Lowe’s reports gross margins in 1Q that were below consensus, but the retailer’s better-than-expected sales during the quarter kept profits in line with the consensus estimate, DA Davidson analyst Michael Baker says in a research note. On the margin side, it’s a tough look for Lowe’s, which had been narrowing its margin gap with rival Home Depot for the past several years only for the gap to widen in 1Q, the analyst says. Still, the sales decline was lighter than expected and guidance was reiterated, Baker says. Lowe’s is off 1.4% in early trading.

Home improvement spending may be getting closer to a bottom as the rate of Lowe’s comparable sales declines continued to ease in 1Q, M Science analyst John Tomlinson says in a note. Same-store sales were down 4.1%, beating analyst forecasts for a 5.6% decline and an improvement from a 6.2% drop in 4Q and 7.4% decline in 3Q. Unlike its rival Home Depot, Lowe’s logged stronger quarterly results that topped analyst expectations in part from gains in its professional-customers channel, though spending on big-ticket items remains under pressure, the analyst says. Shares slide 3.1% to $222.12.

Lowe’s notched its best regional performance in 1Q come from the Western U.S., says Joe McFarland, executive vice president of stores, on a call with analysts. He says markets that saw the best weather during the quarter generated the best performance. CFO Brandon Sink notes that the performance from its professional customer cohort, which make up about a quarter of overall sales, was consistent across all regions. CEO Marvin Ellison adds that the company’s rural locations were its best performing subset of stores in 1Q, while the western markets outperformed overall.

Our 12-month target of $238, up $17, is 19.5x our FY 25 EPS view of $12.20 (down $0.06; FY 26’s down $0.28 to $13.48), a premium to historical averages. Our P/E reflects LOW’s productivity initiatives, improved customer service, and improving rate cut expectations. FQ1 (May) EPS of $3.06 (-16.6% Y/Y) beat by $0.10 on revenue of $21.4B (-4.4% Y/Y), 1% above consensus. Comp sales declined 4.1% on a 1% ticket contraction and a 3.1% transaction count decline. Notably, Pro and online sales achieved growth in Q1, with Pro backlogs flat Y/Y. Gross margin of 33.2% declined 50 bps due to investments, promotions, and a decline in credit revenue. SG&A advanced 140 bps to 18.8%, netting a 200-bp EBIT decline to 12.4%. Despite the top- and bottom-line beat, FY 25 guide remains unchanged. We see the roll-out of the loyalty program as necessary in meeting a stressed consumer. LOW assures its