A financial analyst breaks down the biggest differences between Home Depot and Lowe's — and explains which retailer has the edge (2024)

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Áine Cain

2018-12-19T17:01:00Z

A financial analyst breaks down the biggest differences between Home Depot and Lowe's —and explains which retailer has the edge (1)

Home Depot and Lowe's are the two biggest players in US home-improvement retail.
Seth Basham, the managing director of equity research at Wedbush Securities, spoke with Business Insider about what differentiates the two companies.
He said that in many ways, Home Depot has an edge over its competitor.
But he added that Lowe's CEO Marvin Ellison was on a mission to "Home Depot-ize" Lowe's.

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Home Depot can point to higher average sales numbers in its stores.

A financial analyst breaks down the biggest differences between Home Depot and Lowe's —and explains which retailer has the edge (5)

Basham said Home Depot rakes in more money than Lowe's through store sales on average. He added that the company also boasted better operational efficiency.

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Compared with its rival, Lowe's is a bit like the new kid on the block.

A financial analyst breaks down the biggest differences between Home Depot and Lowe's —and explains which retailer has the edge (6)

Basham said Lowe's disadvantages in sales and operations were partly "a function of how the company grew up."

Lowe's was founded in 1946, while Home Depot was established in 1978. But the newer store embarked on its expansion first.

"Lowe's growth streak in terms of opening new stores happened after Home Depot's," Basham said.

Basically, because Home Depot expanded its store presence before Lowe's, it got the first pick when it came to locations. Basham described Lowe's as occupying many "secondary real-estate locations" that aren't ideal in terms of population flow or traffic patterns.

"There's a bit of a structural deficiency in terms of their store locations," he said.

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Lowe's has yet to see much international success.

A financial analyst breaks down the biggest differences between Home Depot and Lowe's —and explains which retailer has the edge (7)

Lowe's has recently had a few international stumbles, including store closures in Canada and Mexico and a failed joint venture in Australia in 2016.

Basham blamed the struggles on Home Depot already having success in some of those markets, as well as the infrastructure costs that it takes to run stores in different countries.

"Lowe's has never had success internationally," he said. "They haven't figured out the formula to get there."

Home Depot, on the other hand, has triumphed abroad, according to Basham.

"They have very profitable businesses in Canada and in Mexico," Basham said. "The comparable-store sales growth in those countries has been nearly as good as the US for a number of years."

But that wasn't always the case. Basham said that in the late 1990s, Home Depot made an unsuccessful foray into Argentina, Brazil, Chile, and China, so there's still hope for Lowe's to turn things around.

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Home Depot crushes Lowe's when it comes to online innovation.

A financial analyst breaks down the biggest differences between Home Depot and Lowe's —and explains which retailer has the edge (8)

Basham said that online fulfillment was "an important area for both companies" and that Home Depot was the clear winner in this category.

He added that Home Depot "has taken it to the next level" by offering customers services like same-day delivery.

"They're investing heavily in building up the infrastructure necessary to offer those types of delivery services," he said. "Lowe's hasn't really gone down that path yet."

When it comes to other issues pertaining to e-commerce, Basham said Home Depot had a stronger IT infrastructure, better online marketing, and an easy-to-navigate website.

"Case in point is that Lowe's website went down on Black Friday," he said.

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But don't count Lowe's out.

A financial analyst breaks down the biggest differences between Home Depot and Lowe's —and explains which retailer has the edge (9)

Lowe's may be an underdog compared with Home Depot, but Basham said he was still relatively optimistic about both companies.

He described Ellison, who officially took the helm at Lowe's in July, a "straight shooter" and praised his leadership of the company.

Before serving as the CEO of JCPenney, Ellison held several executive roles at Home Depot.

"He's trying to essentially Home Depot-ize Lowe's," Basham said. "He's divesting non-core businesses and focusing on the US business and the core stores."