Analysis of Lowe’s Companies, Inc.

(Part 2)

 

Not only does Lowe’s Companies, Inc. focus on the ever-changing needs of its cherished customers but also it is very involved with its employees. Lowe’s is the employer of over one hundred thousand people. Lowe’s believes that quality and customer service start with quality employees. To ensure only quality individuals are hired, Lowe’s has an extensive mentoring, recruiting, and on the job training program in place for its employees. To keep self-esteem high on the job, Lowe’s rewards its employees with the most comprehensive benefits package in retail, through Lowe’s “Buy, Own, Save” program and its 401(k) plans. The focus of the “Buy, Own, Save” program is to help its employees plan for the future. Another program for use at its employee’s disposal is the Employee Stock Ownership Plan. Lowe’s wants its employees to be involved with and share in its corporate success. After one year of service all associates get a stock contribution through the Employee Stock Ownership Plan. This is Lowe’s way of saying thank you to its employees for all that they do. Lowe’s employees have used the Employee Stock Ownership Plan to acquire approximately seven percent of all Lowe’s stock holdings.

Lowe’s Companies, Inc’s. Chief Executive Officer, Robert L. Tillman, has made a lasting promise to Lowe’s customers. Lowe’s mission is to provide both the Do-It-Yourselfer and Commercial Business Customer a simple, convenient environment where they can easily find all that they need to satisfy the needs of their project no matter how simple or complex it may be. If it is to improve your home or renovate an office space, you can find all that you need in one stop. Lowe’s does this all in the name of providing their customers the most modern sales floors in the industry, the best customer convenience, and best products at very low prices. (Annual Repot 2000)

 

Company Organization

 

As you know, Lowe’s Companies, Inc. started out as North Wilkesboro Hardware store. Then in 1946, H.C. Buchan bought out his brother-in-law James Lowe’s portion of North Wilkesboro Hardware, and the name was changed to Lowe’s Hardware. Today Lowe’s is one of the largest home improvement retailers in the world. Lowe’s home improvement warehouses are located in forty-two out of the fifty States. In February 2001, Lowe’s was operating 633 stores nationwide. With projections in fiscal year 2001 to add an additional 120 stores and relocate of 12 old small format stores, Lowe’s should have 753 stores in operation nation wide at the end of 2001.

 

(Annual Repot 2000)

 

Lowe’s new superstores are currently the largest in the home improvement marketplace, averaging a retail space of about 150,000 square feet. With a typical store prototype averaging a sales floor of 121,000 square feet and an additional 30,000 square foot lawn and garden center attached to the sales floor. On the inside of a Lowe’s home improvement warehouse store you will find the sales floor broken up in to sections that are called centers. Each warehouse generally contains an air conditioning center, heating center, plumbing center, electrical supply center, a building materials supply center, interior design and home fashions center, lawn and garden center, and a appliance center. As you can see Lowe’s is actually a broad spectrum of stores rolled up into one all encompassing warehouse for convenience.

A typical Lowe’s home improvement warehouse generally stocks more than 40,000 items plus an additional 400,000 home improvement items available through a special order program. To maximum extent possible Lowe’s purchasing agents from Lowe’s Global Sourcing Division try to purchase foreign products directly from the source to cut down on cost by eliminating the cost of going to third-party importers. This savings is passed directly to the customer. Less than 4% of the items that are stocked at Lowe’s come from a single source, Lowe’s deals with approximately 7,000 venders worldwide. Of the merchandise that each location stocks, approximately 50% purchased and distributed from one of Lowe’s regional distribution centers (RDCs)

which are strategically located throughout the United Sates. There are distribution centers located in North Carolina, Indiana, Georgia, Pennsylvania, and Texas, with the plan to open two new RDCs in 2001 in Perris, California and Findlay, Ohio. There are also 9 support facilities, which are smaller than the RDCs, and are designed to handle and distribute items that need special packaging or shipping.

