Lowe's Companies Inc.

Company Overview

Business Model: Lowe’s Companies, Inc. operates as the world’s second largest home improvement retailer, focusing on an omnichannel strategy to serve both professional (Pro) customers and do-it-yourself (DIY) homeowners and renters. The core value proposition is to help customers with home improvement needs by providing an excellent customer experience, a wide product assortment, and various services. Revenue is primarily generated through the sale of products for construction, maintenance, repair, remodeling, and decorating, complemented by professional installation services and extended protection plans.

Market Position: Lowe’s Companies, Inc. holds a leading position as the second largest home improvement retailer globally. The company operates in a highly fragmented home improvement market, catering to a diverse customer base including small to medium-sized Pro customers (tradespeople, repair and remodelers, property managers), individual homeowners, and renters. Key market drivers monitored include home price appreciation, age of housing stock, real disposable personal income, and housing turnover, alongside demographic trends such as millennial household formation, aging-in-place preferences, and remote work. Competition is broad, encompassing national and regional home improvement chains, specialty retailers, online platforms, and service providers, with key competitive factors being store location, product assortment, pricing, customer service, and omnichannel capabilities.

Recent Strategic Developments: Lowe’s Companies, Inc. continued to execute its "Total Home strategy," updated in December 2024, which is aligned with key drivers of home improvement demand. This strategy is built on five pillars:

• Drive Pro penetration: Enhanced Pro product assortment, increased inventory of high-volume Pro products, launched a redesigned loyalty program, improved job site delivery capabilities, and rolled out a new Pro extended aisle. These efforts resulted in positive Pro customer comparable sales and increased Pro penetration in fiscal 2024.
• Accelerate online sales: Investments in omnichannel retail capabilities, including project design tools and an online product marketplace, contributed to strong online performance.
• Expand home services: Simplified installation solutions are provided through a network of independent and third-party installers for both smaller refresh and more complex projects, supported by a central selling team and online contract finalization. Installed sales accounted for approximately 5% of total sales in fiscal 2024.
• Create a loyalty ecosystem: Building out the MyLowe’s Rewards infrastructure for both Pro and DIY customers to drive brand preference.
• Increase space productivity: Optimizing assortments, tailoring them to local markets, and balancing value-oriented private brands with national brands. The company also finalized the rollout of its market-based delivery model in fiscal 2024, significantly improving delivery speed with most parcel-eligible items delivered within two business days and major appliances next-day in almost every U.S. zip code. An AI framework has been developed to enhance customer experience and unlock productivity across sales, shopping, and work processes.

Geographic Footprint: As of January 31, 2025, Lowe’s Companies, Inc. operated 1,748 home improvement stores and outlets in the United States, representing approximately 195 million square feet of retail selling space. Approximately 89% of these stores are owned, with the remainder leased. The company's executive offices are located in Mooresville, North Carolina, and it maintains support offices in India and China. Following the sale of its Canadian retail business on February 3, 2023, 100% of the company's net sales in fiscal 2024 and fiscal 2023 were generated in the United States.

Financial Performance

Revenue Analysis

Profitability Metrics (Fiscal 2024):

• Gross Margin: 33.32%
• Operating Margin: 12.51%
• Net Margin: 8.31%

Investment in Growth:

• Capital Expenditures: $1,927 million (fiscal 2024)
• Strategic Investments: Continued investments in supply chain transformation, omnichannel retail capabilities, and technology (including AI and machine learning) to enhance customer experience and operational efficiency. For fiscal 2025, capital expenditures are guided to be approximately $2.5 billion.

Business Segment Analysis

Home Improvement Operations (Single Segment)

Financial Performance (Fiscal 2024):

• Revenue: $83,674 million (-3.1% YoY)
• Operating Margin: 12.51%
• Key Growth Drivers: Despite macroeconomic headwinds such as ongoing inflation and higher interest rates impacting big-ticket DIY discretionary spending, the company generated positive Pro customer comparable sales and increased Pro penetration. Strong online performance, driven by an intuitive user experience and omnichannel fulfillment capabilities (e.g., same-day delivery, improved Buy Online Pickup in Store), also contributed.

