Lowe's (LOW) is the world's second largest retailer of home improvement products after Home Depot (HD). Walmart (WMT) and Target (TGT) also cater the home improvements market. Lowe's offers a wide range of home improvement products and installation services to individual home owners as well as professional builders. In addition to the physical stores, consumers can buy products through the company's dedicated website. Lowe's business is vulnerable to the housing market swings and the recent slowdown has affected its sales to a great extent in the past few years.
Lowe's share in plumbing, electrical & kitchen market is comparable to its share in both hardware & seasonal and paint & flooring markets. However, the market for plumbing, electrical & kitchen goods is larger than the other two. We expect that strong growth in Do-It-Yourself activity, aggressive expansion of stores and innovative community initiatives will help boost Lowe's share in plumbing electrical & kitchen market in North America.
We currently have a price estimate of $24.85 for Lowe's stock, below the market price of $26.74.
Given Lowe's growing market share in plumbing, electrical & kitchen products, we pose the following question:
What Percent of Lowe's Stock Value Comes from Plumbing, Electrical and Kitchen Products?
Steady Growth in Lowe's Plumbing, Electrical and Kitchen Products Market Share
Despite tough competition and a fewer number of stores than Home Depot, Lowe's market share in plumbing, electrical & kitchen products has grown from 14% in 2006 to 17% in 2009, and it's growing further. A focus on customer service and attractive price offers has enabled Lowe's to grow its market share even during recession.
Lowe's plans to open 25-30 new stores in 2011, reflecting total square footage growth of around 1.5%. In comparison, Home Depot plans to open only 10 new stores. As Lowe's narrows the store count gap with Home Depot, its market share should get a boost.
However, Lowe's should watch out for its comparable store sales, an indicator of the financial health of the company. Lowe's comparable store sales was up 1.1% in Q4 and 1.3% for fiscal 2010. But Home Depot's CSS growth was much higher at 3.9% for Q4 and 2.9% for the fiscal.
Until the housing market in the U.S. shows positive growth, more buying action is anticipated from DIY customers, mainly for repair & maintenance of small house projects. Lowe's is considered a preferred destination for DIY customers owing to its superior in-store shopping experience coupled with efficient customer service.
Lowe's has also undertaken some "green" initiatives. Last year, it launched recycling centers in most of its stores. The recycling centers allow customers to recycle rechargeable batteries, compact fluorescent lamps (CFLs), cell phones and plastic shopping bags. Such steps to promote community recycling will benefit Lowe's brand identity in the long term.Trefis Wordpress Plugin.