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Lowes - Notes2

Crystal Anderson is looking to diversify her RRSP holdings by investing in the home improvement retail industry, with a focus on capital gains. She needs to evaluate Lowe's historical financial performance and strategic growth plans as the company expands its presence in Canada by opening new home centers. The home improvement retail industry is highly concentrated among the top 4 retailers and was negatively impacted by the 2008 recession, but interest rates are expected to remain low, supporting real estate sales. Lowe's started as a small-town shop but is now the second largest home improvement retailer globally, though it struggled during the recession and plans to close underperforming stores and improve operations.

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120 views

Lowes - Notes2

Crystal Anderson is looking to diversify her RRSP holdings by investing in the home improvement retail industry, with a focus on capital gains. She needs to evaluate Lowe's historical financial performance and strategic growth plans as the company expands its presence in Canada by opening new home centers. The home improvement retail industry is highly concentrated among the top 4 retailers and was negatively impacted by the 2008 recession, but interest rates are expected to remain low, supporting real estate sales. Lowe's started as a small-town shop but is now the second largest home improvement retailer globally, though it struggled during the recession and plans to close underperforming stores and improve operations.

Uploaded by

Karan P
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Lowes Companies, Inc.

Case Notes
Crystal Anderson
o Searching for new equities to purchase before the end of current RRSP season
o Diversify her current holdings by investing in home improvement retail industry
o Primary investment obj.: GROWTH
Willing to accept moderate volatility to achieve capital gains
o Conclusion
Need to evaluate Lowes historical financial performance and assess the co.s
strategic growth plans
Co.s expansion would focus on placing bright, new, state-of-the-art home centers.
Lowes
o A major home improvement retailer
o Undergoing an expansion in the Canadian market.
The Home Improvement Retail Industry
o Size
23,000 home improvement retailers
Home center segment of the market was highly concentrated
TOP 4 retailers, 90% of industry revenues.
$5.5 million annual sales
o Sales
Decline in industry sales over 2 years during 2008 recession
Prices of hardware have been relatively stagnant since 1999
Resulted in reduced overall profit margins throughout the industry
2010: Net Profit Margin = 1%
o Seasonal and Economic Influences
Largely affected by eco. Growth
Reno. Projects undertaking during winter month, led to lower sales in the 1st quarter
of the year
Interest rates indirectly influenced the industrys sales
Low rates increased real estate sales
INTEREST RATES EXPECTED TO STAY RELATIVELY LOW
o Competition
Extremely competitive, due to retailers located in close proximities.
Offer lowest prices and best customer service
Canadian market was becoming increasingly dominated by big-box stores (i.e. home
depot, RONA, etc.)
o Home Depot
Co. vision was to provide customers w/ know-how and tools to perform a task,
while saving them money
Introduced in Canada in 94 and has grown substantially throughout all provinces

Largest home improvement retailer in the world.


o Rona
Formed as way to pool orders for products to secure better prices
Adopted the core values of unity and customer services
Canadas largest retailer and distributor of home renovation, hardware and
gardening products.
o Lowes Co., Inc.
Small-town shop offering a variety of products, including wash tubs and work boots.
Offered lower prices than consumers were accustomed to b/c the co. bought directly
from the manufacturers instead of distributors.
Believed that its business must be customer-focused and must utilize teamwork.
As of 2012, Lowes was the 2nd largest retailer of home improvement products in the
world.
50th on the Fortune 500 list in 2011
Sales
o Experienced a decline throughout the eco. Recession
Future Plans
o Close 20 US underperforming retail location and focus on improving ops.
o Strategic vision: move Lowes from being a home improvement retailer to
co.

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