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Lowe's (LOW) surpassed 1Q26 EPS expectations, extending a winning streak versus analysts' earnings estimates that spans over five years. The upside Q1 EPS result was driven by better-than-expected comparable sales of (1.7)%, improved gross margin due to cost management and a favorable mix shift towards higher-margin products, and the positive impact of share buybacks. The company's reaffirmed FY26 guidance, projecting EPS of $12.15-$12.40, total sales of $83.5 to $84.5 billion, and comparable sales growth of flat to +1%, mirrors Home Depot's (HD) approach and provides reassurance to investors amid tariffs and macroeconomic headwinds.

• LOW's Q1 comps decreased by 1.7%, marking a return to negative territory following a positive comp of +0.2% in the previous quarter. Despite this decline, the figure exceeded analyst expectations, suggesting resilience in a challenging environment. However, it lagged behind HD's comparable sales decline of 0.3%. This gap is likely attributable to LOW's lower exposure to the Pro market (approximately 25% of sales compared to 50% for HD), which has seen stronger demand compared to the DIY business. The underlying factors driving LOW's comps include persistent weakness in big-ticket discretionary items and projects and unfavorable weather conditions, partially offset by mid-single-digit growth in Pro and online comparable sales.
• From a product category standpoint, outdoor living products, such as garden supplies, outdoor power equipment, grills, and patio furniture saw solid demand. Meanwhile, a slower housing market and reduced consumer spending hindered sales in discretionary DIY product categories (home decor, tools), while big-ticket items, such as high-end appliances or large-scale renovation materials, were another likely source of weakness.
• Gross margin improved by 19 bps to 33.38%, driven by better pricing strategies, effective cost management, and a favorable product mix shift. The growth in Pro and online sales, which typically carry higher margins, likely contributed as well, as did disciplined inventory management and operational efficiencies.
• Given the ongoing economic uncertainty, LOW's reaffirmed FY26 guidance provides some reassurance, especially as it aligns with HD's approach, reinforcing investor confidence in LOW's ability to maintain growth and profitability. Strategies such as LOW's Perpetual Productivity Improvement (PPI) initiative, which aims to enhance operational efficiency across all facets of LOW's business, should support its margins and profitability in FY26. Some specific initiatives within the PPI include modernizing checkout infrastructure, enhancing store inventory management systems, expanding the rollout of digital signs, and investing in new touchscreen point-of-sale systems.

LOW's Q1 results demonstrate the company's operational strength with EPS beating expectations and gross margins modestly expanding. The reaffirmed FY26 guidance, projecting modest sales growth and stable margins, offers investors reassurance amid macroeconomic uncertainties, particularly in housing and interest rates. This consistency in beating EPS estimates underscore LOW's strong position in the home improvement sector.