Lowes in the Marketplace

Lowe’s (LOW) and Home Depot (HD) are competitors in the every growing market of Home Improvement. The following analysis of each company will examine the home improvement industry, the individual companies, their operating philosophies, their financial strengths or weaknesses, and a final conclusion on which company would be a better long-term investment.

The industry we have chosen is the department store-retail industry. Within this industry, we have chosen the department stores of JCPenney and Macy’s. We find this industry, as well as these two companies, interesting from a strategic perspective. JCPenney has recently undergone a massive strategic restructuring in regards to its pricing, brand offerings, and store layout, pushing it away from the typical department store strategy of discounts and coupons. Its new strategy has become much closer to Wal-Mart’s strategy of every day low prices. Macy’s, on the other hand, has restructured with a push from the economic

Lowe’s is continuously being threatened by Home Depot in losing market shares. It is a constant battle; Lowe’s and Home Depot are expanding substantially in attempts to take over territory claimed by the other as well as unclaimed territory. The biggest weakness for Lowe’s is its lack of customer service. Customers are leaving Lowe’s in search of credible, knowledgeable service which is found at Home Depot.

The home improvement sector of the economy is large with two major players in the industry and with many smaller local and regional competitors. These two major competitors are Home Depot and Lowe’s. These two companies account for over $110 billion in total sales each year. Even though sales have gone down over the past few years due to the downturn in the economy they have not gone down nearly as much as home sales and this is due to more people deciding to do more home improvements to their own home then buying a new home. Both of these companies have been able to keep up sales and increase them year over year by improving current

Home Depot and Lowe's believe in big warehouse space, an informal atmosphere and low prices. They are able to offer the lower prices to consumers due to their purchasing power. Inventory differs depending on the story type, home centers typically sock more lumber and building supplies, as their biggest customers are contractors. They pay their floor employees minimum wage, and keep overall costs down by keeping them as part time employees.

However, in 1999, Lowe’s recorded very high sales growth alongside its expansion in preparation for the new millennium. From 1999 to 2001, Lowe’s began to assert itself as a worthy competitor for Home Depot, embodied in its significantly better margins and turnover ratios despite the recessionary economic environment. This improvement in ratios is indicative of positive change in the management of the

In order to further strengthen its holdings on the home improvement market, Lowe’s Companies, Inc. has restructured the company’s vision to conform to meet the ever-changing needs of its customers. Lowe’s extensive research has led it to include a well lit sales floor, informative in-store displays, exclusive and proprietary brands, and an ingenious store layout just to name of the few changes. This new vision is not only centered on the store itself, Do-It-Yourselfers and Commercial Business Customers have many ways to satisfy their needs conveniently though stores nationwide by placing orders over the phone, fax, or from the improved Lowe’s web site.

The first company that will be analyzed is Home Depot. Home Depot's total assets increased to $40,518 million from $40,125, an increase of 0.9%. These figures, however, are lower than the value of total assets on the books for HD for the prior three years. The 2008 fiscal year was the point where Home Depot had the highest asset levels at $44.324 billion. The recession has been the biggest culprit for the decline in the size of Home Depot. All of the firms in the building supplies industry have a strong relationship between their sales and the strength of the housing market, as home purchases are a major impetus for home renovation projects. Home Depot's size declined with the onset of slowness in the housing market, and it is expected that its size will not begin to increase until the housing market recovers. Home Depot management has noted that there are signs of life in the US housing market, and that this should be taken as an encouraging sign for the company (Isidore, 2012). Indeed, the company's balance sheet has grown in size throughout the 2013 fiscal year, so that the latest Q3 total

