Lowe’s To See Increase In Top Line Despite Closing Mexico Business

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Trefis
LOW: Lowe's logo
LOW
Lowe's

Lowe’s (NYSE: LOW), whose stock is currently trading at around $110, generates its revenue from its Stores operating across the US and Canada. In this note we discuss the historical performance, and expected Total Revenue for FY 2019. You can look at our interactive dashboard analysis ~ Lowe’s: How does Lowe’s make money? ~ for more details. In addition, here is more Consumer Discretionary data.

 

Lowe’s Business Model

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What Does Lowe’s offer?

  • Lowe’s Companies, Inc. is the world’s second largest home improvement retailer. The company offers home improvement products in the following categories: Lumber & Building Materials, Appliances, Seasonal & Outdoor Living, Rough Plumbing & Electrical, Millwork, Lawn & Garden, Flooring, and Kitchens.
  • As of February 1, 2019, Lowe’s operated 2,015 home improvement and hardware stores. These operations included 1,723 stores located across 50 U.S. states, as well as 279 stores in Canada. The Canadian stores include RONA inc stores. RONA, which was acquired by Lowe’s in 2016, operates 212 stores in Canada as of February 1, 2019, as well as services approximately 231 dealer-owned stores. Further, Lowe’s is currently in the process of exiting Mexico by selling the assets of the business.

Two Primary Customer Groups:

  • DIY Customers: These customers are typically home owners who purchase products and complete their own projects and installations. The associates assist these customers both in stores and through online resources and other media designed to provide product and project knowledge. The company also offers a variety of clinics and workshops both to share knowledge and build an emotional connection with the DIY customers.
  • Professional Customers (or “Pros”): These customers are primarily professional renovators/remodelers, general contractors, handymen, property managers, building service contractors and specialty tradesmen, such as electricians, plumbers, and painters. These customers build, renovate, remodel, repair and maintain residential properties, multifamily properties, hospitality properties, and commercial facilities, including education facilities, healthcare facilities, government buildings, and office buildings.

What Are The Alternatives?

  • Major competitors are companies like Home Depot and other home improvement stores.

What Is The Basis of Competition?

  • The competition is primarily based on customer experience, price, quality, availability, product assortment, and delivery options. It is also based on store location and appearance as well as presentation of merchandise. Further, online and multichannel retailers are increasingly focusing on delivery services, with customers seeking faster, guaranteed delivery times, and low-price or free shipping.

 

Lowe’s Total Revenue has grown by 9.7% between 2016 and 2018, and is expected to grow by 2.1% in 2019:

  • The company has seen a steady growth in revenue over the years. It has grown from $65 billion in 2016 to $71.3 billion in 2018. Trefis estimates Total Revenue to be around $72.8 billion in 2019.
  • The Company’s revenue growth is mainly contributed by the revenue per square footage metric which in turn is pushed by growth in Comparable Sales. It has increased from $305 in 2016 to $340 in 2018. Trefis estimates the metric will reach $348.90 by 2019.
  • The square footage per store metric has increased over the years from 100K square footage per store in 2016 to 104K square footage in 2018. Trefis estimates the metric to be 103.6K in 2019.
  • The number of stores metric has fallen slightly over the years from about 2,129 stores in 2016 to 2,015 in 2018 primarily due to the ongoing Sale of the Mexico business. Trefis estimates the number of stores to remain flat at 2,015 in 2019.

 

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