Home Depot nails its numbers, unlike Lowe's

The home improvement retailer's latest report contains all the metrics that explain why it's crushing its rival.

By Jonathan Berr May 22, 2013 9:21AM
Everything went right for Home Depot (HD) in the last quarter. Not only did the home-repair retailer report better-than-expected earnings on Tuesday, but it also said results in the current quarter would be better than analysts had expected. Shares of Home Depot, which operates 2,257 retail stores in all 50 states, not surprisingly rose on the news.
 

Net income rose 18% to $1.2 billion, or 83 cents per share, compared with $1 billion, or 68 cents per share, a year earlier. Sales rose 7.4% to $19.1 million. More important, U.S. same-store sales, a key retail metric of stores open at least a year, rose 4.8%. Analysts had expected Home Depot to earn profit of 77 cents per share on revenue of $18.68 billion.

 

The reasons for the company’s success in the quarter are many. First, sales were strong despite colder-than-normal weather in parts of the U.S., which rivals such as Lowe's (LOW) have blamed for their poor performance. Indeed, Lowe's today reported earnings Wednesday morning that were below analysts' expectation. The smaller rival's sales were $13.1 billion, a decline of 0.5% compared with the year-ago period.

 

A customer pushes a cart through a Home Depot Inc. store in Washington, D.C. on Nov. 12, 2012 (© Andrew Harrer/Bloomberg via Getty Images)An improving economy is also helping Home Depot as consumers become more comfortable undertaking expensive projects around their houses. New home construction spurred by the rebound in the real estate market also benefits Home Depot because it sells supplies to many construction companies. According to Bloomberg, economists expect home sales to have risen in April to their highest level in more than three years.

 

In fact, Home Depot CEO Frank Blake pointed out during a conference call with analysts that growth in the company's commercial business outpaced that of its consumer unit. Home Depot's e-commerce operation is also growing, with online traffic surging almost 50%.

 

About the only bad thing that could be said about Home Depot is that its stock is expensive.  With a price-to-earnings multiple of 25.53, the valuation is at a five-year high, so investors should feel no urgency to buy the shares now. When the stock pulls back is the time to add them to your portfolios.

 

The reason it's worth buying is simple: Home Depot underpromises and overdelivers. Last year, it boosted its earnings forecast three times. It seems likely to do that for a fourth time before too long.

 

Jonathan Berr does not owns shares of the listed stocks. Follow him on Twitter @jdberr.

Tags: HDLOW
78Comments
May 22, 2013 10:10AM
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Here's my 2 cents, and that's probably all it's worth:

I personally like the inside of Lowe's stores more than HD.  HD seems to be really dark and dingy - Lowe's is much brighter and cleaner.  In our area, for plants and garden supplies, Lowe's is better.  For lumber and hardware, HD wins.  For bathroom fixtures (tubs, toilets, sinks, faucets, etc...), Lowe's has a much better selection.  Tools and flooring are pretty much a toss-up, depending on what you want.  I've run into very competent employees at both stores, as well as some real idiots.  If I'm going for quickcrete or fencing or lumber or basic building materials, I'm going to HD.  For finishing stuff and outdoor stuff, Lowe's gets my business.  I agree with the previous poster that the HD website is better than Lowe's, especially when it comes to their search function.

May 22, 2013 10:10AM
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I think Home Depot does a better marketing job.  I still prefer Lowes, I just think Lowes stores are cleaner, and more organized.  I also find the employees at Lowes to be more friendly.
May 22, 2013 11:50AM
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I worked for Lowes for  six years as a retiree in this industry. I returned from a leave of absence and was told that they could only pay me 25% less than I had made before I left, because my job classification had been changed. It was very obvious that it really didn't mean a lot to them that my 40+ years in the industry would benefit the customers. Who cares it the high school kid working for half of what I was making was unable to assist the customers.  It was all about money, they slashed people throughout the company and the little they saved on me added up. Management is the problem, or lack of it!
May 22, 2013 10:41AM
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I spent an hour on Lowe's web site trying to locate a part for my Kobalt paint sprayer. I can find nothing that relates to parts/service for Kobalt tools & accessories. I went to the store and they were no help either. For the most part, I think HD and Lowe's are pretty equal. However, I prefer my locally owned franchise for Ace Hardware to be better than either of them. Ace employees seem to know their product line better and they often stock those hard to find hardware and gadgets.
May 22, 2013 9:47AM
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One clear advantage I notice of Home Depot over Lowes is that the Home Depot website is much more user friendly and the search function for Home Depot returns what you are actually searching for while the Lowe's search function is really bad and returns products not even remotely close to what you typed in.  This makes it far less time consuming to just order online at Home Depot.   
May 22, 2013 10:44AM
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I shopped at both last Saturday and the difference in was drastic.  At Home Depot I was greeted at the door, and in the departments there were knowledgeable sales people willing to help.  Lowe's on the other hand was like a "ghost town".  Not only very few customers but help was difficult to find and the selection of merchandise not too good.

May 22, 2013 10:35AM
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Lowes is really the better store of the two.  What Lowes needs to do - and do it with common sense -is to get some new and better management!!    When ANY company can't hit its benchmarks, something is wrong with the management. 
May 22, 2013 11:55AM
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I started noticing a big difference at Home Depot stores here in Houston, TX a few years ago when the new CEO increased the number of retail associates on the floor. Prior to this, I did most of my home improvement shopping at Lowe's.