Robert L. Tillman is currently the Chief Executive Officer and President of Lowe’s Companies, Inc. and has held the position since August 1996. Mr. Tillman has a long track record with the involvement of Lowe’s Companies, Inc. He was the Executive Vice President of Merchandising from 1991-1994. From 1994 through July 1996 Mr. Tillman acted as the Senior Vice President and Chief Operation Officer, and in 1998 he became the Chairman of the Board. During Mr. Tillman’s reign Lowe’s has seen vast improvement in all aspects of the company. With the most noticeable changes coming in 1999 with the merger of Eagle Hardware and Garden, through the end of 2001 where the most aggressive expansion plan in the company’s history is taking place.
(http://yahoo.marketguide.com)

Lowe’s knows its owes a large portion of its success to its employees, and rewards them with a competitive salary, benefits, and room to expand their career. Lowe’s ensures that its employees get on-going training to help them develop their product knowledge, job expertise and people/ communication skills. This is done through the company mentorship programs, which provide on the job skills for both the veteran worker and newcomers alike. This knowledge base sets Lowe’s leaps and bounds ahead of the competition and keeps their customer base stable, intact, and growing. There are programs that Lowe’s has set up to allow its employees and managers to bask in the success of the company. At Lowe’s when you reach the level of manager there is a bonus program in place to increase compensation based on the success of the individual store location at which you manage. Lowe’s has 3 programs available for all employees to use in order to increase their financial value, the “Buy, Own, Save” program, Employee Stock Ownership Program, and its 401(k) Program. Through the “Buy, Own, Save” program, employees are able to enjoy the corporate success from day one with enrollment into this discounted stock purchase program.

Qualified employees are able to enroll into Lowe’s Employee Stock Ownership Plan after a year of employment. They receive annual Lowe’s stock contributions. The last program, Lowe’s 401(k) program, is probably the most important to those individuals that are looking to have a long successful career at Lowe’s and stability in retirement. All three of these programs are set up to help the employees join in on the success, plan for the future, and to compensate them for all their hard work.
(Annual Repot 2000)

The great time of need for the nation has not gone unnoticed by Lowe’s Companies, Inc. With the Terrorist attacks on the World Trade Centers and Pentagon, Lowe’s is working hand in hand with the Red Cross to help aid in the aftermath of the worst terrorist attack in United States history. Lowe’s Home Improvement has donated numerous truckloads of supplies to aid in the clean up of the aftermath from September 11, 2001. Everything from hard hats, pickaxes, shovels, and prying bars has been donated to help out. Lowe’s has pledged one million dollars and they are also matching employee donations to the Red Cross. This just goes to show that Lowe’s cares about the great nation that they are located in. (http://www.thepiedmontchannel.com/)

Through careful planning and a tremendous logistical effort over the past two years Lowe’s Companies, Inc. has kept an edge on the competition. At Lowe’s the customers know they will have a convenient one-stop place for all their home improvement needs. Customers will always be met by enthusiastic Lowe’s employees that will help assist with all their needs. This promise to the customers is reassured by a statement that Robert Tillman, Lowe’s CEO, made in the 2000 annual report, “As Lowe’s enters a new fiscal year, Improving Home Improvement is a promise that continues to drive every aspect of our business strategy.” The employees know that they will get a competitive salary and one of the best compensation packages that any one company has to offer. So, through growth, Lowe’s is meeting the needs of their customers and employees.

 

Company Products and Services

 

Lowe’s is a home improvement retail store located out of Wilkesboro, North Carolina. They are the second largest home improvement retailer in the United States. Lowe’s is the only place you will need to stop to satisfy all of your home improvement needs. Lowe’s knows that the trends of the market place and customers change all the time. With the input that is received from their customers Lowe’s constantly refines its product base. Brightly lit sales floors are one change attributed to the customer research that has been accomplished by Lowe’s. Through research Lowe’s knows that customers are looking for a low cost option, a top of the line solution, or something in between. Lowe’s has clear, detailed, descriptions showing the benefits and features of each product to aid the customer in his/her choice of products. Lowe’s offers exclusive or proprietary products such as Lowe’s Top Choice Lumber, Kobalt Tools, and Alexander Julian at Home Decor to name a few that give its customers an added dimension of choice that many home improvement retailers don’t offer.
(Annual Repot 2000)