Product Portfolio (Fiscal 2024 Revenue Contribution):

• Appliances: $12,053 million (14.4%)
• Seasonal & Outdoor Living: $7,370 million (8.8%)
• Lumber: $6,747 million (8.1%)
• Lawn & Garden: $6,526 million (7.8%)
• Kitchens & Bath: $5,869 million (7.0%)
• Hardware: $5,821 million (7.0%)
• Building Materials: $5,419 million (6.5%)
• Millwork: $4,986 million (6.0%)
• Paint: $4,976 million (5.9%)
• Rough Plumbing: $4,930 million (5.9%)
• Tools: $4,539 million (5.4%)
• Electrical: $4,299 million (5.1%)
• Flooring: $4,102 million (4.9%)
• Décor: $3,862 million (4.6%) The company offers a wide selection of national brand-name merchandise complemented by high-value private brands such as "Kobalt," "STAINMASTER," and "allen+roth."

Market Dynamics: The company operates in a highly competitive and fragmented market, serving a broad spectrum of customers from Pro to DIY. Demand is influenced by macroeconomic factors and demographic trends. The company's strategy focuses on enhancing the Pro customer experience, accelerating online sales, and expanding services to maintain competitive positioning.

Merchandise Division Breakdown (Fiscal 2024 Revenue Contribution):

• Home Décor: $30,862 million (36.9% of total sales), includes Appliances, Décor, Flooring, Kitchens & Bath, and Paint.
• Building Products: $26,380 million (31.5% of total sales), includes Building Materials, Electrical, Lumber, Millwork, and Rough Plumbing.
• Hardlines: $24,256 million (29.0% of total sales), includes Hardware, Lawn & Garden, Seasonal & Outdoor Living, and Tools.

Capital Allocation Strategy

Shareholder Returns (Fiscal 2024):

• Share Repurchases: $3,929 million (15.8 million shares on a settlement date basis)
• Dividend Payments: $2,566 million
• Dividends Paid Per Share: $4.50
• Dividend Payout Ratio: 37%
• Future Capital Return Commitments: As of January 31, 2025, $10.8 billion remained under the share repurchase program, authorized by the Board of Directors on December 7, 2022, with no expiration date. The quarterly dividend payment was increased by 5% to $1.15 per share in the third quarter of fiscal 2024.

Balance Sheet Position (as of January 31, 2025):

• Cash and Cash Equivalents: $1,761 million
• Total Debt: $35,487 million (Long-term debt of $32,901 million + Current maturities of long-term debt of $2,586 million)
• Net Cash Position: -$33,726 million (Total Debt exceeds Cash and Cash Equivalents)
• Credit Rating (as of March 24, 2025):
  • S&P: BBB+ (Stable Outlook)
  • Moody’s: Baa1 (Stable Outlook)
• Debt Maturity Profile (Principal amounts, excluding finance lease obligations):
  • Fiscal 2025: $2,500 million
  • Fiscal 2026: $2,350 million
  • Fiscal 2027: $2,368 million
  • Fiscal 2028: $2,255 million
  • Fiscal 2029: $1,811 million
  • Thereafter: $24,035 million
  • Total: $35,319 million

Cash Flow Generation (Fiscal 2024):

• Operating Cash Flow: $9,625 million
• Capital Expenditures: $1,927 million
• Free Cash Flow: $7,698 million (Operating Cash Flow - Capital Expenditures)

Operational Excellence

Production & Service Model: Lowe’s Companies, Inc. operates an omnichannel retail model, enabling customers to shop in-store, online, on-site, or through contact centers.

• In-Store: 1,748 stores and outlets, averaging 112,000 square feet of retail selling space plus 32,000 square feet of outdoor garden center space. Stores offer approximately 40,000 items, with localization variations. Productivity tools like front-end transformation and freight flow optimization are implemented. Outlet stores offer value on discontinued or overstocked items.
• Online: Websites and mobile applications provide 24/7 shopping, product information, customer ratings, buying guides, and how-to videos. Fulfillment options include in-store pickup, curbside pickup, same-day delivery via a gig network, and home/business shipment. Digital inspiration, design, and project management tools are also offered.
• On-Site: Specialists assist retail and Pro customers. Pro sales managers meet Pro customers at their business or job sites, leveraging stores and the distribution network. An In-Home Sales program is available for exterior projects.
• Contact Centers: Internal and third-party staffed centers handle sales, order management, delivery coordination, after-sale installations, and general inquiries via multiple communication channels.
• Installed Sales: Services are offered through independent contractors for categories like Kitchen & Bath, Flooring, Appliances, Millwork, and Rough Plumbing, accounting for approximately 5% of total sales in fiscal 2024. A central selling team and online contract finalization simplify the process.
• Protection Plans: Extended protection plans are offered for various product categories, enhancing manufacturer warranties.

