Lowe's (NYSE:LOW) has stumbled a bit in recent quarters -- that is, relative to the chain's own high standards.
The home improvement retailer delivered diluted earnings per share of $1.86 for its second quarter, up from $1.68 in the year-ago period. Overall sales rose by 7.1% to $20.9 billion, and comparable store sales climbed by 5.3%.
For most retailers, results like that would bring on a celebration. However, Lowe's same-store sales came in below expectations and well shy of the 8% comp sales gain that rival Home Depot put up last quarter.
The quarterly report came not long after Marvin Ellison assumed the CEO position, following the retirement of longtime boss Robert Niblock. That immediately put Ellison in a position to explain what steps he would take to grow the business, during the retailer's Q2 earnings call with investors.
1. He is confident in the home improvement market
Ellison, who worked in senior leadership positions at Home Depot for more than a decade, was the CEO of J.C. Penney before coming to Lowe's. At J.C. Penney, he made a lot of positive moves, but was swimming against the current for many reasons.
Ellison noted that the home improvement space is a "great marketplace -- after spending almost four years in the apparel sector, it's obvious to me that the home improvement marketplace is among the most robust in retail. We anticipate continued growth in the home improvement sector, where there is a strong demand for our products and services from a diverse group of customers motivated to invest in their homes."
2. There is room to grow
The new CEO is confident in not just the market, but also in his company's ability to continue to grow. He acknowledged that the chain still has work to do, saying, "... [W]e have a lot of opportunity as a company. Specifically, we're significantly behind in our supply chain strategy, our in-store technology is dated, overall execution is impaired by complexity, we have a large number of out-of-stocks in our stores that must be addressed, and we need to increase the rigor with which we evaluate capital investments."
Ellison said that while it's never good to be behind, the company's situation gives it room to grow. He noted that since he took over, the company has hired a number of top executives to help close the gap.
3. He is putting in the work
Instead of simply relying on his own intuition and experiences, Ellison has made an effort to hit the road to engage with Lowe's employees, customers, and suppliers. He has held town halls with employees and visited stores across Lowe's 14 U.S. regions, and he discussed those visits:
My aggressive travel schedule has given me the opportunity to learn from those closest to the customer. In fact, my greatest learning thus far is just how outstanding our associates are. Our front-line teams find ways to serve our customers despite some of the competitive disadvantages we've created for ourselves. Without question, our associates are our greatest asset and we must give them better tools to compete.
A good place to be
Lowe's problems are more about refining operations and taking advantage of opportunities than any sort of major business issues. This is a strong company that can improve its execution. Ellison seems to be in control and to understand the situation he has taken over.
Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool is short September 2018 $180 calls on Home Depot and long January 2020 $110 calls on Home Depot. The Motley Fool recommends Home Depot and Lowe's. The Motley Fool has a disclosure policy.