Lowe’s offers two proprietary company credit cards for its customers to use at their convenience. Lowe’s offers a credit card for both the commercial business customer and local retail customers. By setting up in-house accounts Lowe’s commercial business customers are afforded the luxury to charge against that account. Each store accepts all major credit cards. (http://yahoo.marketguide.com)

For those who like to do their shopping in their pajamas at home, they can visit Lowe’s web site at www.lowes.com. Here you will find a user-friendly setup to aid the customer in easy navigation through the website to find what you need. There are comprehensive product descriptions. Each individual can personalize the Lowe’s web site to meet his or her specific shopping needs. Also on the web site you will find a How-To Library that aids the Do-It-Yourselfer with projects, ideas, tricks, safety tips, and safety ideas. Here they will show you everything from building a doghouse to repairing a sticky door. The How-To Library is broken up into eight separate sections; Home Safety, Indoor Projects, Buying Guides, Home Decor, Lawn & Garden, Seasonal Index,
Safety, Indoor Projects, Buying Guides, Home Decor, Lawn & Garden, Seasonal Index, Outdoor Projects, and a Contractor Library. This web site is just one more thing that Lowe’s offers for free to help aid its customers in convenience.

Lowe’s service to the local community is a benchmark in the industry. Throughout the years Lowe’s has made numerous contributions to the local United Way, Red Cross, Special Olympics, and National garden in Washington, DC. For the Special Olympics Lowe’s was a Gold sponsor for the 1999 world games where it contributed thousands of hours of volunteer work and more than a million dollars. For the United Way annual employee contributions total more than 1.7 million dollars. Lowe’s is proud to be the only home improvement retailer to be recognized as a corporate leader by the United Way of America.

Lowe’s community involvement has not gone unrecognized. On April 9th, 2001 Lowe’s Companies, Inc. was named the National Association for the Advancement of Colored People (NAAPC) Southeast Region Corporation of the Year for its involvement in the local community. One of many feats that lead to this award for Lowe’s was its one million dollar contribution to the rebuilding of Princeville, North Carolina. Princeville North Carolina is the oldest township in America and was founded by freed slaves. Floods caused by Hurricane Floyd ruined the town of Princeville. Lowe’s spearheaded a 12 home habitat for humanity project in Princeville. Lowe’s donated materials, and employees donated their time to help refurbish the local NAACP regional headquarters. Lowe’s contributions to the local communities are unparalleled. (http://www.lowes.com)
Lowe’s products are aimed to please all. Lowe’s products cater to the needs of its customers by evolving to meet the changing trends of its customers purchasing desires. Lowe’s donates to the community both by direct interaction with the community and through non-profit charitable donations such as the Red Cross, and United Way of America. Through these avenues, Lowe’s has positioned itself to be the best in the home improvement sector.

 

Financial Highlights

 

Lowe’s Companies, Inc. stocks is traded on the New York Stock Exchange under the ticker of “LOW”, the stocks categorized under the services sector, and the industry is retail (home improvement). Lowe’s net earnings over fiscal year 2000 reached an all time high of 809.9 million dollars, that is a net increase of 20% over the 672.8 million dollars earned in fiscal year 1999. Lowe’s sales in fiscal year 1999 totaled 15.9 billion dollars and for fiscal year 2000 that figure increased 18% to 18.8 billion dollars. Store sales also rose 1.2% in fiscal year 2000. (Annual Repot 2000)

Out doing its largest competitor in 2001, Lowe’s focus is now centered on more efficient operating cost. So far for fiscal year 2001, Lowe’s has out done Home Depot’s performance by 50 percent. For the seventh straight quarter, Lowe’s relative return on assets has improved, and the operational gap between Lowe’s and Home Depot is slimming on a day-to-day basis. Lowe’s has a reported in-store sales increase of 1.7% for the second quarter of fiscal year 2001. Compared to reports from Home Depot of an in-store sales increase of 1% for the second quarter of 2001. (http://news.ft.com/home/us/)
Lowe’s financial forecast for the third quarter of fiscal year 2001 was also right on track. Even with the tragic events that shocked the Nation on September 11, 2001, Lowe’s reported a third quarter earnings per share of about 30 to 32 cents. While Wall Street analysts’ predictions for the third quarter were about 31 cents per share. It is quite impressive that Lowe’s was able to live up to market expectations this third quarter, especially taking into consideration the tragic events of the terrorist attacks on the United States. Lowe’s met its third quarter earning expectations and helped out with the efforts in New York and at the Pentagon. Lowe’s donated free materials to aid in the clean up effort, and financial donations to the Red Cross. The employees of Lowe’s should be very proud of the finical and humanitarian accomplishments that its company has made over these past few months. (http://yahoo.marketguide.com)

