Women customers help Lowe's gain on Home Depot
Friendlier layouts, increase in appliance selection are lures
ATLANTA -- Lowe's Cos., the second-biggest US home improvement chain, is winning the battle for women customers just 9 miles from the Atlanta headquarters of Home Depot Inc., which pioneered the warehouse-style store.
"I love shopping at Lowe's," painter Joyceln Marks said while carrying light bulbs and plants from a Lowe's store on Peachtree Industrial Boulevard in the Chamblee section of Atlanta. "Home Depot is too cluttered and it's not as clean."
Lowe's chief executive Robert Tillman is gaining sales faster than Home Depot by focusing on women, who initiate about 80 percent of all home improvement projects, he said at a September investor meeting. Lowe's is offering a bigger selection of appliances and merchandise, such as $898 Jacuzzi whirlpool baths, while organizing stores with wide aisles, brighter lighting and larger signs to make products easy to find.
The attention to details helped boost Lowe's sales at stores open at least a year by 7.1 percent in the third quarter, compared with 4.5 percent for Home Depot, analysts surveyed by Thomson Financial estimate. They expect Lowe's to report tomorrow that profits rose to about $427 million, or 53 cents a share, from $339 million, or 43 cents, a year earlier.
A survey of women shoppers in July by Forrester Research found 69 percent rated Lowe's highest in cleanliness versus 31 percent for Home Depot, while 57 percent preferred Lowe's merchandise selection. By contrast, 54 percent rated Home Depot's stores as more convenient, while women rated both companies equally on having the best prices.
Shares surge
"Lowe's is targeted more toward females, and a higher-income demographic," said Neil Stern, principal with the McMillan/Doolittle retail consulting firm in Chicago. "They are selling the same stuff, but the bull's-eye of their focus is slightly different."
A stronger economy and increased consumer spending on home improvements has helped both chains.
Wilkesboro, N.C.-based Lowe's closed Friday at $57.51 in New York Stock Exchange composite trading, while Home Depot ended the week at $35.66. Lowe's had jumped 55 percent this year and Home Depot 51 percent, both more than double the 20 percent gain for the Standard & Poor's 500.
Designer brands
Lowe's is adding more designer brands, including Eddie Bauer and Nickelodeon paint and Levolor faux wood blinds. The company has expanded to 250 brands of major appliances, adding energy-efficient washers such as Maytag's Neptune and Whirpool's Calypso. That's a selling point among women as Lowe's adds stores in metropolitan markets dominated by Home Depot.
"We have continued to gain [market] share in appliances," Lowe's resident Robert Niblock said in an August interview. "The most compelling thing is just the dominant offering we have. The high-efficiency laundry products are really where a lot of the innovation has taken place." Last month, 33 percent of Lowe's stores surveyed exceeded their sales targets, compared with 27 percent of Home Depots, according to a survey of appliance sellers by Longbow Research analyst David S. MacGregor.
Lowe's has about half the sales of Home Depot, the world's second-biggest retailer after Wal-Mart Stores Inc.
Urban markets
Lowe's, which started in small markets such as Asheville, N.C., is opening 65 percent of its 130 new stores this year in urban markets, including its first store in Chicago, where Home Depot now has 55 stores. Lowe's will open more stores than planned in markets including Dallas and Atlanta because of the higher than expected sales, Tillman said at the investor meeting in Charlotte.
Tillman, 60, who received salary and bonus of $4 million last year, is working to reduce supply costs by cutting inventories and importing lower-price goods to boost profit margins, which trail Home Depot. Lowe's had a gross margin of 30.3 percent last year, compared with 31.1 percent for Home Depot. Tillman declined to be interviewed for this story.
In the past year, Home Depot, which says half its customers are couples shopping together, renewed an effort to update its image and improve service. Chief executive Robert Nardelli is refurbishing stores, adding brands, and freshening marketing to attract customers after its shares tumbled 53 percent in 2002 as sales growth slowed.
Fighting back Home Depot's third-quarter sales gain was the largest in more than a year, analysts estimate. The company is expected to report Tuesday that profit climbed to about $1.1 billion, or 46 cents a share, from $940 million, or 40 cents, a year earlier, according to Thomson.
Nardelli, who took over in December 2000, is spending $250 million this year to remodel Home Depot's stores, many of which have stacks of lumber and plywood to cater to professional conractors.
The company is adding new signs to almost 600 stores to make merchandise easier to find, and adding self-checkout registers to 800 stores in an attempt to cut customer waits.
Home Depot is trying to cultivate women by holding do-it- yourself workshops for women, which attracted more than 150,000 in May, July, and October. Lowe's said its surveys show most women don't want women-only workshops.
In August, Home Depot agreed to take over commercial sponsorship from Lowe's for Discovery Networks' "Trading Spaces" television series, a reality-based show in which homeowners renovate rooms on take on home projects.
Last month, the company redesigned its http://www.homedepot.com Internet site to make it easier to use. The Home Depot site has lagged http://www.lowes.com in visitors.
"We've got to take costs out globally," with money reinvested in marketing, Home Depot chief financial officer Carol Tome told a business group in Atlanta. "You're going to see Home Depot like you've never seen it before." Lowe's, by moving later in urban markets, has the advantage of having modern stores in cities, compared with Home Depot, said analysts such as Jim Luke of BB&T Asset Management.
"The Lowe's store is new and shiny," said Luke, who helps manage $12 billion, including shares in both companies. "The overall impression of Lowe's stores is better."
