Lowe& 39 S Home Improvement Store Online – Home Depot, Inc. (NYSE:HD) vs. Lowe’s Companies, Inc. (NYSE:LOW) In this analysis we compare the two largest home improvement retailers with a combined share of 48% in 2021. First, we compared Company in terms of market leadership where we looked at both companies’ market share in the home improvement retail market, revenue streams by geographic region and sales metrics including sales per store and retail square feet, customer transactions and average ticket size.
Next, we compared both companies in terms of their service capabilities where we examined their customer reviews on third-party review sites, product ranges based on their websites, average pricing of products and distribution and logistics capabilities.
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Finally, we examined their company’s profitability by looking at their profit margins gross, operating and net as well as FCF margin and cash flow as a % of market cap and credit ratio by company financials through its net debt.
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To compare the two companies in terms of their market leadership, we looked at 3 factors which were their market share, geographic revenue, store count and sales metrics.
In terms of home improvement retail market share, Home Depot and Lowe’s are the two largest companies. However, Home Depot is bigger than Lowe’s and has maintained its position as the number one company for the past 10 years. Although both companies gained share over the past 10 years, Home Depot came out with the higher share gain as its revenue growth was 8.4% compared to 7.19% for Lowe’s.
Moreover, based on their annual reports, both companies show a high revenue concentration in the United States which is more than 90% of their revenue in 2021 with Lowe’s having a slightly higher revenue contribution from the US. On the other hand, Home Depot had a slightly higher revenue contribution from its international operations in Canada. Overall, we believe both companies exhibit high revenue concentration risk as their revenue lacks geographic diversity that is heavily dependent on the US, but Home Depot has slightly lower risk than Lowe’s.
While we believe the number of stores is a key indicator of its ability to serve customers, we also consider other metrics that may indicate the strength of its business, including sales per store, sales per square foot, customer transactions and average ticket size.
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Sales Metrics Home Depot Lowe’s Revenue 151, 157 96, 250 Growth % (10-year) 8.4% 7.2% Sales Per Store 65.2 48.8 Growth % (10-year) 8.1% 6.0% Customer Transactions (‘1mln’) 76,002 Growth % (10-year) 3.0% 2.3% Average ticket 85.9 96.1 Growth % (10-year) 5.3% 4.8% Click to enlarge
Based on the table, Home Depot had higher revenue and a higher 10-year growth rate than Lowe’s. In addition, Home Depot was superior to Lowe’s in all sales metrics except average ticket size, higher sales per store, sales per retail square foot and customer transactions. Furthermore, Home Depot also had the highest 10-year average growth rate for all of these metrics. Therefore, we believe that despite Home Depot’s lower store count growth compared to Lowe’s, its focus on increasing its sales and transactions in stores is driving its revenue growth.
To forecast the revenue of both companies, we used their average 10-year sales per store growth decreased by 1% per year and store growth to get their total revenue growth.
Revenue Estimates 2019 20232323232323232323232425259262 Home Depot Stores 3260 HOME, 352%, 3631%, 3631% 15.7% 0.5 % 0.5% 0.5% 0.5% 0.5% Home Depot Sales per Store 55.6 57.5 65.2 69.9 74.1 77.9 81.1 83.6 Growth % 17.4% 3.6% 13.4% 7.1% 6.1% 55.1% 55.1% % 57.1 ml 55.6 % 1.1% % 1.1 ML 10, 225 132, 110 151, 157 162, 705 173, 500 183, 268 191, 744 198, 684 Increase % 1.9% 19.9% 14.4% 7.6% 6. 6% 5.6% 6.6%, less stores 1, 971 1, 998 2, 025 2, 052 2, 080 2, 108 Increase % -1.9% -0.2% -0.2% 1.3% 1.3% 1.3% 1.3% 1.3% Lowe’s Sales per Store 36.5 45.4 48.8353559.83555 Row % 3.1% 24.4 % 7.6% 5.0% 4.0% 3.0% 2.0% 1.0% Lowe’s Revenue ($ mln) 72, 148 89, 597 96, 250 102, 385 107, 874 112, 5612, 5619, 5619, 5611310% % 24.2% 7.4 % 6.4% 5.4% 4.3% 3.3% 2.3% Click to enlarge
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Overall, we believe The Home Depot has an advantage over Lowe’s for market leadership points because it has the highest market share in the home improvement retail market, slightly higher revenue exposure and revenue growth in international business, better sales metrics in terms of store count, average retail square foot per Sales, customer transactions and average ticket growth.
