Lowe's Companies, Inc. (LOW) Earnings Call Transcript & Summary

Well, good morning. Thank you all for joining us. So my name is Brian Nagel. I'm the senior equity research analyst here at Oppenheimer covering consumer growth and e-commerce. So this is a continuation of our 26th Annual Oppenheimer Consumer Growth & E-Commerce Conference. And again, we very much appreciate you all tuning in this morning. So I'm very pleased to have with us Lowe's and 2 of the company's senior executives, CEO, Marvin Ellison; and CFO, Brandon Sink. Gentlemen, thank you for joining us.

Good to be with you, Brian.

We've done this event many years now. So again, I thank you for always representing well here at our conference. Thank you.

You're welcome too.

We're going to structure this as an informal fireside chat with me asking questions and the Lowe's team answering those questions. To the extent that there are questions from the audience, then send them through the channel, I'll be happy to work them into our conversation. So guys, I thought we'd start before, and there's obviously a lot to talk about specifically with Lowe's. But I think I thought we'd maybe just start just given kind of the state of the world. I guess your views on just the consumer backdrop, what you're seeing out there and how the consumer backdrop is impacting Lowe's at this point?

Yes. So Brian, always great to be with you. So I think from my perspective, we gave our guidance earlier this year. Nothing has really changed since our initial view of how we thought the year would play out. So the consumer is about where we thought they would be. So let me just kind of remind you of who our core customer is. Our core customer is a homeowner with a average household income north of $100,000, they have gainful employment, they receive wage increases, they have record equity in their home, they have money in the bank. So overall, we describe it as a consumer with a really strong personal balance sheet, and this consumer is resilient. However, within that is just sentiment remains low, particularly when it comes to discretionary big ticket. And that is where we're seeing the hesitation in the consumers' ability or willingness to spend. The good news is, as I said earlier, this is a healthy consumer, but the broader macro is giving them a bit of hesitation. And as a reminder, our business is predominantly the do-it-yourself, DIY, customer. And even within this really difficult consumer sentiment based on the broader macro, we still feel really good about our ability to perform and take market share. I mean, as a reminder, we've had 4 consecutive quarters of positive comps. We've taken market share even in this really difficult housing market. And again, I don't need to give you all the housing metrics, you know them as well as I do. And so for us, we're in that old simple adage of controlling what we control. We're focused on making sure that we're offering value, product innovation, service. We're committed to doing all the things we need to do to make sure that the customer feels as though when they walk in our stores or they go online and they're getting a great environment that's going to serve them very specifically. And our mission statement is making sure we're solving problems and fulfilling dreams for the home. And so we're really focused on that. And so we don't see any major deviation from what we thought we would see. Having said that, we're really encouraged because we believe that all the foundational things that we've done relative to IT, supply chain, product innovation, service model in all of those things, including the acquisitions we've made, is really going to set us up really well when the inflection happens in the housing market. We don't know when that's going to be. We know what has to happen. And right now, we're focused on taking share in the short run, but preparing this business to operate really well when that inflection happens.

So Marvin, so as you think about the macro environment, I think probably not answer this question, I mean what's the -- is there a variable you're watching the most of that sort of say that macro unlock? And I guess it's obviously the rate would impact that lower rates could have on the overall housing market. But then also gas price, obviously, a lot of volatility lately. But how much -- if we got some type of sustained moderation in gas prices, how much could that be a macro unlock for those?

