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Lowe’s Internal Renovation Takes Direct Aim at Home Depot

Lowe’s Internal Renovation Takes Direct Aim at Home Depot

By CultureBanx Team

  • Ellison is shutting down the 99 Orchard Supply Hardware stores Lowe's owns
  • Q2 sales at Lowe's stores open at least one year rose 5.3%

As part of newly appointed Lowe’s (LOW +0.16%) CEO Marvin Ellison’s DIY strategy to boost sales, he’s closing stores and cutting back on inventory. Is this new plan for Lowe’s enough to dethrone Home Depot (HD +0.34%) and turn around the second largest home improvement store?

Why This Matters: Ellison seems more than willing to make some big changes to help Lowe's become more competitive. He’s starting by shutting down the 99 Orchard Supply Hardware stores that Lowe's owns in California, Oregon and Florida by the end of the fiscal year. In addition to store closings, Ellison will also "aggressively rationalize store inventory" and cut back on lower-performing items.

Sales at Lowe's stores open at least one year rose 5.3% in the second quarter. That sounds impressive until you consider that Home Depot's sales were up more than 8% during that same time.

Typically Home Depot has higher sales per square foot than Lowe’s, something Ellison plans to combat by not randomly hiring more people. He wants to identify the actual cause of the lagging sales in stores and not just “throw payroll at problems,” according to Bloomberg.

During the company’s first earnings call with Ellison at the helm, he provided additional insights on his plans to shake up the executive office. Lowe’s now has a new CFO and earlier this summer he eliminated the COO position, along with chief customer officer role.

Situational Awareness: Ellison previously worked at Target (TGT -0.81%) and spent a dozen years at Home Depot. He was the first African-American to join Home Depot’s senior ranks and left for JCPenney (JCP -6.01%) after missing out on the top job there. In his role at Penney he was mandated to plug the store’s countless leaks in operations, strategy, and technology. These are nearly identical shortcomings he will face at Lowe’s as they look to catch up with the leader in the space Home Depot.

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