Home improvement chains The Home Depot Inc. and Lowe’s Cos. Inc. reported second quarter earnings this week. The Home Depot reported a 20% year-over-year increase in online sales for its fiscal quarter ending Aug. 4, while Lowe’s reported a 4% increase in ecommerce sales for its fiscal second quarter ending Aug. 2 compared the same period last year. Home Depot is No. 7 in the Internet Retailer 2019 Top 1000 and Lowe’s is No. 23.
Home Depot didn’t reveal exact ecommerce figures. However, Lowe’s CEO Marvin Ellison said online sales accounted for approximately 5% of total revenue, which equals $1.05 billion, in a call with investors transcribed by Seeking Alpha.
“We took steps to improve the quality of our online business by eliminating certain programs, which were unsustainable from a profit perspective,” Ellison said. “In taking these steps, we knew that we would stunt our short-term growth.”
The growth was slower than Ellison expected, but it was part of the necessary steps to make adding inventory more profitable, he said. The old system required bricks-and-mortar stores to add products to inventory before they could be added online, Ellison said.
“We had just some fundamental process issues,” he said. “As rudimentary as that sounds, that was the process, and we were able to get that fixed in the early part of Q3.”
Lowe’s is adding more products to its online selection as it moves low-volume SKUs out of its stores, so it was vital to modernize its inventory systems, Ellison said. He projected “modest” online growth for the rest of the year as the merchant moves its back-end systems to Google Cloud and works on other “foundational functionality” like search, checkout and navigation improvements.
Home Depot’s investments in similar ecommerce functions, which it updated during this quarter, resulted in better conversion rates and traffic, CEO Craig Menear said in a call transcribed by Seeking Alpha. Search, product content and category pages all saw updates during the quarter.
The ratio of online purchases picked up in stores dropped from last quarter, with 50% of all U.S. ecommerce orders picked up at stores. Last quarter, that number rose to 54%. Historically, Lowe’s has had a higher ratio of in-store pickups compared with Home Depot. In-store pickups are usually more profitable as they eliminate the cost of shipping to a customer’s home, but Lowe’s didn’t break out that figure this quarter.
Home Depot’s operating income fell 0.1% to $4.90 billion while Lowe’s increased its operating income 10.1% to $2.38 billion.
In other earnings news:
- Dick’s Sporting Goods (No. 58) reported a 21% increase in ecommerce sales for its second fiscal quarter ending Aug. 3. It didn’t break out exact figures, but the retailer noted that penetration increased to 12% of total sales, compared with 11% last year. That equals $271.1 million in ecommerce sales this quarter. This week, the sporting goods chain opened two ecommerce-only fulfillment centers in New York and California. It also formed a delivery partnership with FedEx, which ended ground delivery with Amazon Inc. (No. 1) this month.
- Nordstrom Inc. (No. 18) grew online sales 1.7% for its second fiscal quarter ending Aug. 3 to $1.133 billion from $1.114 billion last year. Overall sales shrank 5.1%, with ecommerce making up 30% of sales, up from 28% during the same period last year.