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We've chosen to do our report on Lowe's Home Improvement stores. Helping their customers improve their homes has been Lowe's goal for 60 years. Lowe's has more than 1,700 stores in the continental United States and Canada.
Lowe's started out as a small North Carolina hardware store, called North Wilkesboro Hardware Company, and it has become the world's second largest home improvement retailer and the seventh largest retailer in the U.S. Carl Buchan envisioned building a chain of hardware stores around the country. Lowe's has specialized in selling only hardware, appliances, and hard-to-find building materials. Lowe's reputation for low prices has been established by eliminating wholesalers and dealing directly with manufacturers. The rise in sales lead to more stores being opened in neighboring towns and throughout western North Carolina.
Lowe's became a publicly traded company in 1979 and it was around this time that U.S. housing became big business which leads to professional builders becoming a large part of Lowe's business. In 1982, Lowe's profit of $25 million, during its first billion dollar sales year. Lowe's stores now attract a new type of customer called do-it-yourself homeowners.
To accommodate both customer and contractors' needs, Lowe's enlarged its stores and increased the variety of merchandise. Lowe's has 1,640 superstores in 50 states and a dozen outlets in Canada. The Lowe's modern stores began in 1994 which consisted of store sizes of 85,000 square feet. Expansion of Lowe's stores is on average about one a week, the 117,000 square-foot stores in the larger metro areas and the newer 94,000 square-foot stores in the small to mid-sized markets. December 2007, saw Canada's first Lowe's store opening and the first stores in Mexico in February 2010.
Lowe's has about 40,000 products for its do-it-yourself customers and for professional builders as well as offering hundreds of thousands more by special order. With such a wide selection they have just about everything their customers need to build, repair, and enjoy their homes. Lowe's values haven't changed since it first opened its doors in 1946, the company remains committed to offering quality home improvement products at the lowest prices, while delivering superior customer service.
Lowe's isn't big on disclosing much on how technology is incorporated into its business strategy, but Lowe's does offer real-time inventory monitoring, "item monitoring experience", labor planning, and centralized inventory replenishment. The tactics employed by Lowe's are often considered conservative. Home Depot has implemented automated checkout counters, but Lowe's alternative is to simply open more registers. There are signs in Lowe's stores that state if there are more than three people in line, a new register will be opened; being true to its word Lowe's has stood by this policy.
Mining company sales and customer data, Lowe's is able to select merchandise for its customers, gauge the success of promotions, and schedule its' employees based on sales. Data warehousing targeting customers who sign up for newsletters and catalogs, employ electronic data interchange tools to meld its operations with vendors, and aid store design. Lowe's has improved their business by integrating its operations with those of its suppliers. Compared to Home Depot, Lowe's has been able to successfully streamline many of its' business processes such as human resources and upgrading to PeopleSoft 8. People familiar with the technology used by Lowe's say the company is a lot like many retailers, with many applications that do not communicate well together. Despite this Lowe's is still able to pick projects that give it a better chance to outdo Home Depot.
Lowe's vision is that it will provide customer-valued solutions with the best prices, products and services to make Lowe's the first choice for home improvement; as well as becoming a sustainable business.
Robert A. Niblock has been the chairman and CEO of Lowe's Companies, Inc since January 2005 and he also served as Lowe's president from 2003 to 2006, and joined the Board of Directors when he was named chairman and CEO-elect in 2004. Larry D. Stone has been Lowe's president and chief operating officer since 2006 and is responsible for store operations, merchandising, marketing, logistics and distribution, merchandising, and store support. He is also responsible for Lowe's Canadian operations. Robert F. Hull, Jr. is Lowe's chief financial officer since March 2003. Hull is responsible for accounting, tax, treasury, investor relations, procurement and financial planning and analysis.
The Audit Committee is established by the Board of Directors as an independent and objective committee of the Board. Its purposes are to (a) assist the Board in monitoring the integrity of the Company's financial statements, the Company's legal and regulatory compliance, the Company's independent auditor's qualifications and independence, the performance of the Company's internal audit function and independent auditors, and the compliance by the company with its established internal controls, and (b) to prepare the Audit Committee report that is required by the rules of the SEC to be included in the Company's annual proxy statement.
