred million dollar drag related to unfavorable weather the last two years so cycling against that some of that recovery moved into Q2 over the last couple of years so that's also embedded into our outlook as we're looking at Q2 for this year.

Speaker Change: Gain incremental loyalty members and so as an early example, there the mother's day engagement, we're very pleased with.

Unknown Executive: Okay, I got it. That makes sense.

Speaker Change: That's great. Thanks, and then I guess my follow up would be just around that just about plans for their go to market strategy over the balance of the year I mean, it clearly sounds like you guys took some steps here during the spring to capture some incremental business.

Speaker Change: As you think about the back half of the year have you layered in additional.

Speaker Change: I guess events or promotions.

Speaker Change: To kind of help get those comps that comp trend improved.

Speaker Change: If not is that a lever you think you'll need to pull or would be willing to Paul just kind of curious how how do you think about the balance of the year. The second half of the year with respect to promotions. Thank you.

Marvin R. Ellison: Just a related question on the improvement that you saw in the pro business going back to positive this quarter. Obviously, there's a lot that you're doing to drive that, but any sense whether that reflects market share gains or just broader improvement in some of those pro-oriented categories? And I guess any perspective on whether your performance is coming from customer growth or wallet share and just any context there? Thanks.

Marvin R. Ellison: Well, I think overall, we're very pleased with the performance of our pro strategy. As you know, it's been a five-year investment journey on things like investing in job-lock quantities for inventory, improving service levels, and adding national brands. Bill and I both mentioned the great performance of Klein Tools, the number one brand for electricians and HVAC professionals.

Bill: Yes, Peter it's bill and so the promotional environment remains stable and so nothing.

Marvin R. Ellison: Bringing brands like that to the assortment just adds to the credibility of the turnaround that we've been on in trying to win some of these customers back from years past, in addition to a stronger digital platform and a great loyalty program that's responding with the customers. From the survey results that we share, this is a resilient customer that continues to fight through the economic headwinds, and their backlog is relatively equal to last year.

Bill: Radically crazy we are going to go similar to what we've been doing we want to be seasonally relevant as we go into the back half of the year. Obviously, we will be out there as we go into fall with Labor day, we're going to introduce Halloween, we're going to make sure that were relevant with holiday and gift center and intra.

Bill: Introduce and set our stores for spring in the deep south for that.

December January timeframe, but.

Bill: We're going to make that transition, we're going to be relevant as the consumer comes out of those.

Key seasonal categories will make that transition into those fall seasonal categories, but there won't be anything there won't be anything goofy that'll happen in the second half of the year and so that's how we're going to approach it.

Marvin R. Ellison: Whether or not we're taking share or not, we don't want to determine that as much as we're just looking internally at just much improved execution and results. I'll let Joe talk a little bit about some of the other initiatives that we're driving that we think are really responding that allowed us to get this business back to positive.

Unknown Executive: If you think about the maturity of our loyalty program in pro, our CRM program, our growing share of wallet, we continue to expand our Lowe's pro supply. And then from the survey that Marvin mentioned, the dimensions of the health we look at, backlogs, materials, credit, labor, and project type, the pros have been stable and steady there. And so we're pleased with the gains we're making with this customer, both in-store, product-wise, and online. And Seth, I'll just close the pro discussion with just...

Unknown Executive: And Seth, I'll just close the pro discussion with just one additional point. We're really focused on the customer that we can serve at a very high level. And that's the small to medium business.

Speaker Change #100: Great. Thanks, Good luck guys.

Rob: No Rob we have time for one more question.

Marvin R. Ellison: And we estimate that's a $200 billion market opportunity. And so we're focused squarely on that customer. That customer still leverages the store for fill-in, and we can leverage the productivity of our existing real estate footprint to serve that customer well. It's not about having to make dramatic investments in operating expenses in addition to the fulfillment capabilities that Joe talked about. So we are very confident that our strategy is working, and that is reflected in the results. We still have other investments to make, but we'll make them. And we, hopefully, will continue to see this business head in the right direction in spite of a very difficult macro environment.

Speaker Change #102: Our final question comes from line of Jonathan <unk>.

Speaker Change #103: With Jefferies. Please proceed with your question.

Speaker Change #102: Yeah.

