Home improvement retailer Lowe’s Cos. Inc. said Wednesday that sales totaled $16 billion in the fourth quarter ended Jan. 31, up 2.6% from $15.6 billion a year earlier. For all of 2019, sales reached $72.1 billion, up 1.1% from $71.3 billion a year earlier. Lowe’s, No. 23 in the 2019 Digital Commerce 360 Top 1000, does not break out ecommerce sales, but it said Lowes.com grew approximately 3% for the quarter.
Over the past few months, lower borrowing rates have lured more home buyers, boosting prices. That typically benefits home-improvement retailers because homeowners often do more renovations when they see their property value’s rise. But that frothy environment wasn’t enough for Lowe’s to hit Wall Street’s sales expectations, which served as another sign that CEO Marvin Ellison’s work is far from done.
Regarding its digital operations, Ellison says the retailer has a strategy in place to grow online sales. “We have a detailed road map in place to modernize our ecommerce platform and accelerate Lowes.com sales, which, combined with the sales productivity improvement in our physical stores, underscores our opportunity to unlock additional growth,” Ellison said in an earnings call transcript obtained by Seeking Alpha.
Since joining Lowe’s in 2018, Ellison has sold off divisions, closed underperforming locations, revamped operations and invested heavily in improving its old ecommerce system. That had helped the company close the performance gap with larger rival Home Depot—at least until last quarter. Ellison served as a senior executive at Home Depot for more than a decade.
Lowes.com is still under construction, Ellison said. “As customers increasingly utilize online shopping options for convenience and efficiency, in the shorter holiday selling season, Lowes.com lagged market growth,” he said. “Let me remind you, at the beginning of 2019, Lowes.com was sitting on a decade-old platform. And although we’re in the process of replatforming the entire site to Google Cloud, that work will not be completed until Q2.”
Many home improvement transactions begin online, even though they might finish in a store, Ellison said. Shoppers research many home purchases online, then go to a store to buy. So, a poor online experience actually hurts both online and store sales, he noted.
“If you have limitations online, not only does it hurt your dot-com sales, it actually hurts your brick-and-mortar sales because it limits the amount of traffic where people will show up after having quality, efficient research and decide to buy,” Ellison said on the earnings call. “So, we think its part and parcel that Lowes.com has to improve, and when that improves, it enlists the entire company from an ecommerce standpoint, from an omnichannel standpoint and from a brick-and-mortar perspective.”
Ellison has noted in the past 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.
To catch up, it is investing heavily in technology. It plans to spend $500 million per year through 2021 on technology and to hire more than 2,000 engineers to improve its ecommerce site and app, as well as to bolster its supply chain, merchandising and administrative operations.
Another customer base it’s working hard to resonate with both online and offline is professionals—a customer segment in which Home Depot has a solid upper hand. The average professional spends more than twice annually with Home Depot than Lowe’s—$6,100 a year at Home Depot compared with $2,350 at Lowe’s, according to Wedbush Securities. Sales to professionals, which vary by quarter for both retailers, account for about 40% of sales at Home Depot, but range between 20% and 25% of sales at Lowe’s. Lowe’s is actively seeking to move that needle by offering free shipping, special pricing and tax-exempt ordering on LowesforPros.com.
Lowe’s is also shifting slower-moving products out of stores and onto its website and app. It’s also training store employees on using that online selection to satisfy in-store shoppers.
Ellison said Lowe’s has recruited a team to overhaul the ecommerce site and has detailed project road map to modernize Lowes.com. He expects the efforts to pay off in the second half of 2020 to reach “high single-digit” sales growth, which will provide a “modest contribution” to overall sales growth.
Bloomberg contributed to this articleFavorite