Mooresville, North Carolina
With a market capitalization of $44 billion dollars, it's second only to Home Depot in the retail building supply business. It has become the destination point for tools and appliances with a wide range of selection and more then adequate service to provide the individual attention that customer are searching for but not finding at Sears and Home Depot at this time.
In the beginning....
It's the big box retailer that started in 1921 as a small hardware store in North Wilkesboro, North Carolina which sold hardware,, snuff, groceries and harnesses for wagons and plow horses. It was at that time it was a family run enterprise started by Lucius S. Lowe, and on his death in 1940, he left it to his daughter Ruth. She sold out her interest to her brother Jim and her husband H. Carl Buchan. They shifted the company's product line from that of being a dry goods store to a hardware and building materials provider to local builders. In 1952, differing on direction, the two split with Lowe taking over their interest in a car dealership and Buchan staying with the building supply operation.
It was Buchan who eventually bought out the rest of the families interest in '56 and formerly incorporated it as Lowe's North Wilkesboro Hardware and maintained the family slogan of Lowe's Low Prices'.
The Index In the beginning.... A Perspective All the pieces New Concepts Marketing Inner City Internet Product mix
Management line-up Financials Installations Sponsorships The competition Operations Crisis management Shipping Returns Complaints Credit Efficiencies
The Bulletin Board
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By 1960, he had expanded the chain into 3 of the neighboring state, now numbering 15 stores and bring in $31 million in sales. Buchan died that year at only 44, before reaching the goals he wanted for the chain. As a result of his death, the family and executives created the Lowe's Employee Profit Sharing and Trust which purchased the 89% Buchan interest and subsequently renamed the company as Lowe's Companies. To bring about the buy-out, the transaction was financed by a public offering which substantially diluted the employees ownership position to less then 20%. As it grew, it was then elevated 8 years later to a listing on the NYSE.
In 1980, Robert Strickland the CEO at that juncture, felt the impact of the newly created venture, Home Depot with its mission of opening low price warehouse concepts. Seeing the writing on the wall and what their marketing was thriving on, he made it his mission going forward, to shift Lowes' sole dependence on professional homebuilders to now embrace the DIY market. By '82, he had revamped half of the 229 stores in order to be more accommodating to the newly emerging homeowner consumer market. Although the average store was only 20,000 square ft., it was now being remodeled to encompass display models of full kitchens and baths, with improved lighting and cleaner facilities, and an eye toward attracting the female buying segment.
1982 was significant since it was the first year in which sales broke above the $1 billion mark (with a $25 million profit)
1989 was a turning point, since the Home Depot had now overtaken and surpassed it, now being the #1 homeowner retail chain store operation. With its 100,000 square foot warehouse outlets, the Depot far outpaced Lowes and forced Lowes to rethink it's market strategy. To met the competition. it doubled it's standard store model footprint to mimic the larger warehouse configuration that the Depot had gained so much market share with. Over half the prior units were closed and new units built to replace them in their respective marketplaces. The change over forced them to take a $71 million charge out of their operating budget to underwrite the revamping. Since the, they have been growing rapidly through store openings and acquisitions, and is without doubt the most aggressive and noteworthy competitor to Home Depot. It specializes in the retail building materials market, with substantial emphasis in the appliance, lumber furnishings and hardware markets. In has in stock, a selection of 40,000 products and an extensive s/o program supplementing that.
1998 It joint venture with Snap on tools, to market the Kobalt brand of professional tools, which also opened up it's first special order program to supplement standard store inventories on hand.
1999 as part of its $1.5 billion push into the Western coast states, It bought for $1.3 billion the Eagle House ware and Garden chain of 38 stores which were eventual converted in Lowes stores.
2001 Lowes sets in motion a $2.4 billion expansion program for new stores and distribution centers to support them. With over 1,375 stores in 49 states, it generates $16 billion in net revenue, which is 40% of Home Depot's total from its 2162 stores. It employees over 138,000 employees. and serves 13 million customer a week. At this time it is the #2 appliance retailer in the US after Sears. It is also and more importantly the #2 home improvement retailer after Home Depot and gaining market share at a faster rate.
