Lowe's Companies, Inc. operates as a home improvement company in the United States, Canada, and Mexico. It offers a line of products for maintenance, repair, remodeling, and decorating. The company provides home improvement products in various categories, such as lumber and building materials, tools and hardware, appliances, fashion fixtures, rough plumbing and electrical, seasonal living, lawn and garden, paint, millwork, flooring, kitchens, outdoor power equipment, and home fashions. It also offers installation services through independent contractors in various product categories; extended protection plans; and in-warranty and out-of-warranty repair services. The company sells its national brand-name merchandise and private branded products to homeowners, renters, and professional customers; and retail customers comprising individual homeowners and renters. As of March 24, 2017, it operated 2,365 home improvement and hardware stores. The company also sells its products through online sites comprising Lowes.com and Lowesforpros.com; and through mobile applications. Lowe's Companies, Inc. was founded in 1946 and is headquartered in Mooresville, North Carolina.
Business Analysis of Lowe's
The Retail Sector is witnessing a major shakeup, new age business models in the industry are transforming both customers and businesses. Faced with this uncertainity, companies are investing resources to transform their business. An in-depth business analysis is a valuable resource to identify and articulate the need for a business model change. At R&P Research we believe, the starting point for a business analysis is Benchmarking. Business benchmarking can be done at various levels: 1) Industry Benchmarking 2) Peer Benchmarking 3) Disruptors Benchmarking. In this report, we share the snapshot of how Lowe's compares against the industry on the major performance indicators. This analysis, along with peer group/disruptors benchmarking and revenue model understanding can help identify growth and cost optimization opportunities to maximize the value delivered by Lowe's to its stakeholders. R&P Research Industry Intelligence Platform provides historical data for last 15 years with an easy to use benchmarking interface for an in-depth comparative business analysis.
Here is the performance snapshot of Lowe's with an interactive chart.
- Revenue Growth: Lowe's reported a revenue growth of 5.1% year-on-year during 2016. Home Improvement Retail Industry grew at 5.7% in the same period
- COGS share of Revenues: As a percentage of revenue, Lowe's spent 65.2% of its total revenues on COGS. Home Improvement Retail industry average (COGS share of revenue) in the same period was 64.8%
- R&D share of Revenues: Lowe's R&D share of Revenues details are not available because either company does not share the data or we do not have it
- SG&A share of Revenues: As a percentage of revenue, Lowe's spent 23.9% of its total revenues on Sales, Marketing, and General Administration (SG&A). Home Improvement Retail industry average SG&A spending in the same period was 22.3%
- Inventory share of Revenues: As a percentage of revenue, Lowe's spent 16.0% of its total revenues on Inventories. Home Improvement Retail industry average Inventory spending in the same period was 15.6%
- Accounts Payable share of Revenues: As a percentage of revenue, Lowe's invested 9.5% of its total revenues on Accounts Payable (A/P) Home Improvement Retail industry average Accounts Payable investment in the same period was 8.2%
- Accounts Receivable share of Revenues: Lowe's Accounts Receivable share of Revenues details are not available because either company does not share the data or we do not have it
- PP&E share of Revenues: As a percentage of revenue, Lowe's invested 33.1% of its total revenues on Property, Plants, and Equipments (PP&E). Home Improvement Retail industry average PPE investment in the same period was 26.6%
- Intangibles share of Revenues: Lowe's Intangibles share of Revenues details are not available because either company does not share the data or we do not have it
- Net Margins: Lowe's Net Margins in the year 2016 were 4.3%. Home Improvement Retail industry average Net Margins in the same period were 6.3%
Sector and Industry Association of Lowe's
For the purpose of performance benchmarking of a company with a sector or industry average, R&P Research associates every company with one sector and one industry. An industry consists of companies with related/similar business models. A sector comprises of a group of related/similar industries.
Lowe's is associated with Retail Sector and Home Improvement Retail Industry.
Retail sector is comprised of the following industries: Broadline Retail; Grocery Retail; Specialty Retail; Apparel Retail; Home Improvement Retail; Specialized Consumer Services. The definitions for each of the industries is as follows:
- Broadline Retail industry includes retail outlets and wholesalers offering a wide variety of products including both hard goods and soft goods.
- Grocery Retail industry includes retail stores that primarily offer non-perishable food that is packaged in cans, bottles and boxes, with some also having fresh produce, butchers, delis, and bakeries
- Specialty Retail industry includes retailers and wholesalers concentrating on a Single Class of Goods, such as electronics, books, automotive parts or closeouts. It also includes automobile dealerships, video rental stores, dollar stores, duty-free shops and automotive fuel stations not owned by oil companies.
- Apparel Retail industry consists of retailers and wholesalers specializing mainly in Clothing, Shoes, Jewelry, Sunglasses and Other accessories.
- Home Improvement Retail industry includes retailers and wholesalers concentrating on the sale of home improvement products, including Garden Equipment, Carpets, Wallpaper, Paint, Home Furniture, Blinds and Curtains, and Building materials.
- Specialized Consumer Services industry includes providers of consumer services such as Auction Houses, Day-care Centers, Dry Cleaners, Schools, Consumer Rental Companies, Veterinary Clinics, Hair Salons and providers of Funeral, Lawn-maintenance, Consumer-storage, Heating and Cooling installation and Plumbing services.
Industry Ranking of Lowe's
With $59.1 billion revenues, Lowe's ranked number 2 of all the companies in the US Home Improvement Retail industry. There were a total of 14 public companies in the US Home Improvement Retail industry that had revenues greater than $50 million during 2016.
The top-10 companies in the US Home Improvement Retail industry by revenues during 2016 were:
- Home Depot ($88.5 billion)
- Lowe's ($59.1 billion)
- Bed Bath & Beyond ($12.1 billion)
- Williams-Sonoma ($5 billion)
- Restoration Hardware ($2.1 billion)
- Pier 1 Imports ($1.9 billion)
- La-Z-Boy ($1.5 billion)
- Tuesday Morning ($956.4 million)
- Haverty Furniture Companies ($821.6 million)
- Ethan Allen Interiors ($794.2 million)
Business Model Analysis (BMA) Framework
We use the following framework to assess the business model of a company. Business Model Analysis framework can be used by organizations to articulate growth strategies and identify cost optimization opportunities. Technology and consulting companies can use this framework to identify the value drivers and pain points of their targeted customers. Entrepreneurs can use this framework to understand the language of business and identify promising business opportunities. This framework can be used by any professional aspiring to take up a leadership role to better understand the businesses challenges, articulate growth strategy, and monitor the business improvement requirements for the organization.