Good morning, everyone. It's my pleasure to introduce Marvin Ellison, Chairman, President, and Chief Executive Officer of Lowe's. Marvin's been in the role since 2018, and obviously has a lot of leadership and operational experience in the retail and home improvement industry. We're really pleased to have you today. Thanks for joining us. It's a pleasure to be here. We are probably gonna spend most of our time asking questions on the housing market and the macro- Yeah. - which should surprise you. So I wondered if we could start there. It's obviously still an environment where housing turnover is still somewhat muted, for lack of a better word. And we wondered if you could maybe walk through what you're seeing in the environment, when your expectation is when things can unlock, and how we should go from here. Great. Well, I think the best way to describe the market is still cautious. Consumers overall still remain cautious based on inflationary concerns and elevated interest rates. For us, we looked at the back half of two thousand and twenty-three, and we projected rather accurately, that two thousand and twenty-four would look a lot like the back half of two thousand and twenty-three, relative to consumer demand, and that's really what we're seeing. If you think about our world for a second, over 70% of our revenue is driven from the DIY customer. And so what's happening with this cautious view of the consumer, based on elevated interest rates and inflation, is that this DIY discretionary big ticket has felt a lot of pressure, and that's disproportionately impacted our business. For us, we're spending a lot of time ensuring that we are investing in the business and making the right strategic initiatives and putting them in place, so when this market turns, we're gonna be in a really good position for that. But as we look at it right now, the consumer remains cautious. There is pent-up demand, but that demand has yet to materialize based on interest rates and inflation. And so, one thing that we've been thinking about is there's, you know, the housing market is one piece of it- Mm-hmm. And then there's just the health, the health of the consumer. And so we wondered if you could maybe drill down on the health of the consumer a little bit because, you know, it's been thirteen quarters of the negative transaction growth. Like you said, that probably indicates there's some pent-up demand. Yeah. But what are you seeing with regards to just the consumer? And if you think it's maybe gotten a little bit harder for that consumer to... Yes. So I think the best way to answer that question is to look at the historic demand drivers of our business. And so what historically has driven demand for Lowe's would be home price appreciation, disposable personal income, and the age of housing stock. So let's just focus on those three. When we look at those three demand drivers, they all point in a positive direction. And so for us, the health of the consumer is really positive. The challenge is, in the near term, the elevated interest rate and the fear of the instability of inflation is driving the consumer just to be on the sidelines. Mm-hmm. The great thing about home improvement projects, especially those large, big-ticket items like a kitchen remodel, whole house flooring jobs, you know, replacing your roof, et cetera, those projects rarely get canceled, they get delayed. So for us, on one hand, we feel great about the health of the consumer, but on the other hand, we understand that the consumer remains on the sidelines, very cautious because of the near-term pressures they're feeling. So as we think about that, we have two objectives. One objective is to run the business effectively in the short run while we deal with the near-term macro challenges, and we've done that really well if you look at how well we've managed operating expenses, our return on invested capital, and just overall profitability. And so we're really focused on running the business well with a lot of macro pressure in housing. But we feel incredibly optimistic about the medium to long-term prospects for home improvement, specifically for Lowe's, because when this marketplace inflects, and we are not able to give you the date of the inflection, we feel like those demand drivers that I spoke of are gonna really pay off for us. And so we're really working hard to position ourselves to be in a market share gaining opportunity when the inflection happens in the macro. And so on one hand, the near term remains challenging because of the cautious nature of the consumer, but the demand drivers and the health of the consumer is actually relatively good. Do you have an estimate as to where you think mortgage rates have to go in order to see more activity in housing? You know, we don't. It's. As you know, this is probably one of the most unique environments that we've ever seen, because I don't know that there's been a period of time where we've seen interest rates, you know, especially mortgage rates, being at the levels they were for an extended period of time at historic lows. So we don't have the specific mortgage rate number, interest rate number, nor do we know when that rate starts to drop, the timing it will take for that overall activity to flow down to create demand in home improvement. But what we do know is that we've got a great balance sheet. We have a very consistent capital allocation process and we're making a lot of investments to be prepared when that happens. We will be in a great position as a business, and we'll be in a great market share gaining position whenever rates decline to the point where consumers get off the sidelines. Now, the reality is that a large% of the American homeowners are sitting on thirty-year fixed rates at 4% or lower. Mm-hmm. And so we don't know what rate activity needs to happen to get that customer off the sideline, but what we do know, that we're gonna be ready to take advantage of that when that timing occurs. and if mortgage rates don't go back all the way to four or under, you know, there was such a long time period