It's ranked 42 on the Fortune 500 list, named Energy Star R Retail Partner of the Year. It went public in 1961 and entered the NYSE in 1979 under LOW. It's creator was H. Carl Buchan, who at that time was a partner in a small chain of retailer store, North Wilkesboro Hardware Company. He left the chain and with his brother-in law James Lowe, started Lowes, focusing on appliances, hardware and unique and new technology inspired building material ( for that time). It grew rapidly during the post World War II building boom, and centered its core business on direct dealings with manufacturers and satisfying the needs of professional builders.
. As a result of the 1989 re-thinking, the 'Modern Lowes' opened the first of it's enlarged (85,000 sq. ft of selling space) and customer friendly stores. Today's Lowes opens a 117K store or 94K store every 3 days on average. In the last quarter of 2006 it opened 58 new stores. Within the next 12 months it will be making it's first sales penetration into Canada, being the Toronto store. In 2009 it will be opening 5 stores in Monterrey, Mexico.
The recent depression in the lumber field has significantly affected its same store comparison, which have been disappointing in recent quarters. It is also having greater than anticipated challenges in revamping and bringing up to standard the former 36 Eagle Hardware & Garden stores, which they acquired in 10 Western states 3 years ago, an area in which they previously had no presence in. In the coming year, they will continue to actively grow, by adding up to 125 new, larger locations to the distribution channel, increasing the national sales floor square footage by 18%. They are anticipating a 5% same store growth at their key locations this year. In 2007 they are projecting an EPS 2.09, an a same store increase of 2%.
All the pieces
U.S. Operations - 210,000 employees, operating 1,424 stores throughout all 50 states. Corporate headquarters is in North Wilkesboro, North Carolina, just North of Charlotte.
Overseas Expansion
Canada - first store opened this year (Toronto) with a projected expansion of 200 on the drawing board.
Mexico - First store to open in '09 ( Monterrey ) with a projection of 50 at this time
Marketing
'Let's Build Something Together' is it's current Motto, initiated in '06
'Improving Home Improvement' was prior to that.
Their strategic marketing strategy is divided between 2 primary target groups of consumers : the 'soccer mom' and the commercial business customer ( CBC)
At this time they still feel that their stores 'are not rough enough' to fulfill the atmosphere that they feel their CBC is comfortable with.
The company's store opening strategy moving forward is to target and belly up with a poorly operated Home depot or what's left of a Sears/K-Mart.
The company's current prototype store has 150,000 square ft of selling space, with an additional 35,000 dedicated to lawn and garden products. Last year 10% of its sales were from tools, 10% from lumber and 9% from appliances. In addition, 11% and the largest single contributor to the annual revenue was from fashion plumbing fixtures and furnishing and electrical. At the most recent sales meeting, Lowe's spoke about Home Depot as a competitor and also noted which was surprisingly said in the same breath ... Menards. It is currently planning to open 2 story stores (vertical retailing advent) in which there is 85,000 sq ft on upper floor and 84,000 on lower, with seasonal gardening on top floor. They are focusing on the Paint Department as a prime target market, with a recent upgrading in quality with Valspar, to bring its a competitive plane with Sherwin-Williams who refused a private labeling offer. It continues to focus on appliances and flooring, and presenting a softer marketing venue overall.
Since 2001 the stock price has gone up 200%. Back in those days the stock was selling at 20 times earning and the growth as maintained at approximately 20% per year. It has also started an aggressive growth pattern in the NY metro area, which for 20 years has proven to be the pot of gold for Home Depot.
can one be in business in the South with a car, or at least your name plaster somewhere on a NASCAR entry...? NO.
