No longer a low-profile company, Lowe's Companies has evolved from a regional hardware store operator 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 nearly 1,800 stores in the US, along with some 40 stores in Canada, 10 stores in Mexico, and an e-commerce site. Its stores sell roughly 36,000 products for do-it-yourselfers and professionals for home improvement and repair projects, such as lumber, paint, plumbing and electrical supplies, tools, and gardening products, as well as appliances, lighting, and furniture. Lowe's is also the second-largest US home appliance retailer after Sears.
By product, Lowe's generates around 15% of its revenue from kitchens & appliances sales, while lumber & building materials, tools & hardware, fashion fixtures, rough plumbing & electrical, and lawn & garden sales each account for around 10% of revenue (or 50% of total sales combined). The rest of its revenue comes from seasonal living; paint; home fashions, storage & cleaning; flooring; millwork, and outdoor power equipment sales, with each category making up around 5% of revenue.
The retailer sources its products from 7,000-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 more than 70 neighborhood hardware and backyard stores (primarily in California).
Beyond its stores in North America, Lowe's also has a joint venture in Australia with Woolworths to develop a network of stores there.
Sales and Marketing
Lowe's mainly serves two audiences: Pro customers, which made up 30% of sales in FY2015 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 FY2015. Online sales, through websites including ATGstores.com, lowes.com and lowes.ca, accounted for another 2.5% of total sales. The company also markets and sells its products through two contact centers (in Wilkesboro, NC and Albuquerque, NM) via direct phone sales and customer support.
Lowe's has been ramping up its advertising spend in recent years. It spent $819 million in fiscal 2015 (ended January 2015), up from $811 million and $809 million in FY2014 and FY2013, respectively.
Lowe's revenues and profits have been rising over the past few years as the strengthening housing market and overall economy has boosted demand for home-improvement products.
The retailer's sales jumped 5% to $56.2 billion in fiscal 2015 (ended January 2015), mostly driven by a 4% rise in comparable store sales with an average ticket increase of 2.4% and a comparable transaction increase of 1.8%. Sales from most of the product and service categories grew in the middle-single digits, with tools & hardware and millwork sales growing the fastest (each sported a 7% sales increase)
Higher revenue in FY2015 drove Lowe's net income up 18% to $2.7 billion. The retailer's operating cash levels climbed 20% to $4.9 billion for the year on higher cash earnings and favorable working capital changes mostly as it cleared more of its merchandise inventory.
Lowe's continued in 2015 to focus on three priorities to drive top-line growth, including: its enhanced Sales & Operations Planning process, which improved the timing of seasonal planning and new product and promotion launches; building on its customer experience design capabilities; and improving its relevance with the Pro customer, a growing customer base, by adding more key and in-demand brands such as Henry coatings, Hubbell wiring devices, GRK Fasteners, and Progress Lighting.
To drive same-store sales growth, Lowe's and its Innovation Labs work to improve its stores' customer experience. To this end, in early 2015, it opened its Global Innovation Center (GIC) in Bangalore, India to help develop next-generation customer experiences, placing more emphasis on technology and analytics to provide more personalized shopping experiences for customers. In 2014, Lowe's introduced the first of its Holoroom concept, which offers 3-D and augmented reality home improvement simulations. In another innovation launched that year, it introduced two retail service robots to help assist customers in an OSH store.
With sales maturing in the US, Lowe's has also begun to set its sights on international markets for store expansion and revenue growth. In mid-2015, it expanded its store count in Canada to 54 locations (up from 40) by acquiring a dozen former Target stores in the region and opening up two new stores.
Lowe's has also been trying to differentiate itself from its rivals by forming strategic partnerships with select suppliers, including Stainmaster (carpets), and Pella (windows), to offer brand-name merchandise in its stores. It's also trying to attract more female customers, who, the company claims, call the shots on about 80% of home improvement decisions. To make its big-box stores appealing, Lowe's makes effective use of lighting and signage and caters to women and baby boomers with an inviting store layout (as opposed to Home Depot's more industrial look). The retailer has also increased the number of sales representatives working the floor on weekends, its peak shopping period.
Mergers and Acquisitions
Lowe's is not a particularly acquisitive company, preferring to build its own stores rather than buy them. However, in 2013 the company acquired a majority stake of California-based Orchard Supply Hardware (OSH), adding 70 stores to the 110 stores that Lowe's already operated in California.