Dive Brief:
- Lowe’s plans to open 10 to 15 stores annually in the coming years in fast-growing U.S. markets as part of a larger multi-point strategy to grow and capture more market share. The company plans to tap its larger footprint to attract new DIY and pro customers, the company said in a Wednesday press release alongside its investor conference.
- The company plans to also expand its rural product assortment to 150 more stores, which would bring the format to nearly 500 locations overall. The rural assortment offers expanded selections that appeal to the farm segment, including pet, work apparel, automotive supplies and utility vehicles.
- Lowe’s also said Wednesday it launched a home improvement product marketplace. The retailer said it is working with new and existing sellers and suppliers “to offer a wider selection of products without carrying the inventory, managing pricing or investing in new online fulfillment centers.”
Dive Insight:
In total, Lowe’s announced five long-term growth initiatives for 2025 during its analyst and investor conference Wednesday. They are driving pro penetration, accelerating online sales, expanding home services, creating a loyalty ecosystem and increasing space productivity.
The company also said it is preparing a set of initiatives that will soon generate nearly $1 billion in annual cost savings.
“By leveraging leading technology solutions, we're creating a best-in-class omnichannel shopping experience for all generations of homeowners,” CEO Marvin Ellison said in a press release. “At the same time, we're building on our momentum with pros now that we've reached 30% pro penetration.”
Despite persisting macroeconomic pressures, analysts expressed optimism that Lowe’s is on a positive long-term trajectory and will likely see many of its growth initiatives come to fruition. Although Q3 net sales fell 1.5% to $20.2 billion and comps declined 1.1%, online sales comps rose 6%, the retailer said in November.
“We came away from Lowe's investor day with continued confidence in the company's ability to be a retail winner down the line, given its plan for solid growth and productivity,” Telsey Advisory Group analysts led by Joe Feldman said in a Thursday note.
While mortgage rates remain around 6.8%, demand for discretionary products remains weak and spending on big ticket items is soft, TD Cowen analysts led by Max Rakhlenko said. Home equity lines of credit rates are at their lowest level in nearly 18 months, the analysts said in a Thursday note citing a Bankrate survey of large lenders.
“When combined with the $35 [trillion] of equity homeowners are sitting on, the setup is better for an eventual strong return in equity extraction-fueled project demand, which could be a bigger driver of growth in 2025 than existing home sales, a factor [Lowe’s management] concurs with us on,” Rakhlenko said.
Expanded jobsite delivery for large, special pro orders is also among the growth initiatives Lowe’s highlighted this week. According to the company, associates will now have access to an expanded digital catalog that features inventory availability, pricing and supplier services, including jobsite and rooftop delivery. This initiative is expected to capture more pro spending, improve the close rate on large orders and leverage large suppliers to handle the delivery.
Lowe’s also plans to use AI-powered technology to enhance the customer experience and announced the upcoming relaunch of its pro loyalty program.
While many of the company’s initiatives may take years to reach full speed, “we could see early signs of success in 2025, especially from continued strong growth in pro facilitated by ‘extended aisle’ to expand jobsite delivery leveraging large suppliers and existing flatbed distribution assets for delivery,” Wedbush analysts led by Seth Basham said in a Thursday note.
