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Stock Wars: Home Depot Vs. Lowe's

The coronavirus pandemic has created strong demand for housing supplies as many people shift to do-it-yourself projects around the house. Two home improvement retailers have had nice returns over the last 10 years, five years and in 2020. Here's a look at how they stack up.

· 11/18/2020 07:40

The coronavirus pandemic has created strong demand for housing supplies as many people shift to do-it-yourself projects around the house. Two home improvement retailers have had nice returns over the last 10 years, five years and in 2020. Here's a look at how they stack up.

About Home Depot: Leading home improvement retailer Home Depot Inc (NYSE:HD) had 2,291 stores at the end of 2019. The stores are located in the United States, Canada and Mexico.

The company offers installation services, rentals of tools and equipment and has some exclusive brands carried only in its stores.

About Lowe’s: Lowe’s trails only Home Depot as the largest home improvement retailer in the United States. The company ended 2019 with 1,977 stores in the United States and Canada.

Lowe’s offers installation services and also features exclusive brands like Kobalt, Top Choice, Project Source and Garden Treasure.

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Financials: In fiscal 2019, Home Depot reported $110.2 billion in revenue.

Sales have grown in each of the last three full fiscal years for Home Depot, with 2017 and 2018 seeing totals of $100.9 billion and $108.2 billion, respectively.

Same-store sales are up 6.8%, 5.2% and 3.5%, respectively, in the last three fiscal years. 

Home Depot reported third-quarter revenue up 23.2% year-over-year to $33.5 billion. The company saw same-store sales increase by 24.6% in the United States.

Lowe’s had sales of $72.1 billion in fiscal 2019. The total has risen each of the last four years, with revenue totals of $65 billion, $68.6 billion and $71.3 billion, respectively.

Lowe’s second-quarter sales were up 30% year-over-year to $27.3 billion. Same-store sales grew 35.1% in the United States in the second quarter.

Acquisitions: Home Depot announced it was buying HD Supply, a company it previously owned. HD Supply Holdings (NASDAQ:HDS) is a major player in the MRO — maintenance, repair, operations — market.

DigitalCommerce360 said the deal for HD Supply comes as W.W. Grainger Inc (NYSE:GWW) is seeing gains in the MRO market. Amazon.com (NASDAQ:AMZN) is also becoming a key competitor in the MRO market.

HD Supply had sales of $6.1 billion in the last fiscal year and has over 300,000 customers. A large portion of the company’s sales are made through its websites HDSupplysolutions.com and HDSupplyHIS.com.

The MRO market is highly fragmented and worth about $55 billion, according to the release. 

Lowe’s acquired Boomerang, a retail analytics company, in 2019. The deal was done to help the company modernize technology. Boomerang has been integrated into Lowe’s core retail business and helped the company with pricing strategies.

Stock Performance: Home Depot and Lowe’s shares have gained 28% and 35%, respectively, in 2020. 

Home Depot has outpaced Lowe’s, with gains of 131% and 782% over the last five and 10 years. 

Lowe’s five-year and 10-year returns for shares are 126% and 651%. 

Home Depot’s $301-billion market capitalization is significantly higher than Lowe’s $122 billion.

Benzinga’s Take: Home improvement could be a continuing trend, with the virus at an all-time-peak in the U.S. as of now. 

Home Depot reported a strong increase in same-store sales and said it's seeing an outsized demand for home improvement.

Both stocks look strong going forward, but Home Depot could have the edge with its larger size and by dint of buying back HD Supply in a strong growth market. 

Lowe’s could have more room for growth, with a market cap that's significantly lower than Home Depot despite having nearly 65% of the sales of the larger company.