Supply Chain Architecture: The company owns and operates over 120 supply chain facilities, including regional distribution centers (RDCs), flatbed distribution centers (FDCs), import distribution centers (IDCs), bulk distribution centers (BDCs), cross-dock terminals (XDTs), and Fulfillment Centers (FCs).

• FDCs handle merchandise requiring special handling (e.g., lumber, building materials), with each RDC and FDC serving approximately 115 stores.
• The Pro fulfillment network stocks deeper quantities of Pro assortments and handles large orders.
• IDCs provide increased capacity for import products, enhancing network agility.
• BDCs manage appliances and bulky products, while XDTs facilitate final-mile box truck deliveries.
• The market-based delivery model rollout was finalized in fiscal 2024, enabling most parcel-eligible items to be delivered within two business days and major appliances next-day in almost every U.S. zip code.

Key Suppliers & Partners: Lowe’s Companies, Inc. sources products from vendors worldwide, prioritizing direct purchases from manufacturers. The company has strategic relationships with suppliers for national and private brand products. A supplier finance program is in place with a third party to facilitate supplier payment obligations. A vendor, on whose board the CEO serves, provides transportation and business services, with purchases totaling $240 million in fiscal 2024.

Facility Network (as of January 31, 2025):

• Stores: 1,748 home improvement stores and outlets in the United States, totaling approximately 195 million square feet of retail selling space.
• Distribution: Over 120 supply chain facilities (RDCs, FDCs, IDCs, BDCs, XDTs, FCs).
• Executive Offices: Mooresville, North Carolina.

Operational Metrics (Fiscal 2024):

• Number of Stores: 1,748
• Sales Floor Square Feet: 195 million
• Average Store Size Selling Square Feet: 112,000

Market Access & Customer Relationships

Go-to-Market Strategy: Lowe’s Companies, Inc. employs a comprehensive omnichannel strategy to reach customers:

• Direct Sales: Utilizes in-store associates, on-site specialists, and Pro sales managers who meet with customers at their businesses or job sites.
• Channel Partners: Engages independent contractors for installation services and third-party providers for delivery services (e.g., gig network) and contact center operations.
• Digital Platforms: Leverages websites (Lowes.com) and mobile applications for 24/7 shopping, product information, project design tools, and various fulfillment options.

Customer Portfolio: The company serves a diverse customer base, including:

• Pro Customers: Primarily small to medium-sized tradespeople, repair and remodelers, and property managers, for whom dedicated offerings and services are being enhanced.
• Individual Homeowners (DIY): Customers undertaking their own home improvement projects.
• Renters (DIFM): Customers seeking "do-it-for-me" solutions, often utilizing the company's installation services.

Geographic Revenue Distribution:

• United States: 100% of total revenue in fiscal 2024 and fiscal 2023.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The home improvement market is highly fragmented and influenced by macroeconomic factors such as home price appreciation, the age of housing stock, real disposable personal income, and housing turnover. Demographic and societal trends, including millennial household formation, the preference of older generations to age in place, and the persistence of remote work, also shape industry growth.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: Lowe’s Companies, Inc. competes with a broad array of entities, including national and regional home improvement warehouse chains, lumber yards, traditional hardware stores, plumbing, electrical, and home supply retailers, paint stores, garden centers, maintenance and repair organizations, general merchandise retailers, home goods specialty stores, warehouse clubs, online retailers, equipment and tool rental providers, and service providers.

Emerging Competitive Threats: The evolving retail landscape, particularly the rapid advancements in online and omnichannel retail, poses ongoing competitive threats. This includes new developments and technology investments by competitors, especially in AI and machine learning, and the increasing customer expectation for faster, guaranteed delivery times and convenient pickup options.

