MarketWatch reported that Lowe’s Co.’s Chief Executive Officer Robert Niblock would step down after 25 years at the helm of the company once a successor has been chosen. Until such time as a replacement is found, Niblock will continue in his role.
Lowe’s Companies, Inc., is a home improvement company which is also a part of the Fortune 50 list. It has locations across the US, Canada and Mexico, with more than 2,390 home improvement and hardware stores located in these countries. The company employs more than 310,000 people.
Niblock has spent 25 years with Lowe’s of which 13 have been as the company’s Chairman, President and Chief Executive Officer. The 54-year-old executive stated that this was the right time for him to step down and transition the company to the next generation.
According to CNBC, the home improvement store’s share prices jumped by 6% on the back of this news. For the year so far, the company’s share prices are up down 10%, which is contrast to last year, when the chain’s share prices went up 25% as compared to 2016.
Recently, Lowe’s has been lagging farther and farther behind its rival Home Depot.
In fact, Lowe’s fourth quarter earnings fell short of consensus market expectations last month. While the company’s revenue and same-store sales were higher than expected, earnings did not meet targets due to lower profit margins.
Same store sales grew by 4.1% vis-à-vis the expected 3.1%. Revenue was also up at $15.49 billion – higher than the expected $15.33 billion. However, adjusted earnings per share reported by the company were $0.74, while the market consensus target was $0.87.
Home Depot, the company’s arch rival, saw a much higher same store sales growth of 7.5%.
Activist investor DE Shaw & Co. said that it was concerned about Lowe’s performance in relation to the company’s competition. Following this concern, the company appointed new members to their board.
However, according to Oppenheimer & Co.’s analyst Brian Nagel, the simple fact is that The Home Depot is better managed than Lowe’s is. Both Lowe’s and Home Depot have the benefit of a customer demographic that is at an age where investments in permanent residences are a priority. So, this is a perfect time for both the companies to reap the rewards of a large millennial customer base.
Home Depot has used this time wisely, with better sales performances, better locations for their stores and more responsiveness to changing market trends. Home Depot has jumped on to the e-commerce bandwagon faster than Lowe’s and has been updating its product range to suit changing consumer preferences.
Nagel approved of DE Shaw’s intervention, stating that it was high time it happened. He said that Lowe’s needed to be more aggressive if it was going to successfully reposition itself in the market and especially in the home improvement category.
Lowe’s has taken steps towards improving its performance. The company has reinvested in its workforce to increase motivation and performance; the company has announced bigger bonuses as well as higher benefits packages for its employees. The company is also expanding its supply chain by launching its first ever direct-to-customer fulfillment center in Nashville.
The company has also created a partnership with Sherwin-Williams. According to this deal, Lowe’s will be the only other store in the country (besides Sherwin-Williams) to stock certain Sherwin-Williams paint brands.
The company is expecting a growth in revenues of about 4% and same-store sales are expected to increase by 3.5% this year. Additionally, Lowe’s is expected to build another 10 stores in the US in 2018.