...Accounting/Financial Analysis Of Lowe's Inc. Lowe’s is the world’s second largest home improvement retailer and operated 952 stores in forty five states at their fiscal year ending January 30, 2004. The company is currently in the midst of the most aggressive expansion in its history with 130 new stores opened in 2003 and another 140 slated for this year. Lowe’s saw 2003 sales reach approximately $30.8 billion, due largely to their focus on the retail customers and home-improvement projects. Fifty eight years ago Lowe’s began as North Wilkesboro Hardware Company, a neighborhood hardware store fittingly named after the small town it was located in. Owned by partners H. Carl Buchan and James Lowe, this concept was more than a living, it was a vision of creating a chain of hardware stores. The concept was easy and straight forward. Lowe’s concentrated on selling only hardware, appliances and hard-to-find building materials while eliminating wholesalers and dealing directly with manufacturers to establish a reputation of offering the lowest prices. The company went public in 1961 and began trading on the New York Stock Exchange in 1979 (NYSE:LOW). In 1982, Lowe’s had its first billion-dollar sales year, earning a record profit of $25 million, establishing them as an industry force. Lowe’s has posted extremely strong numbers in the past few years and the company has grown rapidly, swelling it’s store base from 500 to over 950. Sales have increased an average of 20% per year...
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...his case follows the performance-review and financial-statement-forecasting decisions of a Value Line analyst for the retail-building-supply industry in October 2002. The case contrasts the strong operating performance of Home Depot with the strong stock-market performance of Lowe's. Students examine a financial-ratio analysis for Home Depot that acts as a template for generating a comparable ratio analysis for Lowe's. The student ratio analysis is designed to build intuition with respect to interpreting individual ratios as well as ratio interrelationships (e.g., the DuPont framework). The historical-performance comparison suggests that investors are skeptical of the ability of Home Depot to maintain its performance trajectory, yet they project sustained improvements for Lowe's. Students are invited to scrutinize the analyst's five-year income-statement and asset-side balance-sheet forecast for Home Depot. The case expressly focuses on the asset side of the balance sheet as a preview for other cases using free-cash-flow forecasting. The Home Depot forecast exercise exposes students to the mechanics of financial-statement modeling and sensitivity analysis, which they can use in building their own forecast for Lowe's. Finally, the strong-growth assumptions for Home Depot relative to the modest-growth forecast for the industry suggest that the company can be expected to capture massive and perhaps unreasonable market share in the near term. The exercise provides a striking example...
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...innovative business approaches. Thus, in 2001, Robert Nardelli was named Chief Executive Office of the Home Depot. Nardelli introduced many new initiatives to the company such as, centralized buying, company-wide analytics and improved information systems, which were essential for the company to remain competitive. Many of his other changes, however, led to significant dissatisfaction, low morale, high turnover, reduced productivity, and general discontent among the associates that seriously derailed the company from the customer-centric approach that made the Home Depot such a success story during the Marcus and Blank era. The result was the most dramatic decrease in customer satisfaction in retailing history. In 2001, the Home Depot and Lowe’s both had customer satisfaction scores of 74 on the American Customer Satisfaction Index (ACSI). By 2005 however, customer satisfaction at the Home Depot fell to 67, becoming the worst performing retailer on the American Customer Satisfaction Index (ACSI) that year.ii As Claus Fornell aptly stated: “Home Depot had devalued its most critical asset: the health of customer relationships”.iii In turn, this...
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...TermPaperWarehouse.com - Free Term Papers, Essays and Research Documents The Research Paper Factory Join Search Browse Saved Papers Home page » Business and Management Should Companies Comply With China's Terms In: Business and Management Should Companies Comply With China's Terms Should companies comply with China’s terms? As our society advances towards a global society, and companies begin to transition themselves into multinational and global organizations, the question of which rules and regulations should the company follow is likely to precipitate. I feel such is the case with China. I believe prior to answering the question of foreign nation compliance, one should examine the reasons why an organization has entered into that foreign market. The primary objective is typically profits, a secondary could be expansion, an initiative to become a globally known brand and gain international market share. Once the fundamental question of “why” is answered, the remaining issues, such as foreign government policies, can be addressed as well. So should a company comply or defy? Proponents of both sides of the fence are up in arms and ready to debate their stance. Proponents argue loss of market share if a company decides to leave a potentially new market, especially an international market. And proponents of defying the compliance terms are citing moral and ethical beliefs which make it wrong to comply with a communist government (http://hbswk...