 

I now drive about 5 miles past Lowe's to reach Home Depot due to their great customer service and much lower prices for most of my home improvement needs.

 

Lowe's does however have a much better upscale selection of lighting & plumbing fixtures, appliances and has a better garden center, but good luck trying to find someone to help you at a Lowe's store here in Houston, TX.

 

A few weeks ago I went back to WV. to visit family and while there I worked on a few projects for my 89 yr old grandmother, I made several trips and purchases at the Lowe's in Cross Lanes, WV. and I was shocked at the difference between their Lowe's store and my local Lowe's store in TX.

 

The Lowe's store in WV. was extremely well organized and there were plenty of knowledgeable, friendly store associates available. I actually found myself walking back across the store to return items to the shelves that I decided not to purchase, at my local store in TX. I would have simply set  the items down anywhere.

 

When I commended the Lowe's manager in WV. about the my outstanding experience at his store, he informed me that his store was chosen for a test market by putting 10 extra associates on the floor between 10:00 A.M. to 2:00 P.M. and between  5:00 P.M. to 9:00 P.M.

If Lowe's rolls this new strategy nationwide, then I may shop there more often.

May 22, 2013 12:12PM
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In my area, Lowes (which was my favorite) has seems to be reducing inventory and staff to the point they have little selection and virtually no assistance (except in the paint dept).  Home Depot on the other hand, has been building inventory and staff and is now where I buy the most items.  I think both are banking too much on online sales, that may be fine for some things, but for most items I need to see a real sample.
May 22, 2013 11:16AM
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I bought a defective wash machine at Lowe's - was promised months ago that I would be given a new machine.  Then that manager is no longer with the store and now no one knows anything about my washer being switched out. I know I won't be buying ANYTHING from Lowe's again due to bad customer service.
May 22, 2013 11:20AM
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The reason Home Depot is doing well is because they have excellent customer service.  Their sales associates are always helpful.  When I shop there I can always find what i am looking for with their help.
May 22, 2013 11:51AM
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I bought my house 2 years ago and completely remodeled it. Bedrooms, bathrooms, kitchen, floors, walls, almost completely gutted. Had to do comparative shopping for quotes. Home Depot won. Their sales people were a lot more helpful and knowledgeable. Their selection was almost the same as Lowes, just different names. Lowes was a bit cleaner, but what do you expect from an empty warehouse. I didn't understand how they couldn't answer some of my questions or assist me in the flooring area when there were no other customers there. Home Depot was the opposite. Was greeted at the door and immediately got assistance and questions answered. My wife went on other occasions alone, ( paint, kitchen) and always left very happy. She was amazed on how female friendly Home Depot was. We had many items delivered and never an issue as well. Thank You Home Depot.
May 22, 2013 11:10AM
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Home Depot will continue to out perform Lowes due to it's 'brand stickiness". What we mean by this is that Home Depot has made expressions like 'do it yourself' & 'home improvement' synonymous with shopping at their stores. Their marketing is has targeted those of middle & upper middle incomes that might need improvements but do not necessarily have the money to hire a contractor or handyman. We're not talking about full remodels here, just the 'Harvey homeowners' improvements; which anyone, with the right tools can do. 

 

Their stock will continue to improve as we go into the summer months (Hurricane season starts on June 1st.) & I would also have a stake in Georgia Pacific as well. There is going to be much demand for building materials this summer though the beginning of 2014.

May 22, 2013 11:51AM
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Lowes provides one of the worse retail experience in my 80 years

 

May 22, 2013 11:54AM
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Lowe's is still my store. The help knows what's it's talking about when you ask a question, the garden center is nicer, and the store layout better.
May 22, 2013 12:03PM
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Lowes is my pick for appliances and lighting fixtures.  I buy paint at Home Depot.  I'm not a fan of HD and their employees.  Lowes gives much better customer service.
May 22, 2013 1:21PM
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I prefer Lowes because they accept my military ID card without a picture. I tried using the card at HD and showing my pictured drivers license but management would not allow it.    
May 22, 2013 11:47AM
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The success has gone to Home Depots head and made them dishonest, belligerent, unfriendly, and with no customer service.

I recently had carpet installed by Home Depot and the amount I ended up paying was twice as much as the estimate.

I contracted for the special $97.00 install price and paid an extra $600.00 to have stairs wrapped. When the installer arrived they said they were not going to do the install for the amount Home Depot was paying them for the install. When I contacted the Home Depot store I purchased from, I was treated rudely and they were not going to install the carpet unless I paid an extra $230.00.

There was also half the roll of carpet and pad left over after the install. When I contacted customer service about the overage, they were evasive, would not answer my questions and refused to address the issue. I would not reccommend Home Depot services to anyone.

May 22, 2013 3:19PM
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My experience in the difference in the two is simply this... I walk into Lowes and the sales assistant says how can I help you. When I tell them I am looking for a 3/8th offset hinge they take you to the ailse and say "here are all our hinges"  at Home Depot they say here is the hinge do you want stainless or brass?...To me that is a big difference..

May 22, 2013 2:38PM
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We use both but there is a difference between the two. HD seems to support construction more, such as building things from the ground up, where L's seems to support maintaining or upgrading a home. In the last 3-4 years I have noticed a great difference in customer service: HD used to be unaware that you were walking through its isles, but now every person, in the multiple different stores we visit, acknowledges us, asking if we need assistance. L's on the other-hand used to be this way, when things were going great, but since the economic downturn they have become unaware of their customers, as HD used to be. I will go to HD before L's because they always have what we need.
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