Home Depot Starts Looking Better Equipped Than Lowe's -- Heard on the Street
19 November 2020 - 5:02AM
Dow Jones News
By Jinjoo Lee
While both Home Depot and Lowe's were clear retail winners this
year, the latter has arguably benefited more thanks to a less urban
footprint and a higher proportion of do-it-yourself customers. That
may be a winning formula today, but Home Depot is the one that
seems poised for more upside post-pandemic.
That isn't to dismiss the gains that both retailers have seen.
Neither experienced much of a slowdown in sales growth last
quarter, as consumers continued spending more time and money on
their homes.
Home Depot's revenue rose 23% from a year earlier in its third
quarter, basically the same growth it enjoyed the prior quarter.
Lowe's saw sales increase 28% in its latest quarter, after growing
30% in the previous period. Both results were above analyst
expectations. Outdoor and garden categories proved popular; Home
Depot noted that its 12-foot skeletons sold out before October.
Sales to DIY customers have been growing faster for Home Depot
and Lowe's compared with professionals such as general contractors
and renovators, providing a larger sales uplift to Lowe's, which
focuses more on that kind of customer. Lowe's also has less
exposure to urban markets, where people were initially more
skittish about stepping foot inside stores due to the coronavirus
pandemic.
That has been reflected in the share price movement: Lowe's was
trouncing Home Depot by as much as 16.7 percentage points earlier
this year, but the gap has narrowed considerably. Today, their
share-price performance looks pretty much the same
year-to-date.
Positive vaccine developments allow for a possibility that
people will spend less time at home sooner than expected, and Home
Depot is the one that would benefit more from that scenario. Urban
stores are set to rebound -- already, sales growth in big-city
stores are starting to outpace rural ones, as Lowe's noted during
its Wednesday earnings call.
Plus, there is likely pent-up demand for professional customers,
who have been seeing muted demand for jobs because people remain
cautious about allowing strangers into their homes. Both Lowe's and
Home Depot are making investments in that market, but Home Depot is
clearly ahead, especially now that it is buying back facilities
management company HD Supply. While HD Supply has been surprisingly
resilient this year, it has seen weakness from hospitality
customers; a gradual return to normal should bring back some of
that business.
A retooling seems to be in order.
Write to Jinjoo Lee at jinjoo.lee@wsj.com
(END) Dow Jones Newswires
November 18, 2020 12:47 ET (17:47 GMT)
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