before the pandemic where, you know, interest rates were so low and mortgage rates. Yeah were so low. Do you think you can get back to a regular algo if the mortgage rates don't go back quite as low as 3%-4%? It's a great question, and I don't know that I can give you a precise answer other than to say, I do believe there will be a new normal when it comes to mortgage rates. And I think it will be a new normal when it comes to expectations of consumers and homeowners or prospective homeowners to get off the sidelines to, to really engage. There are a couple of other factors in addition to those demand drivers I talked about that we look at. We look at things like the millennial household formation trends, which are significantly higher than any of us would have predicted a decade ago. We look at the fact that there are significantly more people that will be permanently working from home than we ever imagined, even five years ago. And also, as Baby Boomers age, they have more of a propensity to stay in their existing home and modify it to fit their changing mobility. And so all of those things also will benefit us because it drives wear and tear on the home, and it drives the need for home modifications, meaning structural changes within the home. So although I can't answer your question precisely, what I can say is all of those factors that I just laid out, including those demand drivers, just give us a lot of confidence in the medium to long term. For us, this is looking at a, like, a dual screen. On the first screen is the near term remains challenging because of a cautious consumer based on interest rates and inflation. So we have to run the business really well, but we also have to have a very aggressive investment thesis so that we can prepare our business model for the inflection. And then the second side of the screen is, be prepared for the inflection. We can't time it, we can't call the date, but what we do know is that we have the ability with our Total Home strategy, to prepare ourselves to be in a great position when the market starts to create demand, that we can be in a position to take outside share. And really, we're doing those things in parallel. If I can maybe just ask a question about the pro, and then we can get into some of the company initiatives that you've put in place. It does seem like your small to mid-sized pro customer, which is your core customer, sounds pretty resilient, just based on the survey data you walked through on the- Sure ... on the quarterly call. Why do you think that is? Why do you think their backlogs are holding in, despite what we just kind of walked through with the consumer? Let me first answer that question by going back in time a bit. When I joined Lowe's in two thousand and eighteen, we didn't really have a defined strategy to serve these customers. The first thing that we did is what I call, we created a foundation to serve that customer, and the foundation are very basic things. Things like making sure that we had adequate staffing in our 1,700-plus stores. Things like making sure that we had loading assistants when a customer showed up, and they bought product, that they didn't have to load it themselves. Making sure that we had adequate levels of inventory on hand. Those things are very basic, but if you don't have those basic things, nothing else works. And so then after we achieved that foundation, we started to go one level up, and the next step was, let's put in a loyalty program, which we launched, you know, a couple of years ago, and to gain some level of repeat business and stickiness. And then the next level was, let's put a world-class CRM system in, so we can identify the customer. And then we had to bring in the brands, because the previous management team didn't really understand the pro customer, and so they removed a lot of the national brands, and they replaced them with private brands. The problem with that was, pros are incredibly brand loyal, and when those brands left, in some cases, went across the street to our competitors, so did the customers. Mm. And so our merchant team worked incredibly hard for the last five plus years to bring those brands back. And so brands like Klein Tools, which kind of gives you credibility with that, your electrician and that HVAC pro. And so after we were able to do those things, then it was all about, can we get fulfillment? Can we now get product to the customer, to the job site efficiently? And so all of these foundational initiatives, and then we layered on top of those, started to give the pros confidence that you were in business to serve them. And now to answer your question, you know, we delivered mid-single-digit positive comps with the small to medium pro, which was a surprise to some, but not to us. Because if you think about the fact that the U.S. today has the oldest housing stock on record, over 41 years old on average, there's a lot of wear and tear and a lot of maintenance required. These houses require roof replacements and roof repairs. These houses require replacements of water heaters, major appliances, and other things that just happen, you know, in our older homes. And who is creating the actual project and the work to get that, those things done are the small to medium pro. And so the age of the housing stock is driving repair demand that is creating resiliency within that customer. But also, I think strategically, we came to the realization that that customer was not being served well in the marketplace. There's a lot of initiatives out there to serve the larger, more industrial pro, but there were not a lot of companies out there saying, "Let's take care of this general contractor," and so we were very, very specific and very purposeful to focus on that small or medium-sized pro, because we felt like, A, that pro was not being served well in the marketplace, and B, we felt we had the capabilities, based on our 1,700-plus stores and all the things I walked through, to give these customers something that they maybe were not receiving in the marketplace, and we feel really good about