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...industry are Home Depot and Lowe’s. Each has their eye on moving into international markets, each has superstores in all 50 states and each has evolved along different paths to reach their current positions. According to Fortune 500 Home Depot, Inc. is ranked at #25 and the second largest retailer in the US after Wal-Mart. Home Depot Inc. has its corporate headquarters in Atlanta Georgia. What began in 1979 as two 60,000-foot stores that resembled warehouses has grown to about 2,200 stores across North America, Puerto Rico, and China. Home Depot Inc. is publicly traded on the New York Stock Exchange as NYSE:HD. At the end of 2008 Home Depot Inc. employed 331,000 people. Home Depot sales recorded and posted in 2009 are $71,288.0 mil. Home Depot Inc. is the number one home improvement retailer with Lowe’s coming in second place with sales posted in 2009 at $48, 230.0 mil.. Founded in 1946 Lowe’s went from a small hardware store to the ninth largest retailer in the US. Lowe’s went public in 1961 and began trading on the New York Stock Exchange as NYSE:LOW in 1979. According to Fortune 500 Lowe’s Companies, Inc. is ranked at #47. Lowe’s Companies, Inc. are headquartered in Mooresville North Carolina. Lowe’s competes with Home Depot, Inc. (home improvement) and Sears (appliances) they are second to both. Lowe’s currently has 1640 superstores in the U.S. and another dozen stores in Canada. Lowe’s also plans to open stores in Mexico in 2009. Lowe’s has not moved as aggressively...
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..."The Home Depot NYSE: HD, headquartered in Vinings, Georgia, is a home improvement retailer that aims for both the do-it-yourself consumer and the professional in home improvement and construction. It is the second largest retailer in the United States, behind Wal-Mart; and the third largest retailer in the world, behind Wal-Mart and French company Carrefour. The Home Depot operates about 1,900 stores across North America. The company operates stores in the United States (including the 50 states, Puerto Rico, the United States Virgin Islands), Canada, and Mexico. The Home Depot also operates EXPO Design Center stores in select U.S. markets, providing high-end home design products and services. Its 2004 sales totaled US $73.1 billion. It was ranked #13 on FORTUNE magazine's FORTUNE 500 The Home Depot also owns a chain of higher-end home decorating and appliance stores. The Home Depot employs over 325,000 people." The company was founded in 1978 in Atlanta, Georgia by Bernie Marcus and Arthur Blank, and grew rapidly, with sales topping $1 billion annually by 1986. From the moment of its foundation, HD has continued to grow constantly by targeting strong markets with many new homeowners and young people such as New Orleans. Home Depot managed to grow fast by quickly adapting to change and continued to be successful by holding fast to the culture and values of the organization. The constant renewal and the work to sustain culture that produces good products, employees, and customers...
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...Kyle Fortin Case 12: VALUE LINE PUBLISHING, OCTOBER 2002 From a profitability standpoint, Home Depot created value, according to their 12.3% WACC found in exhibit 3. They are consistently creating value in all years (97’-01’) beings their ROC is higher than their WACC. Considering the Industry ROE average was 17.1% in 1997 according to Wikinvest.com, Home Depot was a little behind the game as far as creating value for their investors. Home Depot’s Gross Margin increased steadily each year, indicating higher profits, as well as their operating margin increasing to a high in 99’ and leveling out around 2001 due to the economic factors erupting after 9/11. Their NOPAT margin is higher than their biggest competitor lowe’s so they were consistently producing more returns, in conjunction with greater sales figures. Home Depot is operating on relatively wide margins compared to its competitors; its substantial growth rate is quite high compared to Lowe’s which is easily explained by their innovative business strategy. The Home Depot at the end of 2000 stands on good financial footing. Their net revenues have grown 208% between FY 1995 and FY 2000. Home Depot continues its market saturation strategy which consistently grows their net revenues. Home Depot’s growth in net earnings over the same period has been 284%. The money that the firm is retaining as profits is larger than the total amount being brought into the company, indicative of a company that is realizing economies of...
