Why did Lowe's gross profit decline in Q1 2025?

Lowe's gross profit declined in Q1 2025 due to a combination of factors: 1. **Decrease in Revenue**: The most significant factor contributing to the decline in gross profit was the decrease in revenue. Lowe's experienced a 3.1% decline in revenue for the full fiscal year 2025, with the revenue for Q1 2025 being $8.37 billion, down from $8.68 billion in the same quarter of the previous year. This decrease in revenue, particularly in the first quarter, directly impacted the gross profit margin. 2. **Lower Revenue from DIY Projects**: While the company saw positive growth in pro and online sales channels, there was a continued cautious consumer behavior affecting DIY discretionary spending. This shift in consumer behavior, influenced by economic factors such as interest rates, led to a decrease in revenue from DIY projects. The reduction in DIY-related sales had a negative impact on gross profit, as these projects typically contribute significantly to the company's revenue and profit margins. 3. **Increased Depreciation**: The company's investments in operational improvements and technological advancements led to higher depreciation costs. This increase in depreciation, although partly offset by improvements in the selling, general, and administrative (SG&A) rate estimate, had a slight impact on the gross profit margin. The analyst from Loop Capital noted that the investments in professional customer initiatives were showing promising growth but were expected to constrain gross margin improvements due to higher depreciation costs. In conclusion, the decline in Lowe's gross profit in Q1 2025 was primarily driven by a decrease in revenue, particularly from DIY projects, and increased depreciation costs. These factors, combined with other operational and economic factors, resulted in a decline in the company's gross profit margin for the quarter.