Competitive Response Strategy: The company's response strategy centers on its "Total Home strategy," which includes driving Pro penetration, accelerating online sales, expanding home services, creating a loyalty ecosystem, and increasing space productivity. This involves continuous investment in omnichannel capabilities, supply chain transformation, and technology to meet evolving customer demands and maintain a competitive advantage.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics: The company's success is highly dependent on its ability to adapt to a rapidly evolving retail environment, including changing customer shopping habits, demands, and demographics. Failure to identify and respond to economic, social, and style trends, or to implement increasingly localized merchandising assortments, could negatively impact market share and results. Macroeconomic factors such as slow economic growth, recession, home price appreciation, decreasing housing turnover, volatility in financial markets, inflation, rising interest rates, labor shortages, and geopolitical conflicts can adversely affect consumer spending and demand for home improvement products and services. Technology Disruption: Risks include the inability to realize intended benefits from strategic initiatives and technology investments, particularly in omnichannel capabilities and AI/machine learning. Failure of customer-facing technology systems to perform effectively, including outages or cyber-attacks, could damage customer perceptions and sales. Customer Concentration: While not explicitly detailed as a concentration risk, the company's sales are sensitive to overall consumer demand for home improvement projects.

Operational & Execution Risks

Supply Chain Vulnerabilities: Disruptions in the global supply chain due to catastrophic events, extreme weather, public health crises, geopolitical conflicts, and trade policy changes (e.g., tariffs on goods from China and Mexico) can affect product availability and costs. Reliance on key vendors and service providers, if they fail to perform or cannot be quickly replaced, could disrupt operations. Third-Party Installer Program: Failures related to the third-party installer program, including compliance with regulatory requirements (e.g., licensing, lead-safe practices) or quality of work, could lead to lost sales, fines, lawsuits, and reputational damage. Talent Management: Failure to hire, train, manage, and retain qualified associates and corporate support staff, especially in a competitive labor market, could negatively impact service quality and labor costs. The loss of key executive or senior officers also poses a risk. Public Image and Reputation: Damage to the company's public image or reputation due to perceived positions on social, environmental, political, or public policy issues, or failure to meet stated ESG objectives, could harm relationships with customers, vendors, and associates. Negative social media campaigns or criticism related to initiatives (e.g., diversity and inclusion) can also pose risks. Product and Service Quality: Failure to maintain high product and service quality, or non-compliance with safety standards and responsible sourcing practices, could lead to lost sales, increased costs, litigation, and reputational damage. Store Operations: Maintaining the store base, appropriate inventory levels, and managing "shrink" (loss or theft of inventory, including organized retail crime) are critical to sales and profitability.

Financial & Regulatory Risks

Market & Financial Risks: Volatility in commodity prices (lumber, copper, energy) can affect product prices, demand, and sales. The ability to pass on cost increases to customers without negatively impacting demand is a key challenge. Regulatory & Compliance Risks: The business is subject to a wide array of federal, state, and local laws and regulations. Changes in or expanded enforcement of laws related to minimum wage, labor relations, healthcare, data privacy, cybersecurity, product sales, international trade, and environmental matters could increase costs or impact operations. Non-compliance with laws like the Foreign Corrupt Practices Act could lead to legal and reputational risks. Legal Proceedings: The company is involved in various lawsuits and legal proceedings in the ordinary course of business, including an ongoing investigation by the U.S. Attorney’s Office and EPA regarding compliance with lead-safe practices in its third-party installer program. While none are currently expected to have a material adverse effect, outcomes are uncertain.

Geopolitical & External Risks

Geopolitical Exposure: Geopolitical conflicts, trade policy changes, and tariffs (e.g., between the U.S. and China/Mexico) can increase merchandise costs and impact consumer demand. Changes to free trade agreements (e.g., USMCA) could also adversely affect financial results. Catastrophic Events: Natural disasters, extreme weather conditions, pandemics, acts of terrorism, or civil unrest can disrupt operations, affect consumer spending, and impact the supply chain.

Innovation & Technology Leadership

Research & Development Focus: Lowe’s Companies, Inc. is actively investing in and leveraging technology to enhance its business operations and customer experience.

• Core Technology Areas: Focus areas include omnichannel retail capabilities, project design tools, online product marketplaces, and the strategic integration of Artificial Intelligence (AI) and machine learning technologies. An AI framework has been developed to enable quick and personalized customer interactions, design assistance platforms, and tools for improved forecasting, sourcing, inventory planning, and faster fulfillment.
• Innovation Pipeline: The company is committed to ongoing deployment and improvement of existing machine learning and AI technologies, as well as developing new features using AI.

