Lowe's Credit New Goal With Home Depot Sales Growth

Lowe's challenges his competitor Home Depot for a customer that the small renovation chain has not paid attention to over the years: the professional contractor.

Lowe's new strategy for "professionals" is one of the reasons why the retailer beat Home Depot on second-quarter sales growth.

"I think one of the strategic missteps of the last seven years is not really understanding what the professional customer is doing for the overall productivity of the business," said Joseph McFarland, vice president executive stores.

Lowe's stated that the company had added 35,000 new business customers during this single quarter, without however disclosing the total number of customers for competitive reasons. Home Depot has announced that it has reached one million business customers this quarter.

Lowe US ​​sites' revenue for at least a year increased 3.2% in the second quarter, while same-store sales increased 3.1% in Home Depot's US stores. Lowe's earnings growth also beat its larger competitor. The second retailer 's $ 1.67 billion profit increased 10.2% in the second quarter compared to the same period last year. In comparison, Home Depot's $ 3.48 billion profit was down 0.8% from last year, according to data compiled by FactSet.

"We are pretty confident that our sales momentum over the past two quarters, our improved transactions and our improved square foot sales are largely driven by professionals," said McFarland. "Pro's strategic reason for being so is the traffic, the transactions, the productivity of sales per square foot and the unlocking of more value in each site."

Sales to professional contractors exceeded sales by independent customers for both companies in the second quarter. But both still have a long way to go.

"Home Depot and Lowe's have recognized that when they think about the addressable market, they are under-penetrated in business customers," said Brian Nagel, an analyst at Oppenheimer. "So they both pushed these attempts to make their business customers more aggressive, and this has been a continuous story over the past few quarters."

Nagel said Home Depot, which he says has always been better managed, is continuing its journey to conquer professionals. But to ensure that its customers do not leave the market, Home Depot continues to "invest in a portfolio of service offerings to strengthen our level of engagement with professionals."

She launched a business-to-business website for professionals and said her goal was to simplify shopping and delivery experiences for business customers. This also strengthens its tool rental service.

"Twenty-five percent of the professionals are renting us today," said Craig Menear, CEO of The Home Depot, during a call for results. "We know that 90% of professionals rent tools, so we have an opportunity to invest in this business to continue to grow."

Lowe's invests in large quantities of supplies in order to ensure that there is enough stock for the contractors. It also gives special treatment to professionals, with a preference for parking in its stores, associates dedicated to professional offices and dedicated supervisors for professional areas. These are services that Home Depot has already deployed.

Paintings are another area that both competitors are considering. According to Lowe, this is the most popular product for DIY projects. Home Depot creates color solution centers in its physical locations to simplify the color selection process for customers and has launched a new Project Color application. But Lowe's said that for the first time in 10 years, paint sales have led the merchandising department of the company to grow.

According to Nagel, that's because Lowe's improved his painting promotions.

"Under the previous leadership, Lowe's would make these large-scale promotions and these would not be as effective as a marketing tool for attracting customers," he said. "One of the areas they have identified is the ability to make targeted promotions on paint prices, which contributes to the smooth running of the overall business."