Market Leadership Profit Market Share Home Depot Geographic Revenue Home Depot Sales Metrics Home Depot Overall Home Depot Click to Expand
To compare the two companies in terms of their service capabilities, we looked at 3 factors which were their customer reviews, product range, pricing and delivery and logistics.
To compare both companies in terms of their customer service, we looked at their average customer reviews from TrustPilot and identified the company with the best ratings.
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From the table, both companies had bad reviews with less than 2 out of 5 stars on Trust Pilot. Based on the reviews, we found customer complaints regarding various factors including customer service. However, Lowe’s had a slightly better rating than Home Depot. We believe this indicates similar customer service levels for both companies, but Lowe’s is slightly better.
Furthermore, we examined companies based on their product range to determine which companies have an advantage in product diversity. To compare their product range, we looked at their websites and compiled the number of product subcategories for the 14 categories below.
Based on the chart, we found that 7 of the 14 product categories included Appliances, Building Materials & Supplies, Flooring, Hardware, Heating & Cooling, Storage & Organization, and Doors & Windows had the highest number of Lowe’s product subcategories. On the other hand, Home Depot has more number of subcategories in 4 product categories like automotive, holiday decoration, kitchen and smart home. Among the 3 product categories, both companies were tied with the same number of subcategories which are Bath, Plumbing and Appliances. However, Home Depot has a higher number of total product subcategories in 14 product categories totaling 186 subcategories compared to 179. We believe this highlights Home Depot’s advantage of having a high number of total product subcategories. However, Lowe’s is expanding its private brand portfolios such as Allen + Roth and Steinmaster. However, we believe Home Depot has an advantage over Lowe’s with a greater variety of products to attract and serve customers.
Furthermore, we also compared these companies in terms of their product pricing. Similar to the previous factor, we compiled the product list price for 14 selected products for each category and calculated the price difference between them.
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Category Product Home Depot ($) Lowe’s ($) Different Appliances GE 4.8 cu. ft. High Efficiency White Top Load Washer with FlexDispense and Sanitize with Oxy, ENERGY STAR 899 999 -11% Automotive Battery Extender 12-Volt 1, 200 Amp Battery Jump Starter 154 149 % Single Bathroom and Single Bathroom Chrome 263.85 292.62 -11% Construction Materials /Supply Quikrete 20 lb. Hydraulic Water-Stop Cement Concrete Mix 15.37 24.48 -59% Flooring Brushplano Oak Gunstock 3/4 in. %139 %139. 13/4 inches. Hardware Tapcon1/4 in. x 3-1/4 in. Hex-Washer-Had Concrete Anchors (75-Pack) 31.98 31.98 0% Heating & Cooling 8, 000 BTU ENERGY STAR Window Smart Room Air Conditioner 249%31 Decorations 6-foot Downswept Douglas Fir Artificial Christmas Tree with Clear Lights 250.55 323.99 -29% Kitchen KRAUSLoften All-in-One Dual Mount Drop-In Stainless Steel 33 In. 2-Hole Single Bowl Kitchen 2-Hole Single Bowl Kitchen 250.55 %2959595959 % 2 Hole INGCountertop Multi Filtration Drinking Water Filter Dispenser 66.8 61.17 8% Smart Home TP-LINKAC1200 Wi-Fi Range Extender 49.98 49.98 0 % Storage and Organization ClosetMaid SuperSlide 48 in. W x 12 in. D Wire Fixed Closet Mount Shelf %174.974 K-974 with Dewaltomotomic 20 Volt Matt Cord Compact 1/2 in 50.97 -6% Average – – – -12% Click to enlarge
In the table, Home Depot was priced lower than Lowe’s for 8 out of 14 total products. Average pricing for all products was 12% lower than Lowe’s. However, 3 of the 14 products had the same price. Therefore, we believe this could provide Home Depot with a pricing advantage to make its products more competitive and attract customers.
Finally, both companies have large distribution systems to handle and fulfill their customers’ orders and purchases. We compared the distribution and logistics capabilities of both companies based on their delivery times and number of distribution centers.
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