Unknown Executive: Thank you. Our next question is from the line of Peter Benedict with Baird. Please proceed with your question.

Jonathan: Great. Thanks for taking my question first one I wanted to dig into regional trends some peers had been calling out less worse trends in the way that deal with one of the first.

Region to enter the housing recession.

Jonathan: Seen less worse trends there it looks like six years 15.

Jonathan: Geographic regions outperformed the company average so any more detail in terms of regional variability that youre seeing would be helpful. That's my first question.

Unknown Executive: Hey, good morning, guys. I guess, just on the DIY Loyalty Program. I know it didn't have much of an impact on the P&L here in the first quarter. I'm just curious how we should think about that longer term as it scales. And maybe a comment also on the associated lift in private label credit signups, what you're seeing there, what that means, I guess, going forward, any perspective on how private label credit has been for you guys historically and what's maybe possible here with this new program?

Joseph Michael McFarland: Yes, Jonathan it's Joe. Thank you for the question from a geographic standpoint, as we said, where we've seen great weather, we've seen great performance, but from an overall geographical standpoint, our west is our best performance for Q1.

Brandon J. Sink: Yeah, hey Peter, thanks for the question. This is Brandon.

Speaker Change #105: Yes, Jonathan I would just add consistent pro outperformance across all of our regions. So really pleased with that and then Conversely pretty much uniform ongoing pressure in DIY big ticket discretionary so thats been.

Brandon J. Sink: Just again, Marvin hit on this a bit, but our goals overall with the loyalty program are to create further stickiness with our DIY, drive repeat visits, and improve over time our ability to get the data and drive more personalized marketing. Super pleased with what we're seeing with engagement from the customer standpoint and our associates. We're managing the enrollments, the membership points, and redemptions. As you mentioned, sort of financially, we're targeting effectively one more trip annually from our DIY customers.

Brandon J. Sink: That's the revenue upside as we see it, and it's going to take some time to gauge the success of that. So we're going to have to watch that play out over the course of the year. And then, in terms of the overlay with the credit program, I mean, we are bundling and building on top of a 5% credit offer that we believe is best in class. It's going to continue to drive increased penetration there. And we think that that value really resonates with the customer, and we're able to make that work financially. So we think it's a win-win there. Yeah, Peter.

Unknown Executive: Oh, that's great. Thanks.

Unknown Executive: Peter, to add on to Brandon quickly, you know we're pleased with the first kind of loyalty perk that we rolled out with Mother's Day, the engagement we had with the members and new members as well as our associates and our ability to gain incremental loyalty members, and so as an early example of that, the Mother's Day engagement, we're very pleased with.

Speaker Change #105: Pretty broad based both the pro side and the pressure in <unk>.

Speaker Change #105: Real differences in what we're seeing across regions I think the only comment I'll make Jonathan is that our rural stores.

Continue to be our best performing subset of stores within the overall geography, and some of the initiatives that Bill's teams initiated with pet and apparel continue to perform really well in those locations and that we continue to evaluate the expansion of those categories in a room.

Speaker Change #105: Environments, but overall the west outperformed.

Speaker Change #106: As Brandon mentioned pro was widespread at a really strong performance in the rule set of our stores.

Speaker Change #106: Is the high watermark and performers among all geographic locations.

William P. Boltz: And I guess my follow-up would be just around the plans for the go-to-market strategy over the balance of the year. I mean, it clearly sounds like you guys took some steps here during the spring to capture some incremental business. As you think about the back half of the year, have you layered in additional events or promotions to kind of help get those comps, that comp trend improved?

Speaker Change #107: That's really helpful. Thanks for that and then just quickly just to circle back on Big ticket I know there has been some questions earlier.

William P. Boltz: If not, is that a lever you think you'll need to pull or be willing to pull? Just kind of curious about how you're thinking about the balance of the year, the second half of the year with respect to promotions. Thank you.

