Question

As an investor, discuss which company Home Depot or Lowes would choose to invest in and provide a rationale for your decision. Support your conclusions, why or why not?

Answer 1

History of both the companies

Lowe’s is the world’s second largest home improvement retailer. The company offers a complete line of products and services for home decorating, maintenance, repair, and remodeling for commercial and residential buildings (marketline.com, May 28, 2007). Lowe’s is headquartered in Mooresville, North Carolina. It was founded in 1946 when Carl Buchan and James Lowe began the chain as a small town hardware store. The company became public in 1961, offered its stock on the New York Stock Exchange in 1979, and had its first billion dollar sales year in 1982 (Lowes.com, May 28, 2007).

Home Depot is the largest home improvement retailer in the world. The company sells a wide assortment of building materials, home improvement supplies, lawn and garden products and “do-it-yourself” support, as well as providing a number of services to residential and commercial consumers (marketline.com, May 29, 2007). Home Depot has its headquarters in Atlanta, Georgia. Much newer than Lowe’s, Home Depot was started in 1979 by Bernie Marcus and Arthur Blank. The company went public in 1981 and was offered on the NYSE by 1984. In 1986, four years after Lowe’s hit the billion dollar mark, Home Depot also hit the mark. (NYJOBS.com, May 28, 2007).

Current standing

With the United States housing market’s built in demand, both Lowe’s and Home Depot have the possibility for a bright future. In 2007, Lowe’s is ranked 45th on the Fortune 500 list, Home Depot is performing even better, coming in at 17th (CNNmoney.com, June 3, 2007). At this time, both companies are doing extremely well in their respective markets. Lowe’s recorded revenues of $46,927 million during 2007, an increase of 8.5% over 2006. The operating profit of the company was $5,152 million during the fiscal year 2007, an increase of 10.7% over 2006. The net profit was $3,105 million in the fiscal year 2007, an increase of 12.3% over 2006 (marketline.com, May 29, 2007). Home Depot recorded revenues of $90,837 million, during 2007, an increase of 11.4% over 2006. The operating profit of the company was $9,673 million during the fiscal year 2007, an increase of 3.3% over 2006. The net profit was $5,761 million in the fiscal year 2007, a decrease of 1.3% over 2006 (marketline.com, May 29, 2007).

Home Depot’s financial numbers are considerably larger than that of Lowe’s, but as the percentages show, Lowe’s is committed to expanding its market share by building new stores and expanding already existing locations.

Home Depot currently operates 2,147 stores with locations in all 50 states, including the territories of Puerto Rico and the Virgin Islands. They also have stores in Canada and Mexico (marketline.com, May 29, 2007). With the acquisition of the Chinese retailer, The Home Way, Home Depot has officially made the voyage of expansion overseas. This astonishing coverage of nearly every corner of the globe is what has given Home Depot the tag of largest home improvement retailer in the world.

Lowe’s currently operates 1,385 stores in 49 states, with a total of 157 million square feet of selling space. The company runs two sizes of stores for its two different markets. In the larger, more profitable markets, they have 117,000 square foot warehouses. For the smaller, but still lucrative markets, they have 94,000 square foot warehouses (marketline.com, May 29, 2007). Recently, CEO Robert Niblock has assembled a strategic team to assess the opportunities overseas. This pleased many investors and showed that the company is committed to the future.

With all the things going for these two companies there is a lot of competition to have the largest market share and best brand image. Each company has researched these areas tremendously to see where they do well, where they can improve, what will happen in the future, and what could hurt their profits. They do this in the form of a S.W.O.T analysis. This is a marketing research tool used by companies to measure strengths, weaknesses, opportunities, and threats that they may encounter.

Customer investment

Both Lowe’s and Home Depot offer a Direct Stock Purchase Plan (DSPP). Also, both companies offer a Dividend Reinvestment plan to go along with their DSPP. Consequently, both companies have a maximum investment of $250,000 in their publicly held stocks. Additionally, both companies offer a dividend. Lowe’s has paid a cash dividend quarterly on their stock since 1961. Lowe’s and Home Depot offer their DSPP online, by phone, or mail, which makes it easier for investors to take advantage of the opportunity. Their plans differ in the minimum amount required for new investors. Lowe’s minimum is $250, while Home Depot’s minimum is $500. Both DSPP’s are very intriguing and are quite similar in structure.

Conclusion

Through extensive research of Lowe’s and Home Depot, I have concluded that Home Depot would be a better choice to build a future with.

1. World’s Largest Home Improvement Retailer
They are the world’s largest home improvement retailer which offers stability and job security. Also, being a multinational corporation is a huge benefit when looking for advancement opportunities and possible transfer options in the corporate world.

2. Benefits Package
After researching both companies benefit packages there was not much variation between the two. Home Depot had a great retirement plan that involves a 401K and employee stock purchase plan. The extensiveness of their benefits were also attractive. They go as far as offering tuition reimbursement to veterinary pet insurance. The complete coverage made us feel that the company cared about and valued their employees.

3. Community Involvement
Home Depot’s involvement within communities they are located is phenomenal considering the large amount of locations. The lives affected by their programs and foundations are numerous. They show compassion that most MNC’s do not.