Watch out Home Depot; Lowe's is coming on strong. That was the tone of an item written by Bruce Merrifield in the most recent e-mail newsletter published by Merrifield Consulting Group Inc., Chapel Hill, N.C. Merrifield focused on the different strategies used in the home center turf wars between Home Depot, Atlanta, and Lowe's, Wilkerson, N.C., the world's two largest home centers.
Home Depot's quarterly sales and profits for its first quarter dropped for the first time in history. Sales were off 2 percent from the same quarter a year earlier, profits were down 3.4 percent and same-store sales were down 6 percent. A day earlier, Lowe's had announced their quarterly results: sales were up 16 percent, profits were up 46 percent, and same-store sales were up 4 percent.
Said Merrifield, “This 10-point difference in same-store sales is one of the best illustrations I have ever seen in the head-to-head power of service retention economics. Lowe's has better fill rates and service, so they don't drive away as many customers to Home Depot as HD is driving to Lowe's. The average for the two firms is 1 percent same-store growth, which is consistent with the slow down in both consumer spending and housing.
“This further illustrates that it's possible to grow quite profitably in a contracting industry at the expense of a competitor focusing on financial strategies like: “buying lower, consolidating suppliers, and centralized spend management.”
This was the seventh quarter in a row in which Lowe's has beaten Depot in same-store sales numbers.
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