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...between both company’s values and strategies, but importantly, Home Depot is a stronger investment for the short-term and long-term. My recommendations will support holding stock with Home Depot or invest soon. Quantity: The Value of Market Share In America, “size of the US home improvement retail industry is approximately $129.2B by revenues, with Home Depot leading the market with a 58.9% share; together Home Depot and Lowe’s account for 97% of the market share by revenues,” stated by William Bias. The fact remains that brand recognition drives price. There is clearly brand recognition and more importantly, brand loyalty with Home Depot compared to Lowes. And where does the brand loyal derive from…Proximity. The humanity that dwells within us tends to migrate to common and frequent people and venues. We are creatures of habits and Home Depot has strategically adopted the importance of having more stores to secure market share. On average, Home Depot operated 2,263 stores international US/Mexico/Canada (to name some) versus roughly 1,832 for Lowe's. The difference impacts the bottom line and therefore provides Home Depot with a higher increase economy of scale. HD is able to negotiate less cost per unit because they are...
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...Lowe’s Company Lowe's Company is a publicly traded company and is listed on the New York Stock Exchange. Lowe's is the world's second largest home improvement retailer operating stores in the United States, Mexico and Canada (second to Home Depot). Lowe's operates more than 1,700 stores. The Company offers approximately 40,000 products in a line of home decorating, maintenance, repair, remodeling and property maintenance products and services. Lowe's has been helping our customers improve the places they call home for more than 60 years. Founded in 1946, Lowe’s has grown from a small hardware store to the second-largest home improvement retailer worldwide. Lowe's ranked 54 on the FORTUNE 500 list, two-time winner of the ENERGY STAR Sustained Excellence Award in Retail, contributed more than $32 million to schools and community organizations and Best Employers for Healthy Lifestyles Award, Platinum Winner. In 2010, Lowe's and Lowe's Charitable and Educational Foundation supported more than 3,100 community and education projects in the United States, Canada and Mexico through grants totaling more than $30 million. Lowe’s take a collaborative approach to improving the communities they serve. Lowe’s believe they can make the most progress through partnerships. They partnered with 15 major nonprofit organizations in 2010. With Lowe's recent expansion to Mexico and from eastern to western Canada, they continue to build new relationships that will help serve the...
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...Initiative Although Lowe’s has grown to the second largest home improvement retailer worldwide, they still continue to trail Home Depot. At the center of Lowe’s success are their customer focus and their commitment to ethical behavior. However, Lowe’s 2012 Annual Report results a decline in the financial performance (Lowes.com, 2013). As a result of the decline the financial performance, Lowe’s has implemented the following strategic planning initiatives, Retail Relevance and Seamless and Simple. The Retail Relevance strategy is ensuring that Lowe’s keeps with customer love about the retail company while improving the retail operations (Lowes.com, 2013). The main focus of the Retail Relevance strategy is value improvement and product differentiation. Value Improvement enhances the core business by improving the line designs and lowering unit cost (Lowes.com, 2013). Product differentiation drives excitement in the store through better display techniques (Lowes.com, 2013). Value improvement and product differentiation will enable Lowe’s to compete more effectively by delivering better customer experience (Lowes.com, 2013). The Seamless and Simple initiative involves evolving the sales culture across all channels to include upgrading and continuously enhancing our information technology infrastructure, and allowing access to customer’s project and product status at all relevant touch points (Lowes.com, 2013). The Seamless and Simple initiative allows Lowe’s to deliver seamless...
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...Background Lowe’s although a well-known store for home improvement now falls behind Home Depot in profit and customer preference. Lowered to second place in 2013 when the Home Depot’s profits increased 18% over the year’s earlier period; with great results in housing recovery. Lowe’s failed during that time resulting in a miniature gain of 2.5% profit and a report of the spring being unusually cold, causing returns due to the ruining of products with dampened hoses and gardening gloves. Lowe’s is also reportedly losing in the battle of customer favorites and profits, because of its customer loyalty. Lowe’s shopper deficit stands at a percentage of -10% for both male and females shoppers, whereas Home Depot gained a total of 7% in customer loyalty between both male and female. This year Lowe’s fell behind Home Depot once again in earnings by not fully taking advantage of building a stronger housing market. To regain some of its earning in the housing market, Lowe’s utilized the strategy of big-ticket sales to boost the company’s revenue, in hopes to get a stronger growth in the categories of appliances and outdoor power equipment. Lowe’s has decided to fix the revenue problem by opening two new stores in Manhattan before the end of 2015, along with that fix is the earnings in shares by a rise of $0.16 ($1.20) from last year’s share of $1.04. Goals • Provide the community with 75% - 85% of resources necessary to accomplish their project improvement goals ...