William P. Boltz: Yeah, Peter, it's Bill. And so, you know, the promotional environment remains stable. And so, you know, nothing, you know, radically crazy, we were going to go, you know, similar to what we've been doing, we want to be seasonally relevant as we go into the back half of the year, obviously, we'll be out there as we go into fall with Labor Day, we're going to, you know, introduce Halloween, we're going to make sure that we're relevant with holiday and gift center and, you know, introduce and set our stores for spring in the deep south for, you know, that's, you know, December, January timeframe, but, you know, we're going to, you know, make that transition, we're going to be relevant as the consumer comes out of those, you know, key seasonal categories, we'll make that transition into those fall seasonal categories, but there won't be anything, you know, there won't be anything, you know, goofy that will happen in the second half of the year. And so that's how we're going to approach it.

Unknown Executive: Great. Thanks. Good luck, guys.

Rob: Rob, we have time for one more question.

Speaker Change #108: Just to be clear what does the midpoint of your annual comp guidance and bad for Big ticket right over 500 transactions were down around seven 5%. So does that 2% to 3% comp decline for the year require sequential improvement in year over year declines for.

Speaker Change #108: Purchases over 500 or are you expecting that to basically.

Unknown Executive: Our final question comes from the line of Jonathan Matuszewski with Jefferies.

Speaker Change #108: Continue throughout the rest of 'twenty four.

Speaker Change #108: Yeah, again, Jonathan and I think just on an absolute dollar performance standpoint, we're expecting more of the same in terms of what we saw second half we don't have any macro improvement sort of embedded in.

Speaker Change #108: So from an absolute standpoint across these categories, we're expecting similar performance as we move through the year, but the comps should improve significantly in these categories. Just again based on what we're cycling and when we started to see the downturn in the second half of last year.

Speaker Change #109: Thank you. Thank you all.

Unknown Executive: Great, thanks for taking my questions. For the first one, I wanted to dig into regional trends. Some peers have been calling out less worse trends in the West. It was one of the first regions to enter the housing recession. So are you seeing less worse trends there? It looks like 60 or 15 geographic regions outperform the company average. So any more detail in terms of, you know, the regional variability that you're seeing would be helpful. That's my first question.

Joseph Michael McFarland: Jonathan, it's Joe. Thank you for the question. From a geographic standpoint, as we said, where we've seen great weather, we've seen great performance, but from an overall and geographical standpoint, our West is our best performance for Q1.

Brandon J. Sink: Yeah, Jonathan, I would just add consistent pro-out performance across all of our regions, so really pleased with that. And then, conversely, pretty much uniform ongoing pressure and DIY big-ticket discretionary, so that's been pretty broad-based, both the pro side and the pressure, and no real differences in what we're seeing across regions.

Speaker Change #109: Thank you all for joining US today, we look forward to speaking with you on our second quarter earnings call in August.

Unknown Executive: That's really helpful. Thanks for that.

Marvin R. Ellison: Yeah, I think the only comment I can make, Jonathan, is that our rural stores continue to be our best performing subset of stores within the overall geography, and some of the initiatives that Bill's teams initiated with Pet and Apparel continue to perform really well in those locations, and we continue to evaluate the expansion of those categories in non-rural environments, but overall, the West outperformed. As Brandon mentioned, Pro had a really strong performance in the rural set of our stores, kind of the high watermark in performers among all geographic locations.

Unknown Executive: And then just quickly, just to circle back on big ticket, I know there were some questions earlier. Just to be clear, you know, what is the midpoint of your annual comp guidance and bed for, you know, big ticket, right? So over 500 transactions were down around seven and a half percent. So does that two to 3% comp decline for the year require sequential improvement in year over year declines for purchases over 500? Or are you expecting that to basically, you know, continue throughout the rest of 24? Thanks. Yeah, again, John.

Brandon J. Sink: Yeah, again, Jonathan, I think just on an absolute dollar performance standpoint, we're expecting more of the same in terms of what we saw in the second half. We don't have any macro improvements sort of embedded in. So from an absolute standpoint, across these categories, we're expecting similar performance as we move through the year, but comps should improve significantly in these categories, just again, based on what we're cycling and when we started to see the downturn in the second half of last year.

Unknown Executive: Thank you all for joining us today. We look forward to speaking with you on our second quarter earnings call in August.

Unknown Executive: Thank you. This concludes Lowe's First Quarter 2024 Earnings Call. You may now disconnect.

Speaker Change #110: Thank you. This concludes <unk> first quarter 2024 earnings call you may now disconnect.

Speaker Change #109: Okay.