No, look, it's a good question, and it's a timely question. So specific for us, if you think about the consumer that I just described, gas prices alone does not prevent this consumer from shopping. But when you combine elevated gas prices and the strong visibility around overall gas prices, you combine that with the broader uncertainty in the macro, then that consumer becomes a bit cautious. And you've seen some of the consumer sentiment data from the University of Michigan. I mean, is that some of the lowest levels on -- that they've ever measured. And I think that is a causality of all of those factors, gas prices and broader uncertainty in the macro. So when we take a step back, Brian, we believe that mortgage rates coming down is obviously the big macro unlock that we're looking for. I mean, obviously, none of us can call when that's going to happen, but we know all the indicators that's going to drive that mortgage decision down is going to be core inflation coming down. And for us, gas prices and having some level of decision on what's happening in the Middle East, obviously will play a huge role into that. And we think that when that starts to happen, we're getting some clarity on what's going to happen relative to global oil prices and gas prices coming down and then seeing some of the core inflation data starting to hit in the right direction, then we believe that we're going to see hopefully, mortgage rates start to follow. I mean, as recent as today, there's an article in the Wall Street Journal talking about the supply-demand imbalance in housing and how you have certain markets, geographic markets in the country that have been really difficult to build homes because of restrictions, how those restrictions are starting to loosen up because we're truly at a supply-demand imbalance where something has to happen in the short run and there are some estimates up to 5 million homes needed just to meet current demand, not to mention, analysts are basically forecasting that the number is closer to $12 million over the next 5 years of homes needed just to meet demand. So we believe that although the short run is challenging based on all of the economic factors we've talked about, that we're in an environment that we're going to see a gradual improvement in home improvement based on the improvement in housing. And the question we ask ourselves is, have we built a strategy where our total home strategy, and we may drive investments that we made the right acquisitions that's going to position us to really take share and grow this business when that inflection starts to occur. And we think we put ourselves in the right position. In the meantime, we're going to do what we've always done. We're going to control expenses, we're going to continue to invest in our business, we're going to continue to invest in our associates. We're going to continue to offer great value, innovation and a great environment for our customers to shop. And we think if we do that, we'll continue to take market share, run this business well, and we're going to keep our fingers crossed that we're going to see brighter days ahead in the macro that we'll be able to take advantage of.

And Brian, I would just add, I'm really pleased with the ability of our team to kind of weather what I'll call multiple inflationary cycles over the last 6-plus years. That's from Trump tariffs, first administration 2018. We had the Ovid supply chain shocks. We had the tariffs last year and now sort of maneuvering through fuel prices, geopolitical situation. This year able to continue to deliver results, expand margins. And I think for us, especially with this environment with a customer that's seeking out, responding to value, really leaning into offers, whether it's free shipping, whether it's free same day, a number of different things that we're doing to drive transactions and stay relevant. So we've been able to do all those things in multiple cycles, and we'll continue to do that no matter what the macro scenario that's put in front of us.

That's very helpful. So Marvin, I want to -- I guess, focusing more on Lowe's now and staying a little big picture. So as you know, I followed your company in your sector for a very long time now. You've been the Head of the Lowe's almost a decade now. And you've done a fantastic job. You really repositioned successfully the business. So I guess the question I want to ask is you look at what's been done under your tenure as CEO at Lowe's. Maybe talk about some of the big wins there, but -- just importantly, what's still -- where is the opportunity still alive from your standpoint and I guess in the reposition of the company?