Intellectual Property Portfolio: The company maintains a portfolio of intellectual property, including:

• Trademarks: "Lowe’s" is a registered service mark, along with various additional registered and unregistered trademarks, service marks, and trade names, including private brand product names such as "Kobalt," "STAINMASTER," and "allen+roth."
• Patent Strategy: The company holds patent portfolios related to some of its products and services and seeks to protect certain innovations incorporated into its offerings and business operations.
• Domain Names & Copyrights: Various Internet domain names and registered/unregistered copyrights are also maintained.

Technology Partnerships: The company utilizes third-party service providers for various technology solutions, including digital storage, content delivery, back-office support, fraud prevention, order fulfillment, supply chain management, and customer service.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The company emphasizes the importance of attracting and retaining a qualified workforce and specialized corporate support staff. Succession planning for senior management personnel is considered critical to business success.

Board Composition: Oversight responsibility for cybersecurity risk is shared by the Board of Directors and the Audit Committee, with the Audit Committee primarily responsible for overseeing risks related to cybersecurity, data protection, privacy, and significant emerging technology. The Chief Digital and Information Officer (CDIO) or Chief Information Security Officer (CISO) provide regular cybersecurity updates to the Audit Committee at its quarterly meetings, which are also provided to the full Board.

Human Capital Strategy

Workforce Composition (as of January 31, 2025):

• Total Employees: Approximately 161,000 full-time associates and 109,000 part-time associates.
• Geographic Distribution: Primarily in the United States and India.
• Skill Mix: The company focuses on developing expanded skill sets for sales associates and relies on specialized training and capabilities of corporate support staff to deliver on strategic objectives.

Talent Management: Acquisition & Retention:

• Hiring Strategy: Implemented improved technology for a simplified hiring process, including Spanish language capabilities to promote bilingual hiring.
• Compensation & Benefits: Offers locally competitive salaries and wages, with a minimum wage starting at $15 per hour as of fiscal 2024. Investments include incremental wages and share-based compensation for frontline associates. A comprehensive array of health, welfare, and financial benefits are provided, including healthcare, retirement plans, an employee stock purchase plan, paid time off, and leave programs.
• Employee Value Proposition: Strives to be an employer of choice, creating valuable career opportunities, supporting associates, and cultivating a diverse and inclusive culture. Diversity & Development:
• Diversity Metrics: Committed to building diverse and inclusive teams. Evolved diversity and inclusion initiatives by combining eight Business Resource Groups into one unified associate engagement organization.
• Development Programs: Offers role-specific leadership and development programs, including immersive week-long leadership experiences at Lowe’s University for District and Store Managers, virtual series for store department supervisors, and field supply chain leadership programs. Certification programs are available for store and technology associates.
• Career Advancement: Over 85% of store leadership positions were filled internally in the last year. The "Track to the Trades" program offers associates apprentice certifications in electrical, plumbing, HVAC, appliance repair, or multi-family maintenance, connecting them with Pros for career opportunities. A tuition-free education program is also available.
• Culture & Engagement: Maintains a proactive associate listening strategy through an annual engagement survey, with over 90% participation in fiscal 2024. Prioritizes a culture of safety, embedding it into onboarding and training.

Environmental & Social Impact

Environmental Commitments: Climate Strategy:

• Emissions Targets: Established a goal to reach net-zero emissions across Scope 1, 2, and 3 Greenhouse Gas (GHG) emissions by 2050. Interim targets include decreasing Scope 1 and 2 emissions by 42% and reducing Scope 3 emissions by 25% below 2021 levels by 2030.
• Carbon Neutrality: Committed to achieving net-zero emissions by 2050.
• Renewable Energy: The Mesquite Star wind farm in Texas, the company's first renewable power purchase agreement, has been operational since fiscal 2020. Plans are underway to install rooftop solar panels at 174 store and distribution center locations nationwide, with over 100 sites operational by the end of fiscal 2024, expected to provide approximately 90% of energy usage at each location. Lowe’s Companies, Inc. is a member of the Clean Energy Buyers Association. Supply Chain Sustainability:
• Supplier Engagement: Monitors suppliers' practices to ensure worker rights and environmental protection, adhering to a human rights policy, conflict minerals policy, and Vendor Code of Conduct with enhanced environmental standards.
• Responsible Sourcing: Implemented a wood sourcing policy that prohibits illegal logging, deforestation, sourcing of endangered species, and promotes biodiversity protection and Free, Prior and Informed Consent. This policy includes a robust risk-based approach and a forestry grievance process.
• Supplier Collaboration: Encourages suppliers to report emissions to the Carbon Disclosure Project (CDP) to help reduce Scope 3 GHG emissions. Social Impact Initiatives:
• Community Investment: Supports communities through philanthropic efforts and partnerships with nonprofits, focusing on revitalizing neighborhoods, improving community spaces, disaster response, and skilled trades education. Special emphasis is placed on veterans, active military, and first responders. The Lowe’s Foundation has invested over $25 million since 2023 through Gable Grants to expand skilled trades career pathways.
• Product Impact: Committed to providing eco-friendly, high-quality, and safe products, expanding offerings of independently certified products, and collaborating with utilities to offer rebates for energy-efficient (ENERGY STAR) and water-efficient (WaterSense) products.

