Where do you shop for home improvement projects? For many Americans, increasingly, the answer is Lowe’s (NYSE: LOW). Home Depot (NYSE: HD), a Dow Jones Industrial Average component and the largest U.S. home improvement retailer, benefited enormously from the recent positive trends in home improvement. But competitor Lowe’s did even better, and is right on its heels for the top spot. Can Home Depot keep its lead, or is it in danger of being overtaken by Lowe’s?
Why Home Depot needs to worry
Home Depot has been the leading home improvement chain for decades, being the first to create and expand its big box stores across the U.S. Annual sales came in at more than $110 billion in 2019, a 2% increase over the prior year. The company is admired as solution-driven and agile, and as it helps people across the country with do-it-yourself building projects, sales continue to grow.
Lowe’s is smaller than Home Depot in both store count and sales, and was struggling before Marvin Ellison joined as CEO in 2018. He set a plan to turn the company around, and it’s starting to take shape.
Image source: Getty Images.
As recently as February of this year, Lowe’s had an inadequate digital program, running way behind Home Depot, and almost all of its growth came from stores. But that gave the company great leverage, because as soon as it invested in a digital overhaul, sales exploded. The second quarter’s huge increase was powered by a 135% digital spike.
Lowe’s is making all sorts of improvements through its retail fundamental strategy. It revamped its website and mobile app, and moved over to the cloud. During the next year and a half, it’s planning to open a large number of distribution and fulfillment centers. It recently launched a professional tool rental program, and is focusing on pros with a new loyalty program. It’s also investing in renovating and modernizing stores. And it’s already No. 1 in certain categories. The company recently announced that it’s starting locker pickups, an innovation that Home Depot began two years ago.Â
Lowe’s fiscal 2019 sales were $72 billion versus Home Depot’s $110 billion, but second-quarter 2020 earnings were creeping closer, with a 34% sales increase versus Home Depot’s 23% rise.
|Metric||Q2 2020||Q1 2020||Q4 2019||Q3 2019|
|Home Depot comps||23%||6%||5%||3%|
|Home Depot digital||100%||80%||21%||22%|
Data source: Home Depot and Lowe’s quarterly reports.
How Home Depot is keeping its lead
Home Depot has an eye on the future, and that led to its multi-billion dollar investment in its One Home Depot strategy. This is meant to integrate all aspects of the company’s operations for a seamless shopping experience. This digital and distribution overhaul impacted its earnings in the short term, but long term, it has already paid off in big wins during the pandemic. And it means the top home improvement retailer still