No, it's a great question. And so let me kind of start with where we were in 2018 when I joined the company. I describe it simply as a company with a great balance sheet with a brand that had been tonnage because of just poor execution and decision-making relative to how we serve customers. And so as you think about the things that we've done, the redesigning of our IT infrastructure and I'd argue right now, with the leadership of our IT team that we have one of the most innovative and most effective IT infrastructures, AI implementation and all of the elements of IT, both store, customer-facing and associate-facing of any retailer in the country. We redesigned our supply chain. We're able to totally update and innovate our product assortment. And most importantly, we address the service-related issues that really were impacting us. And we're just pleased when you look at all the recognition we receive, whether it's J.D. Power, whether it's Fortune, just recognizing the fact that the brand has recovered and that we are now viewed as one of the best operating retailers in the world. But when I think about the opportunity, the opportunity for us is greater in front of us than I think that what's been behind us because, as I've described, we're in the new industrial revolution or what's happening with AI and overall advancements in technology. And I think we can do a couple of things. Number one, we can continue to grow our omnichannel and our online business. I mean we delivered a 15.5% comp in the past quarter, and we think there's a lot more in front of us. And we're excited about the introduction of our marketplace, the first product marketplace of any home improvement retailer in the U.S. And we're in the early stages, but what we're seeing is incredibly exciting. So we know that there's incredible upside there. We're really excited about all the innovation we're putting in place that's allowing our associates to operate more productive and giving our customers an easier place to shop, and that's primarily driven by technology and outside our AI agent and our AI companion tool, Mylow. When customers use this AI assistant online, they're able to convert at triple to rate of customers who don't use it and when our associates use it in the store, we have 200 basis points of customer service improvement. We're getting roughly 2 million questions a month when you can buy customers and associates. So this is an iterative system that's learning, and we know the future is incredibly bright for us because we can make our associates more productive, we can take friction out for our customers, and we think that's just going to unlock incredible opportunities for us. We're excited about our Pro Strategy. We have made great progress when I started back in 2018, our Pro penetration was somewhere around 18%. Right now, we're approaching 40%. And that is not including the acquisitions we've made with FBM and ADG. And when you think about the fact that we launched Pro Extended Aisle, which in essence, opens up an incredible marketplace of suppliers, of value, price and quantities to every single product, we think the upside potential there is incredible, not to mention the partnerships with ADG and FBM opens up a $250 billion total addressable market in residential construction, where, as I said earlier, we think that the growth opportunity is still in front of us. And last but not least, I'm just really excited about our ability to be a positive contributor to our communities. I mean, we announced through our foundation that we're committing $250 million to create 250,000 skilled trace positions. I mean, we're at a critical juncture in this country with the need to have more skilled trades individuals, whether it's getting a plumber, an electrician, available to show up to your home or whether it's the skill trades needed to build out this data center infrastructure that we're going to need for the future technology. So I can go on and on and on, but I think, Brian, we're doing 2 things now. We've created a business that can operate brick-and-mortar and digital to serve our small to medium pros and our DIY customers. In addition to that, we've built out a business now that will give us the ability to have an interior solution, everything from drywall to flooring, cabinets, countertops, appliances and so on and so forth for new construction for multi and single family. We never had this opportunity in the history of this company. And that growth potential has yet to materialize, but we know is out there. So I can go on and on and on, but those are the things that are yet to be done, and we're excited about our future.

That's very helpful. So before we guide -- before we tap some of those key points more individually, I guess let me ask a bigger question, as investors watching this continued, well I'm keep using the word repositioning, but improving health of the Lowe's model. What are the key metrics we should be watch for here. If you take that all together, with the technology and other initiatives here, how should we be thinking about where the slack still is in that within the business, well from a financial standpoint?

Yes. So I think, Brian, for us, it's ongoing growth and the ability to take share. I mean, we're operating in a challenged environment. Our guidance suggested kind of flat home improvement this year. I think that's what we continue to see. We expect 100 basis points on top of that. And I think if you start to look even beyond 2026, that ability to take share in multiple environments, that's mainly what we're looking at, Brian. Marvin just cited growth that we're seeing within the Pro, we continue to look at Pro penetration where we're taking share in our retail base with small to medium. We've now opened up a more diversified customer with larger Pro that we can access through the FBM and ADG model. So excited about a potential new revenue profit pool that we can generate there that will create profit dollars and ongoing earnings. So those really are the numbers that I'm looking at, Brian. I think bottom line, we're going to continue to drive productivity. We've cited $1 billion for 2026. That's split roughly half between margin and SG&A. We're well on track to achieve that this year. We're also managing some new pressure points as it relates to fuel. So we're trying to figure out how much we can accelerate there. So confident that we can deliver our margins. So really just looking forward beyond '26, I think it's that revenue growth, the ability to take share and the ability to deliver incremental margins even in a pressured macro that we have a lot of confidence in. And then if we can get some benefit from housing policy from the administration, whether it's pent-up demand from HELOCs, whether it's tax incentives, some of these near-term drivers for us, that just creates incremental upside beyond what we're tracking and what we're expecting to deliver here in 2026.

