Value Line Publishing

Value Line Publishing,

October 2002

In the early October 2002, the economic environment was slow but positive growth, low interest rates, a strong housing market, rising unemployment, uncertain consumer confidence, and concern over cooperate misdeeds. Carrie Galeotafiore was going to publish her quarterly report on the retail building-supply industry, including her five-year financial forecast for industry leaders Home Depot and Lowe’s.

The retail building-supply industry was dominated by two companies: Home Depot and Lowe’s. Together, the two players captured more than a third of the total industry sales. Both companies were viewed as fierce competitors whose rapid-expansion strategies had more than doubled own-store capacity in the past five years. The penetration by these two large companies’ warehouse-format stores had had a profound impact on the industry. Independent hardware retailers were struggling to remain competitive.

Galeotafiore expected that future growth for Home Depot and Lowe’s would come from a variety of sources such as acquisition and consolidation, professional customer’s market attraction, international expansion, alternative retail formats, alternative products, and head-to-head competition. Moreover, she was going to do the financial forecast for Home Depot and Lowe’s based on a review of historical performance, and analysis of trends and ongoing changes in the industry and the macroeconomic, and a detailed understanding of corporate strategy.

Assigned Questions

1. Who deserves the “Management of the Year” award in the retail building-supply industry?

The Retail Buildings Supply Industry in the US is estimated to be $175 billion in 2001 and is expected to reach as high as $194 billion in five years by 2006. It was distributed into three hardware stores, lumberyards and larger-format home centers. Both companies were seen as strong competitors and the penetration of the two companies made a great impact to other...