A buyer pays for his purchases inside a Lowe’s retailer in Cary, North Carolina.
Jim R. Bounds | Bloomberg | Getty Pictures
Lowe’s is difficult rival Home Depot for a buyer the smaller residence enchancment chain has admittedly not paid a lot consideration to over time: the skilled contractor.
Lowe’s new technique catering to so-called professionals is among the issues the retailer credit with beating Home Depot on its gross sales progress throughout the second quarter.
“I feel one of many strategic missteps over the past seven years right here is just not actually understanding what the professional buyer does to the general productiveness of the enterprise,” mentioned Joseph McFarland, govt vice chairman of shops.
Lowe’s mentioned the corporate added 35,000 new professional clients on this quarter alone, though it would not disclose the entire variety of clients for aggressive causes. Home Depot announced it had reached 1 million professional clients this quarter.
Gross sales at Lowe’s U.S. places open for no less than a 12 months rose by 3.2% throughout the second quarter, in contrast with a 3.1% rise in same-store gross sales at Dwelling Depot’s U.S. shops. Lowe’s earnings progress additionally beat out its bigger competitor. The smaller retailer’s second-quarter revenue of $1.67 billion jumped 10.2% from the identical time final 12 months. Dwelling Depot’s $3.48 billion revenue, by comparability, fell by 0.8% from final 12 months, in accordance with information compiled by FactSet.
“We’re fairly assured that our gross sales momentum over the past two quarters, our enchancment in transactions, and our enchancment in gross sales per sq. foot largely is pushed by professional,” mentioned McFarland. “So the strategic rationale for professional is visitors, transaction, gross sales per sq. foot productiveness and simply unlocking extra worth in each location.”
Gross sales to skilled contractors outpaced gross sales to do-it-yourself clients for each firms throughout the second quarter. However each nonetheless have an extended solution to go.
“Each Dwelling Depot and Lowe’s have acknowledged that as they give thought to the addressable market, they’re under-penetrated within the skilled buyer,” mentioned Oppenheimer analyst Brian Nagel. “So that they each have made these pushes now to go extra aggressively for the skilled buyer. And that is been an ongoing narrative within the final a number of quarters.”
Nagel mentioned Dwelling Depot, which he believes has traditionally been managed higher, is additional alongside the journey of capturing professionals. However to verify its clients do not soar ship, Dwelling Depot is continuous to “put money into a portfolio of service choices to deepen our stage of engagement with the professional.”
It launched a business-to-business web site for professionals, and mentioned it is working to simplify purchasing experiences and supply for the skilled clients. It is also beefing up its device rental service.
“Twenty-five p.c of the professionals hire from us at present,” mentioned Craig Menear, CEO of Dwelling Depot in an earnings name. “We all know that 90% of professionals hire instruments, so we’ve got a possibility as we make investments on this enterprise to proceed to develop.”
Lowe’s is investing in massive portions of provides, to verify there’s sufficient in inventory for contractors. It is also giving professionals particular therapy, with preferring parking at its shops, devoted associates at professional desks and devoted supervisors for professional areas. These are companies Dwelling Depot has already rolled out.
One other space that the 2 rivals are eyeing are paints, which Lowe’s mentioned are the most well-liked product for DIY tasks. Dwelling Depot is creating Shade Resolution Facilities in its bodily places to simplify the colour choice course of for purchasers, and has launched a brand new Undertaking Shade app. However Lowe’s mentioned that for the primary time in 10 years, paint gross sales led the corporate’s merchandising division develop.
Based on Nagel, that is as a result of Lowe’s has smartened up its paint promotions.
“Below prior administration, Lowe’s would do these broad-based promotions and people aren’t as efficient as a advertising device to garner clients,” he mentioned. “One of many areas they recognized is that if they will do focused worth promotions on paint, that helps to drive the general enterprise.”