So.... Not only a car, but they bought Charlotte Motor Speedway and named the Concord, North Carolina track Lowe's Motor Speedway in '99. Also sponsoring Jimmie Johnson, in #48 Chevy Monte Carlo SS.
efficient merchandising is the key buzz phrase at Lowes... translating into the creation of an ever improving shopping experience for customers by having on the selling floor effective signage, (point of sale information), product adjacencies ( cluster by task) and state of the art packaging. Their system for tracking sales is by breaking all their offered merchandise down into 20 categories which are then tracked and monitored by Lowes industry wide share, and further broken down into 4 consumer based metric scales which are: dollar share, draw rate, closure rate and unit share. To date, it has shown upward movement in over 50% of the categories throughout '07. They utilize this scaling system , which they refer to as 'customer facing metrics' in evaluating the performance of each and every department each month.
In '06, Lowes increased market share 1.1% in their collective 20 product categories.
They are putting greater and greater emphasis on their special sales which is made up of: Installed sales, Commercial business penetration and special order items. What they refer to as their big '3'. Much of which will be coming from their efforts in upgrading and enhancing their E-Commerce site.... Lowes.com
In the aftermath of Katrina, Lowes developed with designer Marrianne Cusato what they now call 'Lowes Katrina Cottages'. These low cost, high efficiency units are being marketed exclusively by them, and the plans as well as all material for them are within the scope and range of what Lowes can provide the purchasers of such. www.lowes.com/katrinacottage.
Inner City
Internet
Product mix
emergency supplies & aids
for the disabled and handicapped
appliances, fixtures, and building material
energy conservation
green goods and services Their newest advertising campaign will focus on the creation of a healthier and cleaner home. Clean water faucet mounted filter - PUR Vertical Faucet Mounted Filter. As an upgrade the Whirlpool Encapsulated Dual Filtration System, which is an under the counter installation is being offered. The Whirlpool 30,000 grain capacity water softener is being offered for those suffering with hard water. Surface cleaning Clorox Green Works Cleaners. Air purification Filtrete Micro Allergen Extra Reduction Filter and Germ Guardian UV-C Room Air Sanitizer. Paints Green Seal certified Olympic Premium Paints - zero VOC and no odor.
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2007 and beyond
-- an ongoing growth rate of 150 stores per year. It's biggest challenge when pursuing such growth is the limitation of market cannibalization, grabbing needed consumer traffic from existing locations and to develop a workable and profitable smaller store size to use as a template in markets not capable of supporting a larger footprint but ideal for stores limited in on-shelf merchandize but fully equipped to satisfy need by special ordering from vendors as needed.
| The Lowes Upper management rooster going into September '08 Robert A. Niblock - chairman and CEO Larry Stone - President and COO ( as of '06) started in '69. Gregory M. Bridgeford - ECP - Business Development Michael K. Brown - EVP - Store Operations Charles W. (Nick) Canter - EVP Merchandising Robert F. Hull, Jr. - EVP - CFO Joseph M. (Mike) Mabry, Jr. - EVP - Logistics and Distribution Theresa Anderson -Sr. V.P. & GMM home Decor Maureen Ausura - SVP of Human resources Scott Butterfield - SVP of Research & Strategic Planning James Cook - SVP of Finance & Treasurer Marshall Croom - SVP Merchandising & Store Support At this years Merrill Lynch Retail Conference Robert Niblock presented and accompanied by Clinton T. Davis, Senior Vice president and General Merchandising Manager- |
Board of Directors
Recent action-
S. Thomas Moser, retired chairman of KPMG LLP must hold the record for the shortest term, having been elected on 8/122/08 and then resigned 8/28/08. Having been on the Audit committee and Governance makes it that much more of an event then a simple, thank you but no thanks departure.
8/28/08 the Board as with the Depot, amended the bylaws to allow a the majority holders of the shareholder to call a special meeting at their discretion. It would appear that the shareholders of such enterprises are now universally formalizing their position to change policy when they want to rather then at just at annual meetings.