So Marvin, on the Pro business, you mentioned something already. But let's talk about how Lowe's is looking at that continued growth in the Pro both within the store that how you serve Pros there. But then maybe more importantly, with these acquisitions you've made, the ongoing development -- I guess you can just talk about the ongoing development, you have the Pro business for Lowe's.

Yes. And I think that's the right way to describe it, Brian, is the ongoing development and evolution of it. And again, I'll just repeat what I've said earlier, if you go back in time, I mean, we're roughly 18% penetration. And we really didn't have a focus or a strategy. So the first thing we did is we decided that we're going to focus on the small to medium Pro customer in our stores, because we felt, a, we could serve that customer well, and b, that's a $250 billion total addressable market, just that segment of Pro. So it's a very lucrative and very fragmented segment. And so over the course of the past, 7 plus years, we've invested to improve our service model, we've invested in inventory to ensure that we have the quantities needed for Pros to come in and feel confident they can buy what they need. We've been very focused on making sure we're price competitive in commodity-type items. We had lots of work to do with our brands. The previous management team had walked away from national brands and Pros, as you know, every brand loyal. And so we made investments. Today, we are the largest seller of the vault product and the vault remains the #1 power tool brand for Pros, and we reintroduce brands like client tools that are kind of the key brand for electricians and HVAC professionals, and we started to fix the fulfillment issues. I mean, we were very hit to miss and we made investments. We put technology in place. And so those are the foundational things that we did. And again, those things have allowed us to take that penetration from about 18%, again, now we're approaching 40%. And so when we took a step back and we said, okay, we can address the small to medium Pro in the store, but how do we address the more planned span and the more larger complex Pro. And so we're doing really 2 things. The first thing is I mentioned is Pro extended out, which is basically -- think about it as a product marketplace for Pro. So we've added a number of suppliers. So if a customer comes in and they want to get a truckload drywall or they want to get a truckload of electrical wire, the ability to do that now at the right quantity, price and selection is all digital, and we can do it seamlessly. And in most cases, those suppliers not only will provide us a product, they'll deliver to the job site. And so we're continuing to roll this out, and we've been extremely pleased with the results we've seen. And then we decided to act question, as we look at housing and we look at the shortages we've discussed in single-family and multifamily housing, and we know that there has to be a cycle of rebuilding to occur. We want to know how could we play a role in this and we decided to make those acquisitions of ADG and FBM. And we did this in a very surgical way rather than going out and throwing out a big net and said we're going to try to be all things to all segments of this plan Pros pane. We say let's focus on the interior of the space because, a, we felt like that Lowe's could complement that well; and b, we felt like that the profit opportunity there is better for us. So when you think about ADG, which does cabinets, countertops and floors and FBM that does drywall, steel framing, insulation primarily. And if you combine those capabilities and those product categories with what we do on the interior, specifically in areas like appliances, fixtures, et cetera, we now are building a capability that we can have an interior solution for single and multifamily builders current and in the future. And so that is the evolution. And so, this opens us up not only to a $250 billion small to medium Pro. Now we have a $250 billion total addressable market in this interior space for single and multifamily. We've never had an opportunity grow revenue. So we're excited about the future, and we are excited about the continuing evolution. And I didn't mention the value of our loyalty program and how we're seeing incredible valuable learnings and stickiness from those Pro customers engaged in our loyalty program. So again, the building blocks are in place, and now we're continuing to build on top of those foundational things.

