Lowe’s Cos. Inc. (NYSE:LOW)

Total debt exhibited a generally increasing trend over the observed period, although fluctuations are present. A significant rise is noted between 2021 and 2023, followed by a stabilization and subsequent increase towards the end of the forecast period.

Overall Trend

The carrying amount of total debt increased from US$21,780 million in January 2021 to US$39,921 million projected for January 2026. This represents an approximate 83.6% increase over the five-year period. The most substantial increase occurred between January 2022 and February 2023, adding US$9,233 million to the total.

Short-Term Borrowings

Short-term borrowings were not reported for 2021 and 2022, appearing at US$499 million in February 2023. This item is absent from subsequent reporting periods, suggesting either repayment or reclassification. The limited presence of this item indicates it does not significantly contribute to the overall debt profile.

Current Maturities of Long-Term Debt

Current maturities of long-term debt decreased from US$1,112 million in January 2021 to US$585 million in February 2023, before increasing substantially to US$2,586 million projected for January 2025. This suggests a potential shift in debt maturity schedules, with a larger portion of long-term debt becoming due in the later forecast years. A further increase to US$2,431 million is projected for January 2026.

Long-Term Debt (Excluding Current Maturities)

Long-term debt, excluding current maturities, consistently represents the largest component of the total debt. It increased from US$20,668 million in January 2021 to US$37,490 million projected for January 2026. The largest single-year increase in this component occurred between January 2022 and February 2023, rising by US$8,997 million. A slight decrease is observed between February 2023 and February 2024, followed by a projected increase towards the end of the period.

The observed increases in both current maturities and long-term debt contribute to the overall upward trend in total debt. The projected increase in total debt to US$39,921 million in January 2026 warrants further investigation to understand the underlying financing strategies and associated risks.

Interest expense exhibited an overall increasing trend from January 29, 2021, to January 30, 2026. While fluctuations occurred, the latter years demonstrate a consistently higher level of interest expense compared to the earlier period. Interest capitalized, a relatively new line item, also showed a consistent upward trend, albeit from a small base.

Overall Interest Costs

Interest costs incurred mirrored the trend in interest expense, rising from US$872 million in 2021 to US$1,535 million in 2026. The increase was not linear, with a more substantial rise between 2022 and 2024. The rate of increase slowed between 2024 and 2025, and then resumed in 2026.

Interest Expense Trend

Interest expense increased from US$872 million in 2021 to US$897 million in 2022, representing a modest increase. A more significant increase was observed between 2022 and 2023, rising to US$1,160 million. This upward trajectory continued into 2024, reaching US$1,483 million. The increase slowed in 2025 to US$1,472 million, before resuming growth to US$1,527 million in 2026.

Interest Capitalization

Interest capitalization began to be reported in 2022 at US$3 million. It increased to US$4 million in both 2023 and 2024, and continued to rise to US$6 million in 2025 and US$8 million in 2026. This suggests a growing amount of qualifying expenditures are being capitalized, potentially related to construction or development activities.

The difference between interest expense and interest costs incurred is attributable to the interest capitalized. The consistent increase in both interest expense and capitalized interest suggests a growing level of debt financing and/or increasing interest rates, coupled with increased investment in projects eligible for interest capitalization.

The interest coverage ratios demonstrate a consistent decline over the observed period. Both the interest coverage ratio (without capitalized interest) and the adjusted interest coverage ratio (with capitalized interest) exhibit similar patterns, suggesting that the inclusion of capitalized interest has a minimal impact on the overall trend.

Interest Coverage Ratio (Without Capitalized Interest)

The ratio began at 9.88 in January 2021 and increased to a peak of 13.49 in January 2022. Following this peak, a downward trend is evident, with the ratio decreasing to 8.79 in February 2023, 7.86 in February 2024, 7.22 in January 2025, and finally reaching 6.73 in January 2026. This represents a substantial decrease from the initial value.

Adjusted Interest Coverage Ratio (With Capitalized Interest)

The adjusted interest coverage ratio mirrors the trend of the unadjusted ratio. Starting at 9.88 in January 2021, it rose to 13.45 in January 2022 before declining consistently. Values for subsequent periods are 8.76 in February 2023, 7.84 in February 2024, 7.19 in January 2025, and 6.69 in January 2026. The difference between the adjusted and unadjusted ratios remains relatively small throughout the period.

Overall Trend

A clear and consistent downward trend is observed in both ratios. While the ratios remain above 1.0 throughout the period, indicating the company generates sufficient earnings to cover its interest obligations, the decreasing trend warrants monitoring. The rate of decline appears to be relatively consistent year-over-year.

The consistent decline in both ratios suggests a potential weakening in the company’s ability to meet its interest expense obligations from operating income. Further investigation into the underlying drivers of this trend, such as changes in earnings before interest and taxes (EBIT) and interest expense, is recommended.