Funds as of 8/15/08
Owned by ..... 1002
New ...... 90
Liquidated .... 105
Those buying shares ... 346 (40 %)
Those selling shares ... 433 (50%)
Investor Inquiries - Robbin Moore-Randolph 704-758-3579
Media Inquires - Chris Ahearn 704-758-2304
Financials
- by quarter and fiscal year
Q3 '08 ends October 31,2008 and will be reported 11/17/08
Q2 '08
Net earnings for the quarter were $938 million, down 7.9% from prior Q2. That brought the year to date down 12.1% from the prior YTD. Sales of $14.5 billion for the quarter and $26.5 billion for the first 6 months, increased respectively 2.4% and .7% over prior.
Big ticket items continue to be missing from the mix this year and the economic stimulus checks account for much of the positive increase. 'Continuing micro economic pressure on our industry' is severely hampering sales stated Niblock.
As of this reporting Lowes has 1,577 stores equating to 179 million square feet devoted to selling.
Moving forward to year end '08
It's expectation are as of 9/08 that
- sales will have increased by 1% over prior year.
- store comparisons will have dropped 7%.
- the overall operating margin will decrease 1.8 points.
- An additional 120 new stores will be operational and have added an additional 8% selling footage to the overall operation and to have cost an outlay of almost $100 million.
Working with the numbers The company's 1.5 billion outstanding shares are held by over 15,000 owners, 76% of which are institutions. During the last 12 months the share price has ranged between $ 25.98 - 35.74, of which it is currently $ 28.99 recently ( 9/26/07), which represents a collective market capitalization of almost $ $43 billion . It has LTD/Cap. % of 30.9%. 14.4 is the Current P/E ratio, with an EPS of $2.01, ROI 17.54 . Prior year EPS was $1.73. In 2006 earnings rose 12.3% to $3.1 billion, Gross revenues rose 8.6% to 46.9 billion. As to inventory on hand it has decreased on a square footage basis, but turnover has decreased slightly ( -.4 pts.) .Its current daily volume of trading is 11 million shares.
As of 9/24/07 it has maintained a healthy balance sheet with an abundance of liquidity and a steady cash flow, enabling it to be a payer of a consistent dividend and at this time able to support the announced $ 3.8 billion share buyback.
Lowes the third financial quarter ends on 11/01/07 with release on 11/19/07. the
Installations
For measurements, a non- refundable fee is charged which is applied going forward if work is done by them.
Installation tasks- over 40 types of installation services
Appliances (incl. water heaters) - window air conditioner, cook tops, dishwashers, wall ovens, range hoods Kitchens - Cabinets, countertops, faucets, sinks, kitchen appliances Bath w/ Plumbing - Faucets, shower and tub doors, Sinks, toilets, vanities. Flooring - Carpet, ceramic tile, wood, vinyl, Laminates. Doors & Windows (no skylights)- interior and exterior doors, replacement windows, attic stairs, storm doors, garage door openers Window Treatments (blinds & interior shutters) Lighting (Exterior/Interior & ceiling fans) Outdoors Projects (decks, fencing, play sets, sheds/storage buildings, roofing, siding ) Home Environment ( Air conditioners, Water softeners, Water heaters, Evaporative coolers.
Internet
'e- commerce' They offer all 40,000 items available within their stores in addition to their SOS program ( special order sales) which increases product availability by 10 fold. They can also inform a visitor if the item needed is in stock at their local store. This in turn serves as a traffic generator to the brick and mortar operations.
Such special order programs are shipped by the manufacturer or distributor to the store nearest you. Then, the customer is called and can arrange to pick it up at the store of have it delivered to their home from there.
Special order transaction - complete w/ search engine and arrival date at store of choice. Home delivery available once it arrives at store.
online kitchen design center - empowers to use this design tool to make 65% of the needed selections before ever entering a store to complete.
How to video's via Adobe Flash Player
parcel shipping charge - $ 4.95
Operations
Crisis management
Aid in recover and relief efforts during and after catastrophic events within specific geographic areas serviced by the 'big boxes'. This aids customers as well as employees. It also is smart business since it generates sales of products needed within the moment, that are stocked in preparation.
Shipping
Returns
Complaints
Customer Service 1-800-445-6937
product protection plan that extends and augments traditional product warranties covering parts and workmanship....
