Lowe's Companies Inc
. (NYSE: LOW) is the world's second largest retailer of home
improvement products . Through its 1,700 plus stores spread across
the U.S., Canada and Mexico, Lowe's offers a wide range of home
improvement products and installation services for individual home
owners as well as for professional builders. It competes with the
industry leader Home Depot (NYSE:HD) and other players such as
Builders FirstSource (
), Sherwin Williams (
) and Sears (NASDAQ:SHLD).
At the recent Sanford C. Bernstein Strategic Decisions
Conference in New York, Lowe's Chairman and Chief Executive Robert
Niblock revealed that the company's lagging performance was not
because of the retailer conceding market share to its rival Home
Depot but because of sales from new stores cannibalizing business
from older outlets.
New Store Expansion Set to Decline
After years of fast-paced expansion in the U.S., Lowe's is
planning to reduce the number of new store openings to 25 this year
which is still higher than the meager 5 new stores Home Depot is
expected to add in the same period. Home Depot undertook its own
store rationalization program in 2009, deciding to close down many
stores. It has also reduced new additions ever since, focusing on
web sales and supply chain improvements. Lowe's plans to cut down
on store expansion expenditures is in line with its decision last
year to pay back more cash to its shareholders thorough higher
dividends and share buy backs. The company has announced a 5 year
program through which it plans to buy back $18 billion of its
stock, a move that could result in its share base falling to half
its present level.
We capture Lowe's expenses on new store openings in our capital
expenditure as a percentage of sales forecast.
We forecast the downward trend in capital expenditure as
measured against sales volumes to continue over our forecast period
as spending on expansion declines.
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estimate for Lowe's Companies