Several times throughout Black Friday, Lowes.com greeted online shoppers with a message that the site was “down for maintenance.” The message, which appears whenever the retailer experiences systems outages, undoubtedly drove some consumers to its competitors’ sites. The issue also laid bare to the public the “challenging IT infrastructure” that the retailer’s associates deal with every day, CEO Marvin Ellison told analysts and investors a few weeks later. “It was an embarrassing moment for the company, but one that presented our current state to the world,” he said.
Ellison, who took over as CEO last July, didn’t stop his criticism there. He went on to note that Lowe’s has failed to keep up in advancements in ecommerce, information technology and supply chain—especially when compared to its archrival Home Depot Inc.
Those shortcomings haven’t been lost on Lowe’s watchers. “Lowe’s seems to be a few years behind Home Depot in many aspects,” says Simeon Gutman, an analyst with Morgan Stanley who covers the retailer.
That’s why Ellison has embarked on a major business renovation project since arriving at Lowe’s. While Lowe’s may never match Home Depot’s scale, it has a ways to go before it even gets close. For example, Lowe’s fiscal 2018 sales totaled $71.3 billion, while Home Depot’s sales reached $108.2 billion. The gap between the two merchants is even greater online as Lowe’s generated $3.974 billion online last year, a far cry from Home Depot’s $6.761 billion. Home Depot also squeezes more dollars out of its stores: Store sales per square foot are about $340 for Lowe’s compared with $446 for Home Depot, says Alvaro Lacayo, vice president, housing research at G. Research LLC.
“Home Depot is a well-oiled machine, while Lowe’s has been operating well, but not optimally,” he says.
In short, Lowe’s could benefit from some remodeling to improve efficiencies and boost sales. The good news for Lowe’s is that there’s abundant room in the market for it to grow. Lowe’s and Home Depot account for less than 20% of the $900 billion home improvement market, the company says. To capture a bigger piece of the pie…
To get immediate access to the rest of this article, sign up for a free Strategy Membership using the Join for Free button below. If you’re already a member, please sign in.
Want to read more? Unlock Free Strategy Membership