the strategy, and we feel good about the ongoing process, and for us, we look at this in a very simplistic way. We always, again, for the last five years, struggled with this specific customer. And so the question we ask ourselves is a very simple one: If we can maintain a growth with this pro customer, and then the DIY customer comes back when the macro improves, that really bodes well for Lowe's as an overall business. Because now we're dealing with all this DIY pressure, because, again, the majority of our business is driven by that customer, but we really believe strongly that the DIY pressure we are feeling in the marketplace is driven by the macro. Mm. So when the macro inflects, we have every intention on maintaining growth with the Pro, as we've said consistently, and if we can do that and concurrently get the DIY business back because the macro starts to inflect, we feel like that's a good investment thesis for our company. With all the work that you've done around the pros, since you've gotten to Lowe's in 2018, the small and medium-sized pro, I feel like, has been your bread and butter, where you've focused. Now that you feel like you're at a place where you've invested behind the business, can you look to increase, you know, that TAM, go to a larger pro, or is it still gonna be concentrated on the small and midsize? No, it's a very fair question. And what I will say is that we will always be opportunistic to identify investment opportunities that will grow our business, but we've been very, very focused. What I've said to the team consistently is: You have to earn your right to migrate to a larger customer. And what we were not going to do was take a totally broken strategy and say, "We're gonna just immediately leap ahead and try to serve a larger, more complex customer." I look at it, to illustrate it, like in building blocks. Again, you start with a solid foundation, and that foundation, to me, is the small to medium customer. And once you've created the efficiencies for that customer, then you can start, you can build to the next layer and the next layer. And so the short answer is, we absolutely will look at broader market opportunities with the pro, but we will first make sure that we have a good service offering and we have a really good market share presence with the current customer we're focused on, and we think that there remains a lot of opportunity to grow the small to medium pro customer. If we could maybe talk a little bit about the supply chain, because you've made a lot of investments also in the supply chain to improve productivity and drive profitability. Could you maybe talk to us about what inning you are in terms of just, you know, assessing the overall supply- Sure ... chain and what needs to be done, and what some of the takeaways have been, just with regard to what you've been able to accomplish so far? Yes. So I would say let's start at what Lowe's used to be and what we inherited six years ago. Lowe's created the traditional hub-and-spoke supply chain. You know, a supply chain with regional distribution centers that were really stocking DCs for domestic product. In other words, we ship it to the DC, we put it in the racking, and we hold it, and they replenish stores based on demand. That is a very, very traditional supply chain, and that traditional structure does not benefit inventory turns, and it does not serve a customer in a omni-channel environment. And so in other words, everything that we've built at Lowe's was designed for one purpose: to replenish the stores. But there was no vision around sending product to consumers' homes or sending product to job sites for professional customers. And so we had to take a step back and say: Okay, every facility that we have in our supply chain has to be multifaceted, has to have the ability to replenish stores, has to have the ability to ship directly to a customer's home, and also to a job site for a pro, if needed. And so that transformation started roughly five years ago. In addition to that, we were the largest appliance retailer, but we were doing it, I call it, the hard way. We were housing inventory in the back of our stores, in the stock room. We were housing inventory in storage containers behind our stores, and literally, if you purchased an appliance... From our store in Queens, and you are living on Long Island, traditionally, the only way that the store received credit for that sale is that item would ship from Queens to Long Island, even though there was a Long Island store that was five minutes from your house, because of the nature of how our supply chain was built, very primitive and very store-centric. And so we built out our market delivery network specifically for appliances that we think is best in class, and that has enabled us to have the ability to deliver appliances next day in almost every zip code in the country, and that's something that is unmatched in the country. And now we're looking at this market delivery model, and we're saying, now that we've kind of conquered the appliance delivery network, what's next? Now we're looking at other big, bulky items, and we're saying, "Can we now inject those big, bulky items into this market delivery platform?" We'll be speaking a lot more about that at our December Analyst and Investor Conference because we think there's a world of possibilities on how we leverage this market delivery. Relative to our regional distribution centers, as I said earlier, we're now in a position that we're shipping product directly to job site and homes, if needed. More importantly, we've turned these stocking DCs into cross docks so that the inventory doesn't just go from the trailer to the shelves, it flows directly through, and it continues to move, and that has been a net benefit to our inventory turnover, and that's something we'll continue to get better at. And equally as important, we've leveraged our gig network to really create what we think is one of the best brick-and-mortar, omni-channel delivery models in retail, where you can get same-day, in some cases, same-hour