Credit
Efficiencies
Competition
Home Depot, Menards, Ace Hardware, 84 Lumber
extended Service plan (ESP)
A product protection plan that extends and augments traditional product warranties covering parts and workmanship.... functional parts, labor, in home service calls and varying time spans for major components ( 4 and 5 years depending on product or appliance). Their protection plan covers up to ___ years for $ ___ and not only extends these 4 basic features but includes surge protection, rental reimbursement and food spoilage. There will fully replace specific products below a stated replacement value including tax.
Service advantage 1-888-77 Lowes will answer all specific questions pertaining to coverage's, applicability and cost.
Financials
the company is a member of the S&P 500U.S.
Dividends
Its paid a dividend every quarter since 1961, and increased its quarterly payout for the past 25 years. Using a rolling four year timeframe during the last decade, it's dividend has increased at least 15% each time.
returns and refunds
One year plant guarantee
credit policies The private label credit cards of Lowes and their current rates and programs being offered consumers as of 9/15/07 are:
The standard credit card ... 21.99 APRLowe's Project card 7.99 % - 17.99 APR, No interest or payments due for initial 6 months following purchase. The initial qualifying purchase must be at least $1,000.
No annual fee is charged on either card.
The Lowe's Bulletin Board
9/24/08 It was announced that store growth for '09 will be cut 38%, bringing it down to 85 units. Down from the 120 that will be opened this year. Moving forward from there, it will be continuing an 80 store rate until at least 2013, and that will bring about an annual square footage growth of 5%.
9/4/08 Niblock warned that things are not good on the economic front, with a high inventory of unsold homes, a very tight credit market and unfavorable unemployment numbers being on the rise. With food and energy prices on the continual rise and the labor market soft, discretionary spending continues to be waning. All of which have a damping effect on home improvement spending which will continue until the middle of next year.
Speaking at the Goldman sacks conference he added that the 8% decline in Q2, was in part due to the drop in big ticket prices stemming from the economic downturn. And yet he is still on plan to open an additional 120 stores this year.
8/25/08 a dividend of $ 0.085 was declared for shareholders of record as of 10/17/08 and payable 10/31/08. It now has 1,575 stores operational.
8/18/08 Third quarter earning are released, indicating better then forecasted expectations, but earnings were down a billions dollars from the same quarter last year. Big ticket items are not moving. It has further decreased its expectations for the next quarter. Overall for the year, sales are expected to be up 1% but same store sales to fall up to 7%. If it hadn't been for the economic stimulus checks, sales were have been even more dire. 6/24/08 Hull states at Wachovia conference that Lowe's is targeting gains in paint, lighting and hardware from Sears and independent retailers during the economic slump. Any U.S. acquisitions were downplayed due to potential anti-competition possibilities. Manufacturers are raising prices which are being pushed through the system the last half of '08. It announced that same store sales over 1 year will end up '08 down 7%. California and Florida have been found to be the hardest hit by the economic down turn. The company is getting ready to roll out even smaller then the current 94,000 square ft stores to fit the needs of smaller targeted markets. It is also testing at home sales programs for siding, fencing and roofing, plus a revamping of its kitchen design process. expansion of new units was reduced by 20 stores, bring '08 in at 120 plus. 4/11/08 Shareholder meeting held 5/30 in Charlotte, North Carolina. 3/24/08 The quarterly dividend of $.08 per share was announced payable 5/2 to shareholders of record 4/18. 2/25/08 Year end results for '07 were reported. Earnings (net income) were $2.8 ( $1.86 EPS), down 9.7%, compared to the '06 at $3.1 billion ( $1.99 EPS). Revenue was on the upside with $48.3 billion in '08, up $1.4 billion ( + 2.9%). The 4th quarter was exceptionally poor with profits dropping almost 30%. And that's with the extra accounting week. They are anticipating a slight improvement in '08, in spite of a soft housing market. Also, on the good note, they have increased market share. The guidance given by Niblock was as follows: comps will decline almost 6%. New store openings will maintain an 8% rate. Margins will continue to drop, accounting for another 1.8% in '08 Overall sales will increase almost 3%. EPS will be down over 15%.