 

QUARTERLY INCOME STATEMENT

 

In Millions of U.S. Dollars(except for per share items)

3 Months 3 Months 3 Months 3 Months 3 Months
Ending Ending Ending Ending Ending
08/03/013 05/04/01 02/02/01 10/27/00 3 07/28/00

Revenue 6,126.7 5,276.4 4,543.1 4,504.1 5,264.3
Other Revenue – – – – –
Total Revenue 6,126.7 5,276.4 4,543.1 4,504.1 5,264.3

Cost of Revenue 4,409.0 3,782.8 3,251.8 3,204.8 3,812.2
Gross Profit 1,717.7 1,493.5 1,291.3 1,299.4 1,452.0

Selling/ General/ Administrative Expenses 999.7 939.7 874.9 809.4 857.1
Research & Development – – – – –
Depreciation/ Amortization 124.6 119.1 112.0 104.7 98.5
Interest Expense, Net Operating
42.6 41.3 40.6 28.0 26.2
Interest/ Investment Income, Operating
– – – – –
Interest Expense (Income), Net Operating 42.6 41.3 40.6 28.0 26.2
Unusual Expense (Income) – – 0.0 – –
Other Operating Expenses 28.5 35.8 41.0 37.2 27.9
Total Operating Expense 5,604.4 4,918.8 4,320.2 4,184.1 4,821.8

Operating Income 522.3 357.6 222.8 320.1 442.4

Splits: 29-Jun-92 [2:1] 4-Apr-94 [2:1], 29-Jun-98 [2:1], 2-Jul-01 [2:1]

 

Visit the LHSC web site at www.loweshomesafety.org to see firsthand for your self the plethora of information about the LHSC that is just one click of the mouse away. By not only offering home safety tips to preserve the health of its customers but also offering safety conscious items for purchase at each Lowe’s location. This organization is just one example of how much Lowe’s cares about the local community that they so proudly serve on a daily basis. For the future Lowe’s will keep intact a loyal consumer base that knows that Lowe’s is pulling out all the stops for the safety and well being of the consumer. (http://www.loweshomesafety.org)

 

Summary

 

Lowe’s Companies, Inc. is among the largest home improvement retailers in the world. Over the past few years Lowe’s focus has moved from the rural market, which was the backbone for the company’s corporate success since the beginning of the company in 1946, to the more modern urban U.S. market. As you know Lowe’s is just finishing off the largest expansion in the company’s history, in conjunction with the merger of Eagle Hardware to help broaden the visibility of Lowe’s in these urban markets. During this time of expansion Lowe’s has remained financially prosperous. Reporting financial gains each year from 1998 when the expansions started to quarter number three of 2001. Being able to accomplish a large expansion and still make financial gains during the expansion is just a sheer accomplishment by the topnotch top-level management team that Lowe’s has established.

With its large expansion out of the way Lowe’s is now starting to focus back on the development of its employees in the work place through the best recruiting, training, and benefits packages in the industry. Lowe’s focus has also moved towards the consumers in which it serves, and the communities in which it serves, by the establishment of numerous programs that are designed to educate its customers, and teach children safety. Lowe’s has also has listened to the needs and wants of what the customers desire in a home improvement warehouse with proprietary and exclusive items that are only offered for sale at Lowe’s. To the community, Lowe’s has donated materials, money, and time to improve the surrounding communities in which they are located in, time and time again.

The future is very promising for Lowe’s Companies, Inc. The leadership that has been established by Lowe’s has moved the company very far in the past few years. That is because Lowe’s shares its success with everyone, by giving back to the community, their employees, and their customers. Lowe’s makes a difference in all these areas by simply taking the time out to listen to people’s concerns. The bottom line is, like Lowe’s motto says, they are simply Improving Home Improvement.

 

 

Lowe's