Lowe's undergoing makeover to win shoppers

NEW YORK Tue Dec 6, 2011 12:57pm EST

Lowe's workers collect shopping carts in the parking lot at the Lowe's Home Improvement Warehouse in Burbank, California August 15,2011. REUTERS/Fred Prouser

Lowe's workers collect shopping carts in the parking lot at the Lowe's Home Improvement Warehouse in Burbank, California August 15,2011.

Credit: Reuters/Fred Prouser

NEW YORK (Reuters) - From improving signage to adding more technology to its stores, Lowe's (LOW.N) is undergoing a major makeover as the No. 2 home improvement chain tries to woo shoppers away from larger rival Home Depot (HD.N).

At an investor meeting on Tuesday, its top executives laid out a plan to make the retailer more friendly to shoppers who `are increasingly becoming better at "comparison shopping."

The news comes after Lowe's underperformed Home Depot on the same-store sales front for 10 straight quarters, increasing the pressure on the smaller chain to find ways to differentiate itself from the market leader.

Lowe's said it was now shifting away from promotions to more everyday low prices, offering more localized products, improving its website and working to improve the in-store experience by using better signage and technology in stores.

For instance, Lowe's has issued more than 42,000 Apple (AAPL.O) iPhones to employees in more than 1,700 stores so that they can help shoppers who will use smart phones to research products, check rivals' prices and make purchases.

The company is also increasing its assortment of products online. It launched mylowes.com in mid-October, a site that allows consumers to save their room dimensions, create a shopping list and even set reminders for recurring items.

"We live in an increasingly seamless, socially connected world," Chief Executive Robert Niblock told investors at a meeting that was webcast over the Internet. "We have to meet customers on their terms."

Lowe's is also installing television displays that stream videos to educate shoppers on how to do projects and lowering certain product racks to make items more accessible.

On Tuesday, Lowe's also reiterated its outlook for the current fiscal year.

It continues to see sales rising 2 percent to 3 percent in the fiscal year ending February 3. It also backed its profit forecast of $1.37 a share to $1.40 a share, including charges of 20 cents a share associated with store closings and discontinued projects.

During an interview last month, CEO Robert Niblock told Reuters that the planned efforts will not bear fruit right away.

"We believe that through kind of the first part of 2012, we start to make up some ground and you start to see maybe us closing that gap in the second half of 2012," Niblock said.

Still, many look at the new strategy as a step in the right direction.

"While these initiatives will take time to impact results, the message that Lowe's is actively working to improve the business should ring clear," Baird analyst Peter Benedict wrote.

Last week, Goldman Sachs advised clients to buy Lowe's calls ahead of the analyst meeting and sell rival Home Depot Inc (HD.N) calls to fund the purchase.

Goldman on Friday upgraded Lowe's to "Buy" from "Neutral" on the view that management of the chain "is embracing the need for meaningful upgrades to the business after years of drift."

Lowe's recently revamped its management and regional structure in an attempt to improve its U.S. operations.

Its U.S. stores now operate under three divisions -- North, South and West. Previously, it divided its largest market into at least five regions. The chain also consolidated its merchandising operations into two product units from four.

In October, Lowe's said it was closing 20 of its U.S. locations and eliminating nearly 2,000 jobs, and slashing its store-opening plans to improve profitability. It laid off about 1,700 middle managers across the United States in January. (Reporting by Dhanya Skariachan; Editing by Gerald E. McCormick and Tim Dobbyn)