2/15/08 Industrial production increased only .1% in January, indicating that'll be a lot more winter to come in the stock market and housing. 2/12/08 Masco, a major supplier of products for the big box home improvement retailers, reported poor earnings and projected that it will not be getting better in the near future. It is expecting housing starts to continue to drop in '08, reaching less then one million units, which will be 25% lower then '07. 01/29/08 As a result of meetings with Laura Champine, an analyst with Morgan Keegan & company, is was projected that by 2011 Lowes will be up to 1,944 stores. Up from it's current 1,525 count as of now. She also indicated that same stores sales ,will be negative throughout '08 as the retailer follows the same pattern of negative quarterly same sales store comparison it has recorded during the last six consecutive quarters. 01/23/08 Brampton, Ontario Canada store opening 1/14/08 Goldman Sacks (Matthew Fassler) cut its 24 month earning estimates for Home Depot and Lowes, as well as reducing their price targets, with HD down to $29 and Lowe's $22. They rate HD a 'buy' and Lowe's a 'neutral'. Credit Suisse (Gary Balter) also lower estimates but believes the stock prices have already factored such projections into them. Upgrading the rating on both to 'out perform'. They are anticipating a thinning out of the industry going forward with Sears doing a give back and many pro-suppliers disappearing. 12/09/07 The first 3 Canadian stores are to be open - 27 more are on the drawing boards. 11/19/07 Following in the footprints of Home Depot, Lowe's made the formal announcement that it it's outlook for the late quarter of '07 and positive outlook for '08 was no longer possible in light of the on going economic downward pressure which the housing industry was experiencing. Third quarter earning were down 10% from prior year, and EPS was $.43, down .$.03 from prior. Same store was down 4.3% with total sales for the quarter up 3.2% to $11.6 billion. Expectation on the street were EPS of $.41 aon $12.4 billion in sales. Their reasoning was that the continuing plunge in housing turnover and prices, together with increasing inventory of houses up for sale. There lowered 4th quarter EPS expectations down almost 20% and next years 10% . Based on no improvement in housing factors, tightening credit standards, no softening in consumer buying. Based on these lower '08 projections, Lowe's will be trading at 14 times earnings and the Home Depot will be at 12 next year, using current stock pricing. 9/24/07 Management of Lowes has finally accepted the fact that the economic downfall enveloping the housing industry at this point in time is going to severely impact their plans going forward. In addition, compounding the dire consequences of the housing market, the Summer long drought which blanketed the South and West, has all but killed the outdoor retail business in these areas for the retailer who is now left with a huge surplus in unsold inventory. As a result or this double whammy, Lowes announced today that it will fail to meet year end guidance of $1.97 EPS. But they are continuing to hold fast to their long term projection that '08 through '10 EPS will cycle out to be an overall increase of 12-15% and sales 8-11%., As to the year end '07 estimates, before the announcement today , $2.01 was being touted by Bloomberg and $1.99 by Thompson Financial. Niblock in his statement, indicated that earnings will be in the 5-6% range for '08 as it worked out of the '07 economic malaise, and then rapidly rise into the mid-teens by '10. Lowes's feels that they are 'positioned to capitalize on a large and fragmented industry' for continued growth . Their 'organic growth plan' includes the layering of 'new revenue streams on top of 'their existing framework. 'Lowes culture, values and obsession with customer service' is what will make them first in the industry. This is clearly demonstrated by their 'clean, well lit stores, innovative products and brand marketing efforts that resonate with customers.' This is to be complemented by their 'new demand planning system' which 'further leverages' their distribution system and provides faster response time to rapid market changes and insures in-stock positions at all times. 9/15/07 $3.8 billion share buy-back to take place,... to date it has repurchased 40% of this goal.
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Operational efficiencies going forward
special order kiosks positioned strategically within appropriate departments
Organization
Broken down into geographic divisions