Motley Fool Staff
Dec 27, 1999 at 12:00AM
From Fool Jeff Kirby:
"Locally we have both Lowe's and Menard's. Menard's was first on our area and then Lowe's built a much larger store. Menard's has just moved to bigger quarters and the fight is on. Personally I like the "feel" of Lowe's better and think the selection is wider."
Fool Mike Reed writes:
"In my area Lowe's & HD are across the street from one another. I shop at both of them consistently and since I am in retail, I have a good idea of what makes stores work. I am also a stockholder in both companies. Lowe's has a much cleaner appearance, which will appeal to the females. HD has so much stock that it gets piled up in many places before it can get put on the shelves. But HD has more knowledgeable sales people who are generally friendlier. They don't try to hide when you ask a question they don't know."
Let me quote part of a letter from Fool Tom Luther:
"While Lowe's and HD are very similar, my girlfriend comments that Lowe's layout and signage is easier to decipher for a non-hardware person in a huge store."
Generally, the e-mail and messages indicate that both Lowe's and Home Depot have low prices and good customer service. Some of the mail preferred one to the other in customer service, but I suspect that may be what we can expect in the range of individual experiences. One consistent item in all of the mail and message board postings is that Lowe's has a cleaner appearance and some feel the lighting is better.
Now, I took a trip this morning to see the local Lowe's. It was almost an exact reproduction of the Home Depot in Snellville, GA. It was much neater, and it felt brighter. The lighting may or may not have been better -- perception of how well a place is lit can be altered by the colors and the layout. Without a light meter, I can't really judge. The staff was friendly, and seemed knowledgeable from what I could tell in the short time I was there. They also have classes in home improvement subjects (like Home Depot), and the quality of merchandise is very good, as well as their prices.
Let me comment a bit on the appearance issue. If you read Built From Scratch, by Bernie Marcus and Arthur Blank (Home Depot's founders), you will see that the somewhat scruffy appearance of the Home Depot stores is done on purpose. They want the place to look like a busy warehouse. Is this better, or is the customer more comfortable in a neat and sparkling store? I personally agree with the Home Depot founders -- the appearance makes it feel like stuff is flying off the shelves.
The big question: Is Lowe's a better investment than Home Depot? Lowe's carries a P/E of about 36, Home Depot's is 70. Also, Home Depot has quite a number of stores; you can make the argument that there is more expansion possibility with Lowe's. Also, they don't charge fees for their Drip, Home Depot does.
All right, let's look at some other things I think are important. This week I was talking to a builder and his mechanical contractor about a job they needed to do on some ductwork. The mechanical contractor said, "Oh, I know the piece you want me to put in -- I've seen it at Home Depot." When I went to a development one day, I called the builder on the cell phone, and he said he was going to be late meeting me -- "I've got to get something at Home Depot." When my house was built, I asked for a different style doorknob because of my disabled son. "No problem, I'll get them at Home Depot," was the response from the builder. Did all these guys go to Home Depot? They may have, but they are using Home Depot the same way you get a "Kleenex" to wipe your nose instead of a "facial tissue." Nobody says, "I'm going to the home building supply store," or "I'm going to Lowe's." Home Depot has built a brand that's becoming a household word -- at least among contractors.
In the past year, sales for Home Depot have grown 25.10%, the past five years 26.75% (annualized). Lowe's sales have grown 20.80% in the past year and 21.96% in the past five years (annualized). This is a fairly significant difference. For the stock prices, Home Depot's stock has risen 57% in the past year. Lowe's has risen only 14%. From everything I see, Lowe's is not setting the trend, Home Depot is. They've come up with the brand, and they make the rules. I'm going to try to talk to their investor relations people this week. If I don't succeed, we'll compare finances of Home Depot and Lowe's, and hopefully cover that final issue in a future column. Thanks again for all your letters on this subject, I wish I could quote you all.
Motley Fool Staff
- Dec 27, 1999 at 12:00AM
- Special Announcement: The Motley Fool Unveils Ultimate “Organic Intelligence” Breakthrough
- What Is "Financial Wellness," and What Does a Lack of It Mean?
- The Psychology of a Rule Breaker in Good Markets and Bad
- Rule Breaker Psychology: When Markets Dip, Remember This
- Fixed Income Is Boring, But Safe.