Waste Management: Partners with suppliers to improve recycling and waste diversion, develops regional management processes, and conducts waste audits. Stores offer recycling and reuse centers for plastic planter pots, compact fluorescent lamp bulbs, plastic bags, and rechargeable batteries. Collaborates with How2Recycle to educate customers on proper product packaging recycling.

Water Management: Focuses on reducing water consumption in operations through smart irrigation controllers, exploring water-efficient measures, and using leak detection technology. Protocols are in place for chemical disposal to prevent waterway contamination.

Business Cyclicality & Seasonality

Demand Patterns: The home improvement business is subject to seasonal influences, with the highest sales volume historically occurring during the second fiscal quarter (May, June, and July) due to the spring selling season. The lowest sales volume is typically experienced in the fourth fiscal quarter (November, December, and January). Demand is also sensitive to economic conditions, including inflation, interest rates, and housing market activity.

Planning & Forecasting: Working capital requirements are historically greater during the fourth fiscal quarter as inventory is built in anticipation of the spring selling season. These requirements are primarily funded through cash flows generated from operations, supplemented by short-term borrowings as needed.

Regulatory Environment & Compliance

Regulatory Framework: Lowe’s Companies, Inc. is subject to a wide array of federal, state, and local laws and regulations. Compliance with these laws is not currently expected to have a material effect on capital expenditures, results of operations, or competitive position compared to prior periods. Trade & Export Controls: The company's global supply chain is exposed to risks from tax and trade policies, tariffs, and other regulations affecting trade between the United States and countries like China and Mexico, which can increase merchandise costs. Changes in trade policy, retaliatory trade restrictions, or modifications to existing free trade agreements (e.g., USMCA) could adversely impact financial results. Legal Proceedings: The company is routinely involved in various lawsuits, claims, and legal proceedings in the ordinary course of business. As of January 31, 2025, none of these proceedings, individually or in the aggregate, are expected to have a material adverse effect on its financial statements. An ongoing investigation by the U.S. Attorney’s Office and the U.S. EPA concerns compliance with recordkeeping and lead-safe practices under the Toxic Substances Control Act and related regulations, including a 2014 EPA civil consent decree. While possible deviations have been identified, these matters are not expected to have a material adverse effect.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: 24.0% in fiscal 2024, compared to 24.1% in fiscal 2023.
• Tax Reform Impact: The Inflation Reduction Act (August 2022) introduced provisions for transferable federal clean energy tax credits, which the company has utilized. In fiscal 2024, the company deferred $478 million of federal income taxes payable until May 1, 2025, under income tax relief announced by the IRS for businesses impacted by Hurricane Helene. Transferable Tax Credits: The company purchased $909 million in Federal Transferable Tax Credits in fiscal 2024 and $143 million in fiscal 2023.

Insurance & Risk Transfer

Risk Management Framework: Lowe’s Companies, Inc. is self-insured for certain losses related to workers’ compensation, automobile, property, general and product liability, extended protection plans, and certain medical and dental claims.

• Insurance Coverage: The company maintains excess insurance coverage above specific retention amounts to limit exposure from single events and earnings volatility. Retention limits are $2 million per occurrence for workers’ compensation and $10 million per occurrence for general liability, product liability, and automobile liability. There is no excess insurance coverage for self-insured extended protection plan or medical and dental claims.
• Risk Transfer Mechanisms: Surety bonds totaling $272 million were outstanding as of January 31, 2025, to secure workers’ compensation liabilities in certain self-insured states. Cybersecurity insurance coverage is also maintained to protect against potential losses from certain cybersecurity incidents.