Play It Again, Lowe's: A Good Quarter, but Not as Good as That Other Chain
In this segment of theMotley Fool Money radio show, host Chris Hill, Motley Fool Explorer's Simon Erickson, and Motley Fool Pro and Options' Jeff Fischer discuss the long-running narrative between the two big home-improvement retailers. As usual, the numbers from Home Depot(NYSE: HD) look better than those from Lowe's(NYSE: LOW). But is it really a 100% valid comparison?
A full transcript follows the video.
10 stocks we like better than Home DepotWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Home Depot wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of May 1, 2017
This video was recorded on May 26, 2017.
Chris Hill: For what seems like the hundredth quarter in a row, Lowe's latest results were just not as good as Home Depot's. First-quarter same-store sales up just 2%. Simon, I guess that's why overall revenue was a little light, too.
Simon Erickson: Gosh, Chris, I hate that narrative, though. It seems like Lowe's continually gets compared to Home Depot and it wasn't just as good. Sorry son, your older brother is doing a little bit better at baseball this year than you are. A little bit different market. Home Depot is going more after contractors, Lowe's is going more after consumers and homeowners. And we're seeing a seven-year high for new housing starts right now, which has juiced Home Depot's top line, definitely, over last year. But I look at Lowe's, and this is a company, too, that's hitting 10-year highs in its operating margins, 10-year highs on its return on invested capital, which is now north of 16%. That's everything I can ask for as an investor. The stock is up about a triple in the past decade, and they're increasing their dividend. I feel like they're a company doing everything right right now.
Jeff Fischer: And, and to Simon's point, Lowe's has it a little tougher for going after the consumer, because they talk about, periodically, in the quarter, how their marketing was just not quite right. They didn't meet consumers exactly where they were, so that marketing spend didn't have exactly the return they wanted. Home Depot doesn't have to worry about that as much since they're going after the steady and, lately, growing contractor business.
Hill: Do you suppose they have to spend money to actually get those contractors? I'm assuming that if they do, it's a heck of a lot less than advertising on television for people like us.
Fischer: Lowe's does spend to get consumers in, Chris, definitely.
Chris Hill has no position in any stocks mentioned. Jeff Fischer has no position in any stocks mentioned. Simon Erickson owns shares of Lowe's. The Motley Fool recommends Home Depot and Lowe's. The Motley Fool has a disclosure policy.