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... Analyst of Value Line Publishing, Carrie Galeotafiore, was put in charge of the company comparison and developed a comprehensive forecast model that could be used to gauge future success. Historical performance, costs of capital, current financial statements, and macroeconomic trends were all used in creating assumptive ratios and growth rates. With five year projected financials, Galeotafiore applied these projections to current company metrics in an effort to publish an accurate forecast. Before finalizing these projections, it is recommended that Value Line produce a detailed qualitative analysis to support the numbers. The purposes of this analysis are to 1) provide detailed forecast analysis for hardware giants Home Depot and Lowe’s. 2) compare these assumptions to the industries previous and potential performance 3) provide a judgment for Value Line readers for potential stock investment actions. Although these two companies have risen to the top of this industry it is recommended that investors hold their current investment position on both companies, as opposed to buy or sell. Problem Formulation As Galeotafiore prepares to release Value Line’s forecasts, there are several important factors that must be taken into consideration. Primarily, are the numbers used in the models for Home Depot, found in Exhibit 7, dependable? Can both companies be expected to achieve similar growth rates or has market saturation been reached? Next, is Galeotafiore properly...
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...Lucius S. Lowe started Lowe’s in 1921. During the 1950’s Lowe’s opened more hardware stores, primarily in small town in the southeastern United States. Lowe’s went public in 1961 and was successful at merchandising and financial management. In the 1980’s due to competition from Home Depot, Lowe’s joined the bandwagon and joined the big-box type store. Lowe’s has a vast market, which includes, homeowners, renters, and commercial business customers. Lowe’s focuses on, meeting the group of customers needs, Creators, as they feel meeting the Creators discerning needs this will help to exceed the needs of other customers. Lowe’s wants to be the first choice among customers when it comes to home improvement. Realizing customers would like a full solution to home improvement. Lowe’s does this by partnering with the customer through the improvement process by offering inspiration, planning, completion and enjoyment. They have three goals, possibilities, support and value. Lowe’s offers a wide array of merchandise stocking 40,000 or more items, and special order items. Lowe’s installation is offered through independent contractors. Lowe's is an Authorized Service Repair Network allowing a customer to contact Lowe’s with a problem and get a solution. They also have a store credit card, which offers a five percent discount on everyday purchases and if a purchase if over $299, the customer may choose the five percent discount or no interest financing. The commercial credit...
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...Lowe’s Home Improvement Stores Sheila Thomas Webster University Abstract Lowe’s exists to help customers improve and maintain their biggest asset- their home. We do this by meeting the changing needs of our customers by providing inspiration and support whenever and wherever they shop. Whether our customers shop in store, online, by phone, or if we’re meeting them at their home or place of business, Lowe’s is ready to help. In our more than 1,830 stores, we have implemented multiple systems to improve the customer experience, including an upgraded store information technology infrastructure that allows customers and employees to access richer product information, enjoy an endless aisle of product choices and manage their projects from inspiration to enjoyment (Lowe’s.com). Online, we are rapidly expanding our assortments to offer customers a broader range of products that can be researched and purchased online, in store or via our mobile app. MyLowe’s makes it easy for our customers to automatically track and store all purchases on their online customer profile. We’ve vowed to “Never Stop Improving” so we can satisfy the ever-changing needs of our customers (Lowe’s.com). Lowe’s operates more than 1,830 stores in the United States, Canada and Mexico. We serve approximately 15 million customers each week and employ more than 260,000 people (Lowe’s.com). Our stores stock 12 product categories ranging from appliances and tools, to paint, lumber and nursery...
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...In general consumers do not know what process the product they are purchasing has been thru before it gets to the store shelf to be purchased. Every company tries to put together a cost effective procedure to get the product on to the shelf and into their customers’ hands. Companies often compare business plans or business models to construct their own and often improve upon the process. Below the differences of companies like Home Depot, Lowes and any local hardware store. Each of these businesses aims to satisfy their customers by providing a wide range of products that can assist on home improvement projects or general contracting and construction. While all three businesses may have similar business models or target the same type of clientele, they each have a different Operations and Materials Management (OMM) cost. Home Depot is one of the largest hardware retail stores located in the United States. Home Depot employees run various tasks from assisting a customer with suggestions on items, to actually running heavy machinery to cut wood or metal for a customer. The employees seemed to be geared to help customers with their needs as fast as possible. The store stocks a wide variety of items for multiple different projects or repair. They also have a lower cost alternative under the Home Depot brand for many different items available in the store. By having a Home Depot brand on the shelves for a variety of items helps the OMM of the business by increasing revenue thru a...
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