The Compensation Committee is established by the Board of Directors of Lowe's Companies, Inc. as an independent and objective committee of the Board. The purpose of the Committee is to discharge the responsibilities of the Board relating to compensation for the Company's executives. The Committee has overall responsibility for approving and evaluating the executive compensation plans, policies and programs of the Company. The Committee is also responsible for producing an annual report on executive compensation for inclusion in the Company's proxy statement.
The purpose of the Governance Committee of the Board of Directors of Lowe's Companies, Inc. is to identify and recommend individuals to the Board for nomination as members of the Board and its committees consistent with the criteria approved by the Board, to develop and recommend to the Board the Corporate Governance Guidelines applicable to the Company and to oversee the evaluation of the Board and management of the Company.
Competiveness of the Industry:
The retail industry that specializes in home improvement has faced many challenges due to the recession. Homes are no longer being built at the rate that it once was during the early 2000s so people are now opting to fix smaller projects at home themselves (DIY). Lowe's lags behind Home Depot in the market, but does have an advantage over Home Depot as well as other competitors. Lowe's has it's own private label brands that brings loyalty among customers. This brings in repeat business which leads to a higher net income for Lowe's. Lowe's also sells proprietary brands such as Premier Living, Kobalt, and Portfolio which is through a contract for exclusive rights to these brands. Through these contracts, Lowe's can generate income that other retail industry competitors cannot. Lowe's and Home Depot comprise 18% of the $725 billion home improvement industry. The other 82% comes from large retailers such as Wal-Mart, Sears, and smaller hardware store chains such as Builders' First Source. Lowe's does differ in the typical warehouse environment of other retailers by having a more customer friendly shopping store. Smaller competitors have a slight advantage on Lowe's through tradition or convenience. Even the threat of boycott of large retailers by small towns can be an advantage at times.
Lowe's can continue to offer lower prices by monitoring the amount of inventory in stock. Many of Lowe's inventory products are imported from other countries. Restrictions or limitations on these imported products can have a drastic effect on how Lowe's offer competitive prices. Instability with another countries government, financial distress, or a failure to follow any laws or regulations may stop the supply of imports coming in to the United States. Other factors such as the global recession and the credit card crisis are already affecting operations of other Lowe's vendors which have lead to a reduction in sales and access to capital. The rise of unemployment to a 10% high has lead to a decrease in consumer confidence and spending. Big ticket items sales, which have been the highest source of revenue for Lowe's, have dropped sharply. Any changes in the law in regards to mortgage assistance or bank bailouts have a direct impact on Lowe's business.
The economy and environmental regulations will continue to impact Lowe's expansion strategy. Decisions made by the Obama administration will determine how many stores and the size of the stores Lowe's will create in 2010.
Lowe's strive to have a "culture of caring" by participating in numerous community outreach programs. Lowe's has won the ENERGY STAR honors for seven consecutive years through their appliances which saves customers $190 million each year off their energy bills. Lowe's also sells WaterSense-labeled toilets and faucets which saves customers $750,000 each year on water bills. Lowe's was named E.P.A.'s top 10 retail Green Power Partners by moving 95% of its products using SmartWay participating carriers. Since 2005, Lowe's has saved more than $61 million gallons in diesel fuel and 682,000 tons of carbon. Lowe's has developed a program called Energy Awareness Delivers Savings (LEADS) in it's own stores which employees have reduced energy use by more than 300 million BTUS which will bring in a savings of $10 million. Responsible wood sourcing has been a commitment of Lowe's by continuing to support the Combat Illegal Logging Act of 2007.
Lowe's is a partner of Habitat for Humanity and an underwriter for Habitat's Women Build Program which $19 million has been contributed towards. Lowe's also has given $20.1 million in contributions to the American Red Cross. Lowe's has developed a Charitable and Educational Foundation that has supported $15 million in grants throughout the United States and Canada.