Lowe’s (NYSE:LOW), the U.S.’s second largest home-improvement retailer after Home Depot (NYSE:HD), finished its third quarter with better sales than it was hoping for. Still it continued to trail the overall market, Home Depot out-performing it yet again. Going forward, it expects a better fourth quarter hoping its recent restructuring and re-branding initiatives, along with the newly rolled out online tool “MyLowes” start reflecting into higher sales.
With slower than anticipated recovery and slumped big-ticket spends, Lowe’s had lowered its sales outlook for fiscal 2011 from 4% to 2% half way through the year. In the third quarter, sales grew 2.3%, higher than expected 2%. It also raised its fiscal 2011 guidance to 2-3%. Yet, Lowe’s continued to under-perform the overall market with declining comparable store sales so far this year. Going forward, it expects a better part of its recovery to come from its fourth quarter, targeting 8% sales growth, particularly through sharp focus on expanding online sales. Nonetheless, with a 100 bps margin compression in 3Q, operating margins may still be compressed by more than 50 bps in 4Q.
Focus on Web Sales
With recent organizational restructuring and efficiency initiatives, Lowe’s has been trying to reinvent itself. It recently launched a new branding campaign with the tagline “Never Stop Improving” replacing the old “Let’s Build Something Together” to re-position itself in an attempt to boost market share. It has been paying special focus on boosting web-sales and started rolling out the online tool “MyLowes”. Its success it achieving its next quarter and fiscal 2011 targets would critically depend on how these efforts translate into improved sales next quarter.