Lowe's vs. Home Depot Financial Comparison & Analysis
Home Depot & Lowe’s | Financial Comparison and Analysis | |
INTRODUCTION
Lowe’s (LOW) and Home Depot (HD) are competitors in the every growing market of Home Improvement. The following analysis of each company will examine the home improvement industry, the individual companies, their operating philosophies, their financial strengths or weaknesses, and a final conclusion on which company would be a better long-term investment.
INDUSTRY OVERVIEW
The growing trend of home improvement has perpetuated a larger demand for box store home improvement shops such as Home Depot and Lowe’s. There are several types of companies that contribute to the booming renovation industry. Home Depot and Lowe’s provide all the materials and tools necessary to facilitate home renovations. Home or residential renovation is a $300 billion industry in the United States, and a $48 billion industry in Canada. The average cost per project is $3,000 in the United States and $11,000-$15,000 in Canada (Wikipedia.com, Home Improvement April, 2010). Home Depot and Lowe’s are the first and second highest ranking (respectively) home improvement retail stores in the world. Combined these two companies produced $119.5 billion in sales for fiscal years ending February 1, 2009 (Lowe’s, 2008 Annual Report P.18; Home Depot, 2008 Annual Report P.28). These industry leaders, however, have had to change their operating philosophy as the economy started to shift into a recession in December of 2007. The home improvement industry is greatly influenced by the housing market and by various economic factors. In 2008 housing turnover was down 16%, S&P/Case-Shiller US National Home Price Index was down 18.2%, Unemployment up from 4.9% in January 2008 to February 2009, and we witnessed some of the lowest consumer confidence levels on record (Lowe’s, 1008 Annual Report P.2).
Neither Home Depot nor Lowe’s exceeded their goals set for 2008, however, as the economy shifted into
INTRODUCTION
Lowe’s (LOW) and Home Depot (HD) are competitors in the every growing market of Home Improvement. The following analysis of each company will examine the home improvement industry, the individual companies, their operating philosophies, their financial strengths or weaknesses, and a final conclusion on which company would be a better long-term investment.
INDUSTRY OVERVIEW
The growing trend of home improvement has perpetuated a larger demand for box store home improvement shops such as Home Depot and Lowe’s. There are several types of companies that contribute to the booming renovation industry. Home Depot and Lowe’s provide all the materials and tools necessary to facilitate home renovations. Home or residential renovation is a $300 billion industry in the United States, and a $48 billion industry in Canada. The average cost per project is $3,000 in the United States and $11,000-$15,000 in Canada (Wikipedia.com, Home Improvement April, 2010). Home Depot and Lowe’s are the first and second highest ranking (respectively) home improvement retail stores in the world. Combined these two companies produced $119.5 billion in sales for fiscal years ending February 1, 2009 (Lowe’s, 2008 Annual Report P.18; Home Depot, 2008 Annual Report P.28). These industry leaders, however, have had to change their operating philosophy as the economy started to shift into a recession in December of 2007. The home improvement industry is greatly influenced by the housing market and by various economic factors. In 2008 housing turnover was down 16%, S&P/Case-Shiller US National Home Price Index was down 18.2%, Unemployment up from 4.9% in January 2008 to February 2009, and we witnessed some of the lowest consumer confidence levels on record (Lowe’s, 1008 Annual Report P.2).
Neither Home Depot nor Lowe’s exceeded their goals set for 2008, however, as the economy shifted into
Cited: Lowe’s, 2008 Annual Report. Home Depot, 2008 Annual Report. Wikipedia.com. “Lowe’s”. 2010. Retrieved at http://en.wikipedia.org/wiki/Lowe 's Fundinguniverse.com