Lowe’s Looks to Hardware, LED to Light up ’11 Sales
Lowe’s (NYSE: LOW) gained considerable market share at the expense of Home Depot (NYSE:HD) over the last ten years. However, Home Depot has taken several initiatives to consolidate its position. As a result, competition between these two players will remain intense in the coming years. We note Home Depot’s results were better than Lowe’s for Q1 ’11 and fiscal year 2010. As Lowe’s looks ahead, the company hopes that improvements in its hardware & seasonal division will pick up as the economic improves, in part driven by rising demand for LED lighting and online sales.
Hardware & Seasonal Expected to Pick Up
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As the economic environment is better than last year, we expect that there will be increased demand for gardening and landscaping tools and hardware as well as outdoor power equipment this spring and summer. These are represented in our hardware & seasonal division. A broader recovery in the housing market and consumer sentiment over the next few years will further aid these sales. Lowe’s hardware & seasonal market share has generally followed an increasing trend between 2005 and 2010, slightly falling in 2007.
If by the end of our forecast period, Lowe’s is able to increase its market shares in each of plumbing, electrical & kitchen and hardware & seasonal by 150 basis points more than our current estimates, this adds between 5-10% to our $24.85 price estimate, which is inline with the market price.
Lowe’s Hoping to Cash in on LED Lighting
Lowe’s also plans to cash in on the growing popularity of low energy home lighting. It has started selling Osram Sylvania’s LED lighting system at its home improvement stores. The lighting system is easy to install, a plus for do-it-yourself buyers, and uses only 11 watts of power to produce light output equivalent to that of a 65 watt incandescent bulb. [1] The success of this will be a benefit Lowe’s plumbing, electrical & kitchen division, the market share for which has been consistently increasing.
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