deliveries to your home, shipped from 1,750-plus stores that we have, but it is still ongoing. And so if I would say what innings, I, I would say we're probably, we're probably in the mid-innings, early to mid-innings, because the evolution around supply chain and retail is never going to finish. It's gonna continue to evolve. We're gonna continue to learn, we're gonna continue to benchmark, but we think that we've made tremendous progress from a very primitive, very traditional hub-and-spoke model to a more modern omni-channel model, in addition to the ability to leverage our flatbed distribution centers, which were only designed to ship big, bulky product directly to the stores, and we're converting that model to also deliver to the job site. So again, just creating agility, making these facilities multifaceted, and thinking in terms of omni-channel versus traditional retail. If we could just change gears to your PPI initiatives, which I know has been also a very important focus for the company. On. And I might be front-running the December meeting a little bit by asking this, but I thought I'd try. On the second quarter call, you said you're currently piloting the next round of- Yes ... innovations on the PPI roadmap. And so if you can, is there anything you can talk to us about some of the things we can expect from the second phase? What I will say is that we are incredibly pleased with the discipline that we put in place in the company. And as I said on the second quarter earnings call, initially, when we started thinking about perpetual productivity improvement initiatives, it was housed in store operations, in our stores, in our payroll model, in our payroll allocation, in how we drive efficiency in our stores. And we had so much success there that we expanded it to all different functions: supply chain, merchandising, HR, information technology, online, et cetera. And so now what I will tell you is, one of the larger initiatives that we're working on, that I will share, is what we're calling our front-end transformation. Taking the same approach, we were very traditional. We had the majority of our stores didn't even have self-checkout. As we started to look at self-checkout, we wanted to make sure we created an environment that was uniquely different than the rest of the retail world. What was happening in retail is that every retailer was purchasing the same type of self-checkout unit, even though our business models are dramatically different. In other words, in the stores where we had self-checkout, we had purchased those units that were designed for grocery. I don't know about you, but there's a big difference between grocery and home improvement when it comes to the size of product, the weight of it, and the ability to scan it, et cetera, et cetera. And so we took a step back and said, "Okay, if we're gonna do self-checkout, if we're gonna transform the front end of our stores, we need to think about this from an omni-channel perspective, not from a traditional retail." And so from this front-end transformation, we've done a couple of things. We've been able to create point-of-sale units that can be converted from self-checkout to staffed with a cashier. We've been able to free up space for merchandising, so we can be consistent in planogram on the front, and we've been able to create space for omni-channel and boundless fulfillment that didn't exist. And so this has created an incredible amount of productivity: labor productivity, space productivity, and expense productivity. So we're in the process of continuing to retrofit all of our stores in the chain with this front-end transformation, and that's gonna be a major unlock for us, you know, in all the areas that I just outlined. We have other initiatives, again, and we'll talk about in December, that we're excited about. But what's interesting is, you know, Brandon Sink, the CFO, and I have a list of these Perpetual Productivity Improvement initiatives by function over a multi-year period, and all of these initiatives have been tested, and we have a basic expense takeout and productivity target associated with it. So we can look multi-year in understanding the rollout schedule to know when these initiatives will be live, and we have a good idea on the estimated productivity improvement that we will see based on the implementation of it, and we're excited about what the future holds. Okay. One area of business that more specifically is on the hard lines, broad lines, side of retail is retail media networks. Mm-hmm. You mentioned on your Q2 call, your marketing team is rebranding your Retail Media Network program to a simpler platform, where you help your brand partners meet a wide range of marketing objectives. Could you maybe talk a little bit about the goals, the rebrand, and what it entails? Just as the program continues to grow, what is the expectation for revenue and for margins? Sure. We wanted to simplify not only the name, but also simplify and articulate better to our supplier partners the return and the benefits they receive from participating in this retail media network. This is obviously not new in retail. There are other large retailers who've done this really well. For us, it's really more about how do we leverage the scope and reach of Lowe's as a brand to consumers to give our supplier partners a greater opportunity to speak to more consumers? How do we leverage the data that we have in the marketplace to give them more market share opportunities to grow in a way that they can elevate their brand? And what I will tell you is the supplier partners who participate with us, they're extremely pleased, and we use the data and the return that they've gained for their investment in our media network, you know, as a presentation to other brands to say, "This is what we were able to do for brand X, how we're able to grow their business, the number of views, the marketplace presence." And so for us, we're very excited about it because we are specifically home improvement, and so if you're interested in getting your brand in front of consumers