Lowe's lays out plan to boost sales, eyes acquisitions

EAST RUTHERFORD, New Jersey Tue Apr 3, 2012 5:52pm EDT

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

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EAST RUTHERFORD, New Jersey (Reuters) - Lowe's Cos Inc (LOW.N), the world's second-largest home improvement chain, is working on its own home project.

After trailing larger rival Home Depot Inc (HD.N) in same-store sales for 11 straight quarters, Lowe's is now investing in everything from in-store technology to its online business to win back shoppers from the industry leader.

"We recognized that a lot of our ills aren't just housing-related or macro-related, just some things we needed to fix ourselves," Robert Hull, who has served as Lowe's chief financial officer since March 2003, told Reuters on Tuesday.

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Lowe's vs Home Depot graphic: link.reuters.com/jaw47s

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Hull said the company's online business, which accounted for about 1 percent of total sales in 2011, could easily generate 5 percent to 10 percent of sales in five years. Lowe's, which recently bought online home-goods chain ATG Stores, said more acquisitions have the potential to boost that business.

"Everything we did (in the past) was store-centric. Today, we are all about the customer. So, it's about meeting the customer on their terms, no matter how they choose to interact with Lowe's: whether it is in their room, at their jobsite, on the phone or on the Web," Hull said.

He also said he sees opportunity for 100 stores in Canada, up from 31 now, which are mostly in Ontario.

Hull said he was open to all options when asked about Lowe's interest in buying Canadian rival Rona Inc (RON.TO), if that chain were to put itself up for sale.

Some investors said late last year that it made sense for the two chains to get together to better fight Home Depot.

He called Rona a "very interesting company" and said it had many attractive qualities like its footprint in Quebec, a market where Lowe's has hardly any presence at the moment.

Rona was not immediately available for comment.

Rona's shares rose 12.2 percent to C$10.49 on the Toronto Stock Exchange. Lowe's shares closed down 1 percent at $31.07 on the New York Stock Exchange on Tuesday.

Rona, once Canada's dominant do-it-yourself chain, has fared poorly as Lowe's and Home Depot have made inroads in the country. Same-store sales fell 7.3 percent in the fiscal year ended December 25, 2011.

The Canadian company said on February 23 that it was shifting its focus from big-box stores, and would close or reduce the size of 23 outlets to stay competitive.

EXTREME MAKEOVER

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 2011, and also trimmed the number of its U.S. regions and merchandising units.

Hull, who said he expects Lowe's makeover to start bearing fruit in 2012, said seasonal products have sold well so far this spring, partly due to the warmer-than-usual weather.

That prompted many homeowners to take up renovation projects earlier than usual this year, helping Lowe's and Home Depot to report strong sales for their fiscal fourth quarters, ended about February 1.

Lowe's initiatives include a shift from promotions to more everyday low prices. It has also started offering more localized products and made its stores more appealing with improved signs, television displays that stream videos to educate shoppers on how-to-do projects, and lower racks to make items easier to reach.

Lowe's launched mylowes.com in mid-October, a site that allows shoppers to save their room dimensions, create a shopping list and set reminders for recurring items such as air filters and batteries for smoke alarms.

It has given more than 42,000 Apple (AAPL.O) iPhones to employees in more than 1,700 stores so that they can help shoppers who use smart phones to research products, check rivals' prices and make purchases. It has given iPads to store managers so that they can spend more time on the sales floor.

Lowe's, which has already launched iPhone and iPad apps, plans to offer Android and other apps soon. Lowe's also hopes to let customers pay with their smartphones at some point.

It also increased its assortment of products online and will continue to do so, said Robert Gfeller, who was named executive vice president of merchandising in January 2011.

During a tour of Lowe's store in East Rutherford, New Jersey, Gfeller highlighted how the company is now placing many new products, such as Broan bath fans and recessed-to-pendant light conversion kits, right at the front of the aisle to catch the attention of shoppers.

"We are trying to push out ahead of the customer, out ahead of the season to be seen as differentiated in the marketplace, in a way that we really haven't been," Gfeller said.

(Additional reporting by Allison Martell in Toronto; Editing by Phil Berlowitz and Steve Orlofsky)

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