Yes. And Brian, I would just add, as it relates to ADG and FBM, we know that residential construction has been pressured, but really pleased with kind of 6-plus months the momentum that we've had as it relates to the integration efforts. I'm extremely successful with driving out cost, procurement with steel, with insulation, with drywall. And then Marvin mentioned, just as it relates to the ADG model, the ability to start bundling appliances, introducing private brands, STAINMASTER as an example in terms of what we can now offer through builders. And then as it relates to FBM, ability to give our larger Pros access to the capabilities that FBM offers. And then on the flip side, starting to open up our host of complementary products to FBM customers, making momentum on all of those fronts and sort of outpacing what we expected were synergy realization here in year 1. So really pleased with that.

So as you think about the Pro business outside the store and the acquisitions we mentioned, ADG and FBM, do you anticipate further acquisitions to build out that effort?

Look, the short answer is we're going to be very opportunistic. And we think that you will see us make tuck-in acquisitions to support both ADG and FBM in specific categories to either reinforce categories that they're already in or to look at new categories that help us in that interior space that we're referring to. Again, we want to be really disciplined and we want to be really focused. And we've created a very detailed road map and strategic plan on where we want to play because we want to only play in the areas, categories where we feel like that we can be a leader and we can be really effective in serving the customer in some of these bundles that Brandon talked about pulling some of these capabilities together. But there are not a lot of companies in the U.S. that can go to a large builder and offer them a bundle of multiple things that they can do. But again, -- the short answer is, yes, we'll be opportunistic. We'll do some tuck-ins and those tuck-ins will be primarily focused on creating and reinforcing the capabilities that these 2 companies already have.

Yes. Brian, I would just add, the opportunity for me remains highly compelling. I think we look at it. It's financially accretive given our cost of capital. So, we're looking -- we acquired FBM as a growth platform. So I think being committed to that, looking at additional product verticals, geographies, we are being disciplined as Marvin said. So I think near term, very much focused on tuck-in. We've made the commitment from a balance sheet standpoint to get back to our leverage target as we look ahead into 2027. So we're going to manage to that while being opportunistic. But again, looking at this as a longer-term growth platform, and we really like the opportunity and believe we have a lot of conviction in the strategy.

And this may be an oversimplified question. As we think about it, again, as investors, we think about the synergies here, and how now these acquisitions help the Lowe's enterprise grow. So if I'm a customer of, let's say, FBM, do I also shop Lowe's stores? Is there overlap there in that customer base?

There's some overlap, but I think to Brandon's point, it's more on those complementary products. It's more on the power tools, it's more on the power tool accessories, it's more the tools for building materials. And what we're trying to do is offer more of those complementary products in the FBM environment. And again, but what we also believe, Brian, is that we're taking like FBM is being added to our Extended Aisle in our Pro system. So if a Pro customer comes in to a store and they want a truckload of drywall, the question is, why shouldn't we fulfill that order from an FBM branch? And so that's what we're in the process of testing and figuring out how we can make that happen. That way, we basically can take every Lowe's store and Lowe's protest it has an FBM branch in the geographic area and make those 2 platforms marry together. And so we're learning a lot, but on the short run, Brandon's team, the merchant team, our integration team, our integration management office has done an incredible job of going and attacking those synergies when it comes to cost, when it comes to products, when it comes to suppliers, and that's been a real short-term win that's been a benefit to both Lowe's and the FBM. And to Brandon's earlier comments, I mean we're going to continue to find tuck-ins and opportunities that's going to continue to make FBM and ADG more effective and grow those platforms so that we can make them incredibly beneficial to the overall Lowe's enterprise.

Yes. And Brian, I'll just add, there's certainly opportunity in an FBM branch to make the physical space more productive. So as Marvin mentioned, fasteners, safety equipment tools. We're also opening up on fbm.com kind of a more endless aisle introduction of Lowe's catalog SKUs and items. And then the flip side, you mentioned FDM customers potentially shopping Lowe's stores. We're working on the ability to use their trade credit through FBM and Lowe's stores, and we feel like that could potentially be an unlock for us as well.

