Battle Rages on Between Home Depot and Lowe's in Home Improvement Arena

May 24, 2002
While Home Depot reigned supreme as the world's largest home center and Wall Street's favorite home improvement stock for many years, growth at Lowe's,

While Home Depot reigned supreme as the world's largest home center and Wall Street's favorite home improvement stock for many years, growth at Lowe's, the second-largest home center, is actually outpacing that of Home Depot and many stock analysts now say Lowe's has brighter long-range growth potential.

Both companies reported solid first-quarter growth. Lowe's, Wilkesboro, N.C., reported a 54 percent jump in quarterly earnings on a sharper than expected rise in sales. For the first quarter ended on May 3, Lowe's said its net income rose to $345.8 million, or 44 cents a diluted share, from $225.3 million, or 29 cents a share, a year earlier. The company's sales rose 23 percent to $6.5 billion from $5.3 billion.

The Atlanta-based Home Depot, the world's largest home improvement retailer, reported record net earnings of $856 million for the first quarter of fiscal 2002, an increase of 35 percent compared with net earnings of $632 million in fiscal 2001. Home Depot's sales for the quarter increased 17 percent to $14.3 billion and comparable store sales increased 5 percent.

While Home Depot reported an increase in earnings, the company's shares fell more than 7 percent on concerns it did not raise its forecast for the current quarter or full year — as Lowe's did the day before.

Lowe's opened 46 stores during the first quarter and now has 785 stores in 42 states. During its first quarter, Home Depot opened 57 new stores, the highest number of quarterly store openings in company history. The company now operates 1,386 stores. Home Depot also added 234 stores to its program offering special services to the professional customer, bringing the total number of stores in its pro initiative to 769.

A recent article on www.thestreet.com said Lowe's stock price had nearly doubled since September 11, while Home Depot's stock has been flat. Other analysts said Lowe's will be able to generate future growth by expanding into new geographic markets, while Home Depot will have to rely more on cost cutting, revamping its supply chain and sales increases in existing stores, because it has already saturated so many markets.