Strategy Management

Journal of Business Case Studies – February 2008

Volume 4, Number 2

Lowe‟s Companies, Inc. And The Home Improvement Industry In 2007

Debora J. Gilliard, Metropolitan State College of Denver

LOWE’S COMPANIES, INC.

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ith the housing boom coming to an end, rising interest rates, and decreasing consumer spending on home improvement products, the home improvement industry is on the brink of change. The industry is seeing increased costs for fuel, raw materials, and lumber in addition to shortages of raw materials. Past years‟ sales growth rates (9.3% in 2005) are expected to slow to 4-5% as the industry reaches maturity. 1,2 Will Lowe‟s Companies‟ domestic growth strategy be sufficient in the years to come? Robert Niblock, Lowe‟s chief executive expressed confidence in the company‟s ability to maintain its momentum when he stated, “Recent data suggest continued favourable trends in employment levels and income growth which will offset some of the monetary pressures consumers are facing, such as rising fuel prices and interest rates.” 3 He also stated, “As trends in the housing market normalize from the rapid growth experience over the past few years, we believe we have the programs in place to continue to capture share and deliver solid earnings growth.” 4 THE HOME IMPROVEMENT INDUSTRY The retail hardware industry has been present for as long as people have owned homes and needed the tools and equipment to maintain, repair, and improve the homes. By the 1970s the industry began to change as hardware stores added lumber products and lumberyards expanded to include hardware products and corporate chains began to emerge. By the 1990s home improvement chains were opening large stores of over 100,000 square feet and expanding from urban population centers into smaller markets. By the end of 2005, the home improvement industry had total sales of $291.3 billion5 and sales were expected to exceed $312 billion in 2006, reflecting an 8.8% growth rate. 6 The...