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New season, new strategies at HD, LOW

In their latest round of back-to-back earnings call presentations, Home Depot and Lowe’s trotted out statistics for a weather-beaten first quarter, along with insights on what worked and what didn’t.

Michael Jones stepped into the role of Lowe’s chief customer officer by stepping up to the microphone. Jones, who replaced the retiring Greg Bridgeford earlier this year, walked analysts and investors through Lowe’s performance, which saw a comp-store sales increase of 0.9%.

“While we saw reduced demand from many outdoor products, we bolstered performance in our seasonal categories by helping customers dig out from snow and ice as we positioned truckloads of weather-relevant products at our regional distribution centers,” Jones explained.

It wasn’t all about the weather.

Jones said Lowe’s efforts to collect insights on how customers think about “planning, shopping and buying, to using and enjoying” has helped produce better customer experiences.

Case in point: the outdoor living category. After determining that the stores were selling isolated products as opposed to helping consumers build their outdoor room, more than two-thirds of Lowe’s stores removed 15 bays of steel racking, creating 35% more open space for browsing the showroom. The new look introduces sets with coordinating rugs, umbrellas and accessories, such as pillows, lanterns and planters — “and other backyard products just as you would expect in your own backyard.”

The changes were based on Lowe’s insights on how consumers rely largely on in-store display for inspiration for outdoor living. “They want to directly interact with the patio furniture to assess its comfort and to envision using it,” Jones said.

Lowe’s also pointed to growth in its pro business, which it now says generates 30% of its sales (up from previous estimates of 25%). One major area of focus for Lowe’s is to take advantage of the pro market, which is growing faster than the consumer market. Jones pointed to the example of boosting its offering in wire and cable, and adding new hand tools from Southwire, a brand with strong appeal for electricians.

Lowe’s also bolstered its pro offering with the addition in February of Progress Lighting, and a relaunch of LowesForPros.com.

Like Lowe’s, Home Depot says it likes what it sees from its pro customers, which the retailer says make up about 35% of its total sales.

“Our pro customer continues to recover, and we saw broad-based strength in areas that were not affected by weather,” said Craig Menear, president of U.S. retail for the world’s largest home improvement retailer.

Large pro customers were a particular bright spot — sales from those who spend more than $10,000 per year with Home Depot grew more than twice the company average. And the company’s Pro Xtra loyalty program now has more than 1.5 million pros signed up, he said.

Maintaining its edge over its rival in the comp-store sale count (see chart), Home Depot reported 15 of its 19 U.S. regions posted positive comps. Inside the store, Home Depot’s bestselling departments during the first quarter were tools, electrical, plumbing, kitchens, bath, hardware, decor, building materials, millwork and lighting. Overall, Home Depot’s comps were up 2.6% for the quarter.

Also showing positive comps (but below the company average) were flooring, indoor garden and paint.

Negative comps hit the stores’ outdoor garden and lumber departments, Menear said, adding roofing, chemicals, lawnmowers, soils and mulch in the negative column.
“As we saw last year, the majority of these projects will likely be deferred to the second quarter,” he said.

Home Depot has some merchandising moves up its sleeve, as well. Menear pointed to new product categories that he said will “generate a lot of excitement in the second quarter.” Specifically on tap are an expanded offering of LED light bulbs from Cree, a fold-and-store lawn mower from Toro, a Glidden paint program for pros and new KitchenAid appliances.


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