Both Lowe’s and Home Depot announce first quarter earnings this week, with very different results.
Home Depot announced a solid first quarter, with a better than expected profit and revenue, despite dealing with difficult weather situations in the first three months of the year. Lowe’s struggled, announcing a weak first quarter due to price increases and outdated pricing tools. Lowe’s stock dipped 8% immediately following the earnings results.
But both big box stores did have one thing in common. They both announced strong results in their Pro customer category. In fact, both reported Pro customer results outpaced their DIY customers in the first quarter. During conference calls with business reporters, both Lowe’s and Home Depot said they are pleased with their progress with Pro customers, and both are strategizing that growth throughout the rest of this year.
During its conference call, Lowe’s reported adding 40,000 new Pro accounts in the first quarter alone. Lowe’s is focusing its efforts on increasing the number of brands contractors desire, and making an effort to have those items in stock when the Pro customer needs them. “We were very pleased with our Pro business in Q1 and we are focused on leveraging our improved in-stock position along with our key brands to drive additional sales with this very important customer,” William Boltz, Executive Vice-President of Merchandising said during the conference call. “Our teams continue to work to add more key programs to our assortments, as well as leveraging our existing partnerships with brands that are all focused on saving the Pro both time and money.”
Lowe’s also actively tried to attract Pro customers by placing a number of advertisements for its “Do It Right For Less” campaign” during ESPN’s coverage of the NFL draft. Joseph McFarland, Executive Vice-President of Stores, says Lowe’s will focus on executing in five key areas.
“First, we addressed our out-of-stock issues and poor inventory presentation with a commitment to improving our job lot quantities and our product presentation under the Pro Canopy and on our endcaps,” McFarland said. “Second, we improved our store level service to ensure we can get our Pro customers in and out faster. This included adding dedicated loaders and establishing preferred parking under the Canopy; remember for the Pro’s time is money. Next, we staffed our Pro desk with dedicated associates working at consistent schedules and we added department supervisors to all Pro areas of our store. We redesigned our field structure, added 15 new regional Pro managers and recruited experienced leaders to focus on our in-store and outside Pro sales. And then finally, we worked with Bill and the merchandising team to communicate a consistent volume pricing message and improved our product presentation in the area. After we felt comfortable with the execution of these five steps, we invited customers then to share our improved environment with a very successful and nationally marketed Pro appreciation event which allowed us to grow our Pro accounts.”
McFarland added while Lowe’s is trying to gain new customers, it is also planning to build on the amount of money current Pro customers are spending. “As we accelerate that through the back half of the year with things like Pro loyalty, things that will help us capture a much larger share of the Pro’s wallet. You’ll see that come to life through brands, through advertising, and through service in the stores. We remain very, very pleased with the progress.”
Home Depot is also pleased with its success in the Pro category, not just in-store, but also by creating new customers online. “We continue to onboard Pro customers to our new B2B website experience, adding 35,000 customers in the quarter for a total of 135,000 customers that have been migrated to this experience so far. Our plan is to onboard over 1 million customers by the end of this year, Craig Menear, Chairman, CEO and President of Home Depot told reporters. “Though it is early days, we are seeing increased engagement, which translates into increased depth.”
Like Lowe’s, Home Depot is focusing on having more brands in-store for Pro customers and making sure they are seeing the value in those items. “Having the brands that Pros care about in-stock with job-like quantities is table stakes. You have to have that to serve them. But the value proposition that we are creating for the Pro through various investments over the next several years is, as we believe, unique to the marketplace,” Menear added.
Nearly one year ago, Home Depot announced a $1.2 billion delivery plan. Today, it is using some of that plan to improve delivery to Pro customers. “We’re definitely designing our delivery offerings around key Pro use cases,” Ted Decker, Executive Vice-President of Merchandising said. “For instance, we’ll be opening our new flatbed delivery center out of Dallas later this year. That’s really a Pro-oriented delivery; with the flatbed trucks with the Moffett on the back they’re able to put it on the jobsite. Also, we’ve implemented those two and four hour delivery windows that give our Pro reliability in terms of when a delivery will be there so that they can count on their crews being kept busy by having a great time with delivery.”
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