Lowe 's is the world 's second largest home improvement retailer and the 14th largest retailer in the U.S. Lowe 's is in the midst of an aggressive expansion plan, opening a new store on average every three days. Lowe 's is an active supporter of the communities it serves. Through the Lowe 's Heroes volunteer programs and the Home Safety Council, it provides help to civic groups with public safety projects and share important home safety and fire prevention information with neighborhoods across the country. Lowe 's has been a publicly held company since October 10, 1961. Its stock is listed on the New York Stock Exchange, with shares trading under the ticker symbol LOW.Lowe’s Companies, Inc., together with its subsidiaries, operates as a home improvement retailer in the United States and Canada. The company provides a range of products and services for home decoration, maintenance, repair, remodeling, and property maintenance. It offers home improvement products in various categories, such as appliances, lumber, paint, flooring, building materials, millwork, lawn and landscape products, fashion plumbing, hardware, lighting, tools, seasonal living, rough plumbing, outdoor power equipment, cabinets and countertops, nursery, rough electrical, home environment, home organization, and windows and walls. The company’s products also include boards, panel products, irrigation pipes, vinyl sidings, and ladders. It serves

there are a number of different buyers and sellers in the marketplace. This means that we have competition in the market, which allows price to change in response to changes in supply and demand. Furthermore, for almost every product there are substitutes, so if one product becomes too expensive, a buyer can choose a cheaper substitute instead. In a market with many buyers and sellers, both the consumer and the supplier have equal ability to influence price.

RONA Inc is the largest Canadian distributor and retailer of hardware, home renovation and gardening products. They employ 30,000 people at more than 800 corporate, franchise and affiliate locations across Canada. Within the last year RONA has undergone significant changes, hiring a new CEO and choosing to close down several locations, so it is a very interesting period moving forward for the company. This report will outline RONA’s current financial position, current issues that may affect their position, and give a prediction as to the future performance of the company. It will also analyze several of RONA’s key financial ratios, and compare them to those of Home Depot, a major competitor in the industry.

With the exception of ROE, most financial ratios and even absolute values bear testimony to Wal-Mart’s recognition as the leader in the retailing industry. The reason behind Sears’s higher ROE can be explained by a comparison of the 3 ratios that constitute the ratio known as DuPont identity that is profit margin, asset turnover and equity multiplier. While both firms had similar profit margins, Wal-Mart’s asset turnover was 2.8 compared to Sears’ 1.1 due to the firm’s effective utilization of assets and lease agreements to facilitate revenue generation.

1. Williams-Sonoma has experienced strong growth in the past year, but this is on the back of a strong economy and in particular a strong new home market. The furniture business is strongly correlated with the strength of the real estate market. In this respect, the company's strategy is largely irrelevant, because within the next five years the real estate bubble will burst and Williams-Sonoma will suffer a major downturn in its own results as a consequence. However, this reality shows that the company perhaps lacks sufficient differentiation, and can only be expected to perform roughly in line with the housing market. It is neither outperforming competitors nor is it underperforming. W-S has sufficient differentiation within the furnishings and home products segment, and has a fairly strong brand name in the segment. The company's status as a mass-market premium company allows it to grow strongly in strong economic times, but also makes it particularly vulnerable to economic downturn, because not only do consumers redecorate at greater intervals, but they will trade down to more affordable stores when they do.

The retailer will continue to see aggressive competition from Target, Wal-Mart, JCPenney, Kohl’s, Macy’s, Home Depot and Lowes. These companies are some of the national retailers that Sears will have to contend with in order to survive. According to Sears Holding 2011, annual 10K Report with the Securities and Exchange Commission, Home Depot and Lowes are the company’s most fierce rivals of the major appliance category in which Sears accounts for nearly “16% of its entire revenue” (p.5). This fierce market positioning battle between its competitors will be a major obstacle for Sears to overcome. Sears continues to try to move forward as the company’s efficiencies in fixed assets continued

This represents a unique opportunity for Lowe’s as most of the competitors cater to the lower income groups (Home Depot) or higher income group (Studio41/boutique stores). Also some players do not have the capability to do complete installation will all the accessories (Menards, Sears or Ikea). The entire middle range buyer with disposable income could be a segment that Lowe’s could essentially capture. Lowe’s already had business that delivered the required products for kitchen remodeling. The existing product of Lowe’s targeted the middle range buyer, combining this with installation services would be beneficial for Lowe’s. Case Exhibit 1 reinforces the fact the in the lower income group consists of mostly DIY customers and in the mid to high range customers prefer outside services to install the kitchen. Case Exhibit 2 clearly shows that major remodel with mid-range materials and upscale materials are growing. All the above said reasons make it a perfect case for Lowe’s to move into the kitchen remodeling space. It is a sensible decision by Lowe’s to move into the kitchen remodeling and installation services given the above facts. 2|Page