So let's talk more about online. Again, Marvin, you mentioned this, we've seen this in our recent results. I mean clear bright spot for Lowe's has been this outsized growth in online. So I guess the question I want to ask is, who's shopping online? Is it your existing customers? Are you getting better penetration with those customers? Is it a new customer? And how do you see this again say, words, how do you see online evolving for Lowe's over time?

Well, look, we're very excited. I mean, as I stated earlier, we delivered a 15.5% growth result in the most recent quarter. And really, Brian, the entire customer portfolio is shopping online. We're seeing growth in the Pro segment. We're seeing growth in the DIY segment. We're seeing growth across multiple categories. The thing that we've been able to do, and this is literally you've been a 7-year journey. I mean, I'll just take you back to Black Friday of 2018 when the online site crashed. I mean, that was the eye-opening reminder that we have a lot of work to do here. And so if I snap the chalk line on that event and I look to today, I mean it's -- there's really no comparison to where we are. And so the steps that we've been able to take is improving the user experience with large investments in technology because at the end of the day, you and I both know the key is remove the friction, reduce the clicks to check out and make sure that the site is functional and that the customers can find anything they want. And we've been working on navigation, search, all of those things. The other thing that we've been able to do that's been really helpful is making sure that the experience online is unique to the customers' needs. And part of that is just great, great involvement with wonderful technology partners like Apple. When you think about Apple Vision Pro in virtual reality and some of the things we're been able to do with really great tech partners, but throughout all of that, when you look at desktop app, you look at mobile, all of those things are working and we're seeing growth there. We think the future continues to be bright because of the introduction of marketplace, which in essence gives us just the ability to add an incredible large number of SKUs without having to own inventory and being able to be really price competitive. And what we're seeing in the marketplace is we're seeing a new value customer coming in, because we can offer certain products at a value that even beyond what we carry in our brick-and-mortar stores, but we're seeing a premium customer come in as well. I mean, most retailers don't want to take the risk to put in an extremely premium product in the stores because if you don't sell it, you're stuck with the inventory. But the marketplace gives us the opportunity to serve a value customer and a premium customer and we're able to do that. But we're also able to take the core foundation of things that we do really well like appliances. And we built out this unique delivery infrastructure. We have the best fulfillment capabilities for appliances in the U.S. We're the only retailer where you can buy an appliance in-store or online, and you can get it delivered and installed next day in virtually every ZIP code in the country. And so the experience online is as seamless as the experience in the store. And as I mentioned earlier, I mean, our virtual assistant, the AI assisted MyLow built on an open AI platform when customers use our virtual assisted MyLow online their conversion rate is triple of customers that don't. So that tells us that there is an absolute benefit to having an AI assistant that makes the shopping experience easier by answering specific product-related questions. Although 15.5% was really good. I mean, we think the best days are in front of us because we put so much work into it. We put together such a talented team with industry experience and we're going to continue to build on this because we know customers are more and more being more comfortable to migrate online, and we want to make sure we meet the customers where they are.

And Brian, just to put a financial lens on what Marvin just said. If you look back 5-plus years, we've tripled the size of the online business, doubled the penetration. I think we're up to 13% here at the end of Q1 with kind of a path, I think, over the longer term to get that number closer to 20%. 50% of online purchases are fulfilled via BOPUS through our store, another 25%, mostly big and bulky through market delivery with what Marvin just outlined. And what I'm pleased with is the ability over that same time frame to expand our operating margins. So confident even though the growth in the path forward that we're going to deliver positive contribution margin on these incremental online sales. So really like the direction that we're going here.

I know our time is going to act wind down a couple of topics I do want to make sure we hit on. So again, stepping back on the Lowe's business, trade tariffs. So I think you've done a great job of mentioning what has been a volatile trade backdrop. The question I'll ask is, how do you view tariffs at this point how have you and your partners work to sort of say, mitigating impacts of your business? And where are you on any type of tariff [indiscernible] tariff rebates?

