Here Are The Key Growth Drivers For Lowe’s
The improved macro-economic conditions are favoring the home retailers – Home Depot and Lowe’s (NYSE:LOW). However, for Q1 2017, Lowe’s posted disappointing results, indicating that it has not been able to take complete advantage of the strong industry environment. The company is focusing on making itself more customer-centric to drive sales in the Do-it-Yourself (DIY) segment. However, this emphasis resulted in weaker sales of the outdoor segment, where Home Depot is generating significant revenues. Going forward, Lowe’s is looking to deepen and broaden its engagement with its professional (Pro) customers and has made two significant acquisitions in the past few months to serve the multi-family housing industry better. A balanced strategy to promote both DIY and Pro customers, focus on e-commerce to have a strong omni-channel distribution strategy, and international expansion are likely to remain the key growth drivers for Lowe’s in the long term.
Acquisitions To Expand Offerings
In May this year, Lowe’s acquired Maintenance Supply Headquarters, a distributor of products designed to maintain multifamily buildings. Earlier, in November 2016, the company had acquired Central Wholesalers, a distributor in the Mid-Atlantic. These acquisitions are aimed at serving its professional customers better, by expanding its range of offerings. Professional customers are reliable and their order sizes are bigger than the average customer, and hence they are likely to drive more revenues. The company expects that this combined multi-family business will generate more than $400 million in annual sales going forward. While at the beginning of Q1 Lowe’s formulated a strategy to balance indoor and outdoor projects, its marketing was more focused on indoor categories, leading to slower outdoor sales. A balanced approach and a better range of products for professional consumers will ensure that the company drives growth from both its DIY and Pro segments, taking full advantage of the strong macro environment.
Integrated Retail Channels
Lowe’s is investing in an omni-channel retail strategy to enhance customer experience. The company is advancing its omni-channel experience to make it easier for customers to engage with its interior and exterior home project specialists. On its website the company has added online scheduling capabilities which have led to a large number of customers seeking online appointments for these specialists. Lowe’s is also looking to add online tools to its website to improve the customer experience. An integrated retail channel is likely to remain a key growth driver for Lowe’s as customers look for convenience to shop for products and visualization tools to virtually “try” products to understand how they would look in their homes.
International Expansion
Lowe’s acquisition of RONA last year remains a key growth driver in Canada. The company is leveraging RONA’s local expertise along with its own scale to establish itself as a strong player in the region. In the current fiscal year it will convert six RONA big box stores into Lowe’s branded stores. Cost synergies are likely to unlock the value of this acquisition and it will remain a key growth driver for Lowe’s as the company looks to expand beyond the U.S.