Investment Thesis
As the housing sector continues to plow ahead, home improvement retailers are in for a big year in 2018. A squeeze in inventory levels will push more homeowners towards improvement projects in the near future, especially with the combination of higher interest rates, making the cost of moving less attractive. Lowe’s has made large investments to their online and pick up in store programs that have resonated well with consumers, but Home Depot is still the gold standard when it comes to running a business efficiently. In our eye’s, depending on the new leadership choice, Lowe’s has the potential to close the gap and increase shareholder returns at a quicker pace combined with further dividend increases.
The Home Improvement Duopoly
The home improvement industry is a duopoly controlled by long time industry leader The Home Depot (HD), followed by its counterpart Lowe’s Companies (LOW). Though these two clearly control their respective industry, there has really only been one clear leader for decades, The Home Depot. In reading numerous comments within articles I have written in the past on these two, it is clear to me The Home Depot is the preferred destination. However, over time, especially in my most recent articles, The Bullish Case For Lowe’s and The Home Depot On Sale, positive comments about Lowe’s seems to be picking up.