who are homeowners, consumers who have good personal disposable income, equity in their home, then we are a great opportunity to do that. And so the rebrand for us is really more about simplicity- Mm-hmm. and it's all about making sure that we can leverage our digital platform, our media platform, and allow partners to come in and kind of ride our coattails to be able to reach and have access to the same audience that we are very pleased and fortunate to have access to. Great. Thank you for that. We're asking five questions to each company. Mm-hmm ... who's attended the fireside chat sessions of the conference, and so, just kind of looking for, you know, quick answers to these questions in a survey kind of form. So first, we've talked about the consumer- Mm-hmm ... but just if we were to compare what you expect for the second half of 2024 versus what you've already seen in the first half, do you expect things to be the same, better, or worse? We expect the second half to be consistent with our guidance and updated guidance we gave in our second quarter call. We still believe that the consumer is gonna remain cautious, specifically the DIY consumer on big-ticket discretionary. They're gonna remain cautious based on, you know, elevated interest rates, and inflation concerns, but we believe that we'll be able to operate well from a profitability and from a expense management standpoint, in spite of the headwind that we may feel because of the DIY discretionary pullback. And then that goes into our next question, is just on the topic of cost pressures, and this is more about '25- Mm-hmm ... than maybe the second half. But we've seen some tailwinds, with freight and maybe some dissipating costs. But for 2025, how is Lowe's thinking about the cost of materials, labor, maybe even tariffs, when it comes to impacting your cost basis? We don't see any material difference in 2025 versus what we're experiencing now. Obviously, with the threat of additional tariffs, we're watching that very closely. The good news for us is that we are in a much better position as a company with better systems, dedicated teams to focus on cost, on, tariffs, and how those costs impact retail. And so even if there are additional tariffs in 2025, we feel like we're in a much better operational and systems position to manage that, but we don't see any material difference between 2025 and 2024 from a cost or expense perspective. Okay. Our third question is, just about consumer behavior. Again, back to the consumer. We've heard from a lot of retailers that consumers are looking for value. Mm-hmm. Is that something that you've seen at Lowe's, and do you think it's more of a testament to the macro that we're in, or more of a secular trend with how consumers shop? Look, we think the consumer demand relative to promotions, relative to value, we think is very consistent with pre-pandemic demand and the how your consumer approached the business. So for us, we understand that this whole big-ticket DIY discretionary pressure is gonna persist as long as we have elevated interest rates and inflation concerns. Having said that, we also believe that our pro customer is gonna continue to be relatively engaged based on the fact that the houses are aging, repair work will be required, and as you mentioned earlier, roughly 75% of our pros in our survey basically said to us that they feel like that there will be demand for their business in the second half of the year. So we don't see any material difference in our consumer relative to what they expect of us from a pricing promotional standpoint, and luckily for us, we operate in a pretty rational retail industry when it comes to promotion and it comes to being overly aggressive on price. Our fourth question is just, more or less points of distribution in the U.S. next year. Will we see more or less from Lowe's? I think for us, our number one focus is how do we gain more productivity from our existing stores? Mm-hmm. We're in a unique position where we have over 1,700 and call it 1,750 stores, and we have lots of productivity opportunities to get more out of those stores. And so there is a huge initiative on gaining more space productivity, and that's something that is our first priority, getting more from the space that we have. In addition to that, we're gonna be opportunistic on new store openings. As we see what we describe as real estate voids, places where there's available real estate and we don't have the store density we want, or as we see populations shift, and we saw a lot of that, as we all well know, during the pandemic, we're very conscious of those opportunities, and we're gonna be opportunistic, and we will build stores where we think we can hit our hurdle rate, and we can serve our customers. But again, our outsized opportunity is getting more productivity from the existing space we have, and we have a long list of initiatives like rural, like pet, like apparel, like, you know, being more localized with urban in some of these locations. So, we're putting a lot of work in these areas, and we think that we'll get really good return, but again, we'll be opportunistic on new stores. The last question, we touched upon it a little bit, the promotionality of the home improvement is pretty rational. It's not highly promotional, but just if you were to compare the second half of this year versus last year, how would you view the overall promotional calendar? We don't anticipate any material difference in the second half of the year from last year, and that includes the holiday season. Yep. You know, we have a very good plan. We have a great Trim-a-Tree offering that we think the customers are gonna respond well to. We feel really good about our partnerships with our supplier base. We feel great about our relationship with the NFL. That's been a great initiative to help us to gain more of a presence with our Millennial customers. But from a promotional standpoint, we think we'll be very consistent with last year. Okay. Yeah. Thank you for joining us today. Great. It's a pleasure to be here. Appreciate the time.