Home Depot Vs. Lowe's - Battle Of The Hardware Stores
Jun. 15, 2015 10:10 AM ET | About: Home Depot, Inc. (HD), LOW
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
Summary
Home Depot offers exposure to a superior customer mix.
Better valuation and dividend yield.
Avoid Lowe's.
Big city residents probably think of Home Depot (NYSE:HD) and Lowe's (NYSE:LOW) as interchangeable stores with few differences other than their color scheme. As the suburban and rural readers are well aware, nothing could be further from the truth. While there is some level of overlap in terms of departments and product selection, very little merchandise is available at both locations. The customer service model is very different and as this article will layout, so is the expected return for shareholders.
Basic of the business
Both companies define themselves as home improvement retailers. Both operate primarily in the US. Home Depot had 2,269 stores as of December 2014 - 87% in the US, the remainder in Canada and Mexico. By comparison, Lowe's operates about 1,840 locations - 97% of which are located in the US.
As you dig deeper into the businesses you start to see their profiles diverge. For starters, breaking down revenue into major categories you can see that Lowe's is more exposed to volatility around large purchases (kitchens at 14% of revenue) and discretionary construction (lumber at 12%).
Lowe