Lowe's Companies has evolved from a regional hardware store into a nationwide chain of home improvement superstores bent on international expansion. The #2 US home improvement chain (after
The Home Depot
), Lowe's operates 1,820 stores in the US, along with some 300 in Canada, and 10 in Mexico, as well as an e-commerce site. Its stores sell roughly 37,000 products for DIY-ers and professionals for home improvement and repair projects, such as lumber, paint, plumbing and electrical supplies, tools, and gardening products, as well as appliances, outdoor power equipment, home fashions and furniture. Lowe's is also the second-largest US home appliance retailer after
No single product line dominates Lowe's' sales profile. Its biggest earners, at around 15% of sales, are lumber and building materials. Tools and hardware, appliances, fashion fixtures, rough plumbing and electrical, and lawn and garden sales each account for around 10% of revenues (or 50% of total sales combined). The rest of its revenues come from seasonal living; paint; flooring; millwork, kitchens, and outdoor power equipment sales, with each category making up around 5% of revenues. Home fashions, storage and cleaning makes up the remainder.
The retailer sources its products from 7,500-plus vendors worldwide, and owns and operates 15 highly-automated regional distribution centers in the US. In addition to its namesake chain, Lowe's holds a majority stake in
Orchard Supply Hardware
(OSH), which operates 85 neighborhood hardware and backyard stores (primarily in California).
The company serves more than 17 million customers a week from its 2,130 stores in the US, Canada, and Mexico. The US accounts for the vast majority of sales, at 95%.
Sales and Marketing
Lowe's mainly serves two audiences: Pro customers, which made up 30% of sales in fiscal 2016 (January year end) and include homeowners, renters, and professional customers in construction trades and maintenance, repair & operations; and retailer customers, which count individual homeowners and renters.
The retailer offers flooring, millwork, and appliance installation through independent contractors. Installed sales accounted for approximately 8% of sales in fiscal 2016. Online sales, through websites including ATGstores.com, lowes.com and lowes.ca, accounted for another 3% of total sales. The company also markets and sells its products through three contact centers (in Wilkesboro, North Carolina; Albuquerque; and Indinapolis) via direct phone sales and customer support.
Lowe's has been ramping up its advertising spend in recent years. It spent $769 million in fiscal 2016, up from $819 million and $811 million in FY2015 and FY2014, respectively.
The company's net revenues have risen over the past five years. In fiscal 2017, net revenue increased by 10% to $65.0 billion due to an increase in comparable store sales, the contribution from the acquired RONA business, and an extra trading week. Comparable sales were up due to higher sales per customer. All product categories grew, particularly lumber & building materials, appliances, tools & hardware, and lawn & garden, primarily down to higher demand from pro customers. By geography, Lowe's witnessed growth in all regions, with the South and Northwest the brightest points.
Net income grew 21% to $3.1 billion, helping push up cash provided by operating activities 17% to $5.6 billion.
Lowe's is going pro. The company has tapped into a rich seam of growth in the professional customer segment and is evolving its products to meet the needs of its pro customers. It has also improved to functionality of LowesForPros.com by deepening list-making, custom catalog, and purchase history capabilities. The company's main website, Lowes.com, has also been upgraded with better search algorithms, content recommendations, and click-to-chat. Lowe's has also leveraged social media such as Pinterest and Facebook to help bring its products to life, and has channels on Apple TV, Fire TV (Amazon), and Roku, as well as YouTube and its own websites.
Lowe's drastically increased its presence in Canada in 2016 by purchasing Canadian home-improvement chain Rona. The acquisition adds some 500 stores (240 company owned, 260 dealer owned) to the 40-odd stores Lowe's already had in the country. Lowe's will partially convert the Rona store base to the Lowe's banner, but the Rona brand will remain and, if all goes well, grow in its own right.
Mergers and Acquisitions
In 2016, the company bought Quebec-based
, retailer and distributor of hardware, building materials, and home renovation products for C$3.2 billion (US$2.4 billion). This acquisition represents a key step in accelerating Lowe's growth strategy which creates largest home improvement retailers in Canada as well as expanding the company's operations in that country.