Here’s How Lowe’s Can Benefit From Its Acquisition Of Maintenance Supply Headquarters
Recently Lowe’s (NYSE:LOW) announced that it had completed the $512 million acquisition of Maintenance Supply Headquarters, which is a leading distributor of maintenance, repair, and operations products and primarily serves the multifamily housing industry. This acquisition is likely to give Lowe’s a better control over its “Professional Segment” – an area where its competitor Home Depot is currently ahead. Professional customers place larger orders compared to the do-it-yourself segment and serving these customers better can boost revenues for Lowe’s in the long term. One of the key ways to attract these customers is through a wider range of products and services and the acquisition of Maintenance Supply Headquarters can help Lowe’s meet this goal. The former operates in 29 geographic areas through 13 distribution centers and has a wide range of more than 5,300 products and value added services for maintaining multifamily housing properties. Through this acquisition Lowe’s can expand its products and services offered to its professional customers and build a competitive edge over Home Depot.
Increased Focus On the Professional Segment
The recovery in the housing segment has benefited players such as Home Depot and Lowe’s. However, Lowe’s growth has not been as stellar as Home Depot, primarily due to its focus on the do-it-yourself consumer segment. Home Depot on the other hand has remained focused on the big-ticket professional segment which had driven growth for the company. While the do-it-yourself segment is lucrative and accounts for the bulk of Lowe’s revenues, these customers are small ticket buyers and many are just one time customers. On the other hand pro-customers account for only 30% of Lowe’s revenues but they enter into big-ticket transactions and are usually repeat customers. Pro-customers account for nearly 40% of transactions above $500 at Lowe’s, and creating a loyal base of these customers can drive growth for the company in the long term. One of the key ways to grow its pro-customers is to offer a wider range of products to meet their requirements and the acquisition of Maintenance Supply Headquarters can help Lowe’s to increase its offerings significantly. Through this acquisition Lowe’s is likely to increase its focus on the professional segment. The company expects that after this acquisition its multifamily maintenance, repairs and operations business will generate more than $400 million in incremental annual sales. We believe this acquisition is a key part of Lowe’s future growth strategy and should drive revenues for the company in the long term.