Lowe’s CEO: Any overseas expansion would come through acquisitions
08/20/2014 8:22 AM
08/20/2014 9:45 AM
If Mooresville-based Lowe’s Inc. decides to expand overseas, chief executive Robert Niblock said, the home improvement company will look to do so by buying existing firms, rather than muscling in with more Lowe’s stores.
Niblock wouldn’t comment on a Bloomberg report last week that the company is looking to buy Brazilian home improvement firms. But he did say the time and expense required to enter a new country from the ground up makes that option less attractive than simply buying a company.
“It just takes a very long time to get to scale when you take that path,” Niblock told the Observer. “If we were to look at a different country and consider options there, it would probably not be on a greenfield basis.”
Lowe’s, founded in 1946 in North Wilkesboro, spent most of its history growing organically in the U.S. When Lowe’s first expanded to other counties – to Canada in 2007, then Mexico in 2010 – the company opened stores under its own name. The vast majority of Lowe’s stores are in the U.S., with 35 in Canada and 8 in Mexico.
Since then, Lowe’s has been more acquisitive in its quest for growth, both at home and abroad.
The company launched a joint venture with Australian retailer Woolworths to open home improvement stores under the name Masters in 2009. Although the new company lost about $169 million last year, Niblock said Wednesday that steps such as slowing new store openings are helping to turn things around.
In 2012, Lowe’s tried to buy Canadian home improvement retailer Rona, which rejected Lowe’s $1.8 billion bid. And last year, Lowe’s bought Orchard Supply Hardware, a 72-store California home improvement retailer that was coming out of bankruptcy. The deal, which kept the name Orchard Supply on stores, gave Lowe’s a bigger presence in California, where Niblock said the company had been “under-stored.” And it gave Lowe’s entry into cities where local regulations prohibit new big-box stores.
Though any major growth overseas is likely to be by acquisition, Niblock said the company will seek to continue its domestic growth organically.
“(Orchard Supply) was kind of a niche,” said Niblock. “It met our need in that particular market.”
Lowe’s expects to open 15 stores this year, less than 1 percent growth in its store count. Niblock and other executives said Wednesday that they’re focusing on improving sales and profits at their existing stores, as well as improving the online shopping experience for shoppers.
For example, you can’t currently schedule a product delivery on Lowes.com. Instead, you must speak to someone on the phone, said Niblock, giving an example for something the company plans to improve.
Profits up, forecast down
Lowe’s said Wednesday that its second-quarter sales and profits rose as weather, housing and the job market improved, but the company lowered its forecast slightly for the rest of the year.
Lowe’s profits jumped 10.4 percent for the three months ending Aug. 1, to $1 billion. Sales were up 5.7 percent compared to the same quarter last year, to $16.6 billion. Sales at stores open a year or more, considered a key measure of a retailer’s health, rose 4.4 percent.
The company rebounded from a first quarter that saw unseasonably cold weather hurt outdoor sales. But taking into account sales so far this year, Lowe’s lowered its forecast for sales growth to 4.5 percent, down from its earlier projection of 5 percent. The company kept its profit projections the same.
Home Depot, the nation’s largest home improvement retailer, reported Tuesday that its second-quarter profits jumped 14 percent. The Atlanta-based company raised its profit forecast. Home Depot has sharply cut its store growth in recent years, with only one net new store in the U.S. opened this year. The company has more stores already open in Canada and Mexico than Lowe’s – 180 and 106, respectively.
Analyst Wayne Hood, of BMO Capital Markets, called Lowe’s results “a good quarter” in a note to investors. But he said the company wasn’t able to make up as much ground as Home Depot, and said investors would likely be disappointed.
“Unfortunately, the market does not look at the company in isolation and compares the company’s results to Home Depot,” wrote Hood.
Lowe’s stock closed up 1.5 percent, at $52.33 a share, on Wednesday.
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