Broadlines & Hardlines Retailing Horvers’ 1Q Preview - Setup & Expectations; On a Razor’s Edge

Research evidence excerpt

Broadlines & Hardlines Retailing Horvers’ 1Q Preview - Setup & Expectations; On a Razor’s Edge

Christopher Horvers, CFA AC North America Equity Research

(1-212) 622-1316 15 May 2026 J P M O R G A N

christopher.horvers@jpmorgan.com

Based on our industry and data work, we are raising our 1Q comp to +1.3% vs. the

Street’s +0.7% per Consensus Metrix and buyside expectations of ~1.0%, with LOW

having a more favorable weather backdrop (Figures 5-6) and share gains. Recall, LOW

spoke to 1Q comps below the midpoint of the annual guide (i.e., <1%) given winter

storms pressured QTD trends in February, but LOW is also lapping ~$400MM of spring

sales that shifted out of 1Q25 due to the late spring. Similar to above, we expect QTD

trends to be in focus for the call but (like HD) we don’t expect specific commentary

considering the largest weeks of the year remain ahead of us (although the positive setup

is the same as what we described above). On the margin front, we are maintaining our

in-line 32.4% gross margin (-90 bps YOY) with the ADG/FBM acquisition headwind

(-100e bps), fading credit/storm mix tailwinds, and essentially no flowthrough of LOW’s

PPI work net of reinvestments. Recall, LOW guided 1Q operating margin of 11.4% with

the acquisitions a net 50-bp headwind (100 bps gross margin pressure offset by 50 bps

SG&A favorability). That said, considering our expectation for comp upside, and some

conservatism on productivity benefits, we are now modeling 50 bps of SG&A leverage,

resulting in a 11.5% operating margin and $3.03 EPS vs. the Street’s 11.4% and $2.97.

On the stock, similar to HD, we like the entry point and remain more optimistic on DIY

and small projects than pro and remodeling while LOW continues to invest to close some

of the gap to HD.