Yes. Brian, I'll take that. I think tariff environment remains extremely fluid. We've been transitioning from EPA tariff environment last year. We're working through temporary Section 122, which was supposed to be in place for roughly 6 months, watching the evolution into steel and aluminum through 2032 and whatever else comes through [ 301. ] So our guidance kind of reflects where we are in the existing environment, but sort of expecting ongoing rules and ongoing evolution. But our playbook irrespective of any of that is unchanged, and we've seen a lot of success with it. So we've rationalized the number of SKUs through this process. We're down, Brian, probably 20% in terms of SKUs relative to kind of pre-liberation day tariffs. We continue to work through country of origin diversification has been a huge focus. We're down -- we started this with about 20% penetration with China. We're at about 15% as we stand today. And when we get to the end of 2026, that number is going to be significantly reduced. We continue to partner across with our suppliers on sharing and the burden, managing the cost. And then lastly, doing a tremendous job with the pricing organization managing a incremental through the portfolio. So I mentioned earlier, we've weathered a number of these inflationary cycles. I think, we have a great playbook. Team is doing a fantastic job and confident we can manage this back half of '26. And then you mentioned the refund process. I would just say, we are going through the motions. We're waiting on further direction and instruction from the U.S. customs bureau and watching to see what the instructions are, there's multiple phases to this. As of Q1, we didn't disclose that we had filed or we had received. So that process is ongoing. And anything that we see any developments that we see here in Q2, we'll communicate that on our August call.

Guys, last topic on just capital allocation. So again, I mean, a huge positive in my mind, I think it's Lowe's story is your ability to generate cash, utilize that cash, redeploy that cash. So philosophically here, particularly as we talk about some of these recent acquisitions you've made, how do you think about just -- I guess, the uses of capital for Lowe's at this point?

I think, Brian, capital allocation policy and philosophy largely unchanged. Our #1 priority is investing in the business. That's organic and inorganic. Organically, we've communicated that's going to be about $2.5 billion annually, and then we're going to continue to look at the inorganic opportunities. We're very committed to getting back to the leverage target as we mentioned. So managing that, managing the leverage here in the short term. We paid down $2.3 billion in debt here in Q1, so making nice progress against that and then committed to an ongoing dividend. We increased our dividend 4%. We're up to $1.25 per quarter per share. So that's something that we remain committed to. We're kind of in dividend king, dividend aristocrat status and that's something that we're very proud of. So we continue to target roughly a 35% payout rate. So making progress there, but backing up largely from a philosophy standpoint, the capital allocation largely unchanged.

Well, guys, is there anything we didn't talk about that we should have talked about here?

Brian, the only thing I will say is I'll just go back to previous comments. I mean, this is a challenging housing macro, all the factors we've talked about with mortgage rates and consumer sentiment being a bit cautious on big-ticket discretionary. But the only point I'll close with is that we're incredibly confident in our business. We're pleased with the fact that, again, in the face of a really difficult housing macro and with a DIY customer base, that's our primary customer segment that drives our business we're able to deliver 4 consecutive quarters of positive comps. We believe that we're continuing to take market share. Again, this is a much more fragmented market than a lot of people realize. And so we're going to continue to take share irrespective of the macro. But more importantly, we are positioning this company for the future. We take everything that we're doing from investments to leading in AI innovation to the product categories that we've been able to introduce to the innovation we put in place to how we are continuing to drive productivity to our PPI initiatives. We think all of those things set us up for a true growth renaissance when we start to see any positive movement in the housing macro. So again, we're going to execute and control the things that we control in the near term, but we're really excited about the future, and we think we're well positioned to take advantage of that.

Marvin, Brandon, thank you. Congratulations on the ongoing success here. We very much appreciate you attending.

Thank you.

Thank you, Brian.