Lowe's Can Gain Market Share With New Customer Incentives

Lowe's Home Improvement StoreOver the past decade, Lowe's (LOW) has gained significant market share at the expense of rival Home Depot (HD). However, in recent years, Home Depot has been looking stronger, with improved, more customer-friendly store interiors and a stronger supply chain that adds to the company's operational efficiency.

As the competition between these two home improvement heavyweights intensifies, customer service is emerging as one of the key features on which they will need to innovate. We previously discussed Home Depot's new mobile barcode program aimed at improving the in-store customer experience.

To improve its customer service, Lowe's has introduced a new incentive program for customers paying with the store's credit card (which does not carry any annual fees) either in store or on the company's website. Customers making a single purchase of $299 or more can opt for either a 5% discount or a special financing offer.

Lowe's Plumbing, Electrical & Kitchen Market Share

The plumbing, electrical and kitchen division is the largest value driver for Lowe's by our estimates, contributing around 33% of our $24.85 stock price estimate for Lowe's. Our number stands roughly in line with the current market price.

Despite facing tough competition and having fewer stores than Home Depot, Lowe's market share in plumbing, electrical and kitchen products has grown from 13% in 2006 to more than 17% in 2010. But the growth rate has slowed in recent quarters. We anticipate more moderate growth going forward, with market share approaching 19% by the end of our forecast period.

According to analysts at Goldman Sachs (GS), 30% of private-label sales relate to big-ticket purchases ($299 and over) currently subject to six-month, no-interest financing. With the introduction of this new customer incentive program, Lowe's has the potential to attract more customers, in addition to retaining its current customer base. As a result, the company could see a pickup in its market share growth.

If, for example, Lowe's plumbing, electrical and kitchen market share grows to 22% by the end of our forecast period (vs. our base case projection of 18.5%), it would imply about 5% upside to our current price estimate for Lowe's stock.

See our complete analysis for Lowe's stock here

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marine1952

I am angry that both Home Depot and Lowes have revisited their Vererans Discount and eliminated a huge section of the Veteran population. I am sorry that I am not disabled, go to the VA, and did not serve and retire after 20 years of service.However I did enlist(not drafted) and served during war time, We are still Vets and are proud of our service to our nation. So I guess that Ace Hardware and a few other Mom and Pop stores will now get the bulk of my business every chanch I get. I urge all Vets who do not meet the requirements of the Big Outfits----take your business to someone who will appreciate it. They don't need us, then we do not need them.

May 16 2011 at 10:38 AM Report abuse +1 rate up rate down Reply
davidl1950

Years ago HD was great. I could always count on talking to a real electrician or a real plumber. Now I get some dumb ass 18 year old who, after asking if I need help, stands there and stares at the shelves just like I do. I have also gotten some bad advice from these kids who really don't know crap about most of what they are selling. Lowes has become my favorite with a very high level of both quality and service. The HD store is much closer, but the extra miles to Lowes have paid off. I still love the small local hardware store, but their attitude of "If we don't have it, you don't need it" just doesn't work anymore.

May 16 2011 at 10:02 AM Report abuse +1 rate up rate down Reply
tutuney

Lowes needs to post signs that read: All items sold here are MADE in CHINA

May 16 2011 at 9:50 AM Report abuse rate up rate down Reply
thimbleandneedle

I quit buying at Lowe's and Home Depot a while ago and get better buys and quality at the neighborhood hardware store. They're also willing to give some extra time in advise and instructions and will even make 'house calls' no matter how large or small the project is. Besides that, I prefer to support small American businesses rather than big names.

May 16 2011 at 9:26 AM Report abuse rate up rate down Reply
tj1108

Lowes kits Home Depots but every week. In Nascar.

May 16 2011 at 8:45 AM Report abuse -1 rate up rate down Reply
Tommy

both lowes and home depot are over priced but to buy tools and supplies no where else to go .I need new tools had some for 10 to 20 years but the new power tools sold today don't last and cost so much more. Just would like for once to get product that is worth the money i payed for it

May 16 2011 at 8:34 AM Report abuse +2 rate up rate down Reply
mac2jr

Lowes vs Home Depot in NE Philadelphia and Bensalem areas. Lowes (2) clean, organized, friendly, and helpful. Home Depot (2) dirty, unorganized, no help available most of the time, and unwilling to understand that customers pay their salaries. Recently spent $1,000 for materials in Lowes; tried Home Depot, but employees turned me off so badly it made spending my money 'not fun'. Additionally, you cannot do a major project shopping either chain, there is always at least one necessary item not stocked, and thus Ace Hardware stays in business. We need to do away with these Big Box stores and go back to the local lumber yards and hardware stores where people, employees, helped, understood the building trades, and the building codes, delivered the goods, and made sure you got the job done right the first time.

May 16 2011 at 8:29 AM Report abuse +2 rate up rate down Reply
cragpretzel

They had a good plan before. They sent out discounts for anything you wanted to buy. Now they only give you a discount on certain items they want you to buy. I was going to buy a new lawn mower there but didn't have the old type discount so I bought a better one elsewhere. In order to buy a $400 saw cheaper I went to their website and pretended I was moving to a new house. That's a poor way to do things.

May 16 2011 at 7:15 AM Report abuse rate up rate down Reply
ArmyPair

We shop at both, Home Depot and Lowe's. We always do price comparisions between the two. Some stuff is cheaper at Home Depot and vice versa. We are both retired Army and get military discounts at both!

May 16 2011 at 7:10 AM Report abuse +1 rate up rate down Reply
Ron

I will always shop at Lowe's versus Home depot. lowe's are excellant with the retired or active military discounts
keep it up

May 16 2011 at 6:59 AM Report abuse rate up rate down Reply