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During the early years of our current century, Lowe\u2019s was commonly seen as a company which most effectively operated under a well-established set of core principles.\u00a0 The world\u2019s number two home center warehouse operator tended to build from the ground up and hire from within.\u00a0 These principles can be clearly seen as Lowe\u2019s designed plans to physically enter Canada and Mexico.\u00a0 In both cases Lowe\u2019s carefully executed plans of entry over the course of two to three years by constructing new stores based on the company\u2019s studies of local communities and its successes in the United States.<\/p>\n
Years earlier Home Depot had commenced its retail operations in both nations by acquiring and converting existing chains and as well as creating new stores.\u00a0 Lowe\u2019s approach was more methodical and time consuming but their plans were carefully fulfilled in accordance with the company\u2019s corporate culture in the US.\u00a0 These were prime growth years for the industry overall.\u00a0 Lowe\u2019s was increasingly seen as Wall Street\u2019s darling.<\/p>\n
At the same time Home Depot, under an administration which embraced a policy of being all things to all potential customers, essentially strayed from its deep Do-It-Yourself, warehouse roots.\u00a0 The company went on an impressive and expensive acquisition spree and acquired several, well respected regional pro dealer chains.\u00a0 Home Depot also opened retail locations which differed from its traditional warehouse approach but which it saw as ancillary compliments to its DIY concept.\u00a0 The company\u2019s EXPO Design Centers was the largest and boldest of these new concepts.<\/p>\n
In 2007, after a series of troubling reports including financials, Home Depot management changed its course with the costly removal of then leader Robert Nardelli and his $121 million golden parachute.\u00a0 As reported in this space earlier this year, Nardelli\u2019s successor Francis Blake immediately embarked on several costly, bold moves including divesting the company of the pro dealers acquired by the previous administration, at a considerable financial loss.\u00a0 In a clear effort to return to Home Depot\u2019s previously successful and often ground breaking roots, Blake shuttered not core retail operations including the chain of EXPO Design Centers.\u00a0 Recent quarterly financials reported by Home Depot have been invigorating, likely portending a prosperous future.<\/p>\n
As noted in several CSG Insights over the past year, Lowe\u2019s fortunes have not fared nearly as well.\u00a0 In addition to far too many quarters of disappointing financials, Lowe\u2019s seems to be, based on its earlier history, operating through an error prone mode. \u00a0As the company moved to improve its immediate financial status by dropping what it considered to be underperforming locations, Lowe\u2019s ran into the headwinds of strong protest on successive rounds of closures.<\/p>\n
Employees cried out not so much for the loss of jobs as for the way the store closures were announced.\u00a0 Essentially some employees were notified there was no need to ever return to work as they signed out for an evening.\u00a0 To make matters worse members of the local press and politicians in affected areas sharply questioned several closures by wondering if some relatively new stores had been given enough time to turn things around.\u00a0 In some cases community leaders noted tax breaks given by local governments to encourage relatively recent store construction of those now closed.\u00a0 These questions were then elevated by the national press and politicians including a US senator.\u00a0 This embarrassment of execution was only compounded by increasingly optimistic financial reports and a solid turnaround by rival Home Depot.<\/p>\n
As reported earlier in this space, a comprehensive redesign of executive functionality was accompanied by several, somewhat new age titles.\u00a0 Current management titles include Digital Interfaces Executive, U.S. Stores Executive, and Business Development Executive.\u00a0 As most top decision makers are executives, this nomenclature is perhaps a bit superfluous and likely not descriptive enough in terms of rank, tenure and purpose.\u00a0 Either Lowe\u2019s is leading the way to a new wave of title designations or financial pressures are seeping their way into basic corporate decision making.<\/p>\n
Now reports have emerged that Lowe\u2019s is considering a succession plan to determine an eventual successor to current CEO Robert Niblock.\u00a0 Lowe\u2019s indicates it is always considering future successors throughout its corporate structure.\u00a0 However as Mr. Niblock\u2019s background is accounting and financials have been troubling for some time, a look to the future must be embraced.<\/p>\n
It seems that talk of succession revolves around finding a new chief merchandising officer.\u00a0 This position has been vacant since May and it seems that Lowe\u2019s search for a new merchandising leader is taking the company\u2019s typically painstaking course.\u00a0 It is however expected that frustrated by its current financial plight, especially in light of rival Home Depot\u2019s contrasting trajectory, an incentive to a new merchandising chief would likely include the prospect of the CEO title down the line of a few short years.<\/p>\n
Indeed the effects of the chief merchandising vacancy has been seen through several recent retailing gaffes.\u00a0 This summer as Home Depot ceremoniously highlighted displays of air conditioners at the front of its stores during notable hot spells, Lowe\u2019s units were largely hidden at the rear of its stores, at times strapped by out of stocks.\u00a0 A number of consumer complaints were displayed on retailing web sites as appliance seeking customers were directed from out of stock Lowe\u2019s stores only to be told that the lone remaining model in a second location was on display and not for sale.\u00a0 Disappointing and declining financials are frequently a sign of weak or failed merchandising execution.<\/p>\n
Lowe\u2019s typically boasts of a venerable management cadre that is both loyal and long serving.\u00a0 The company\u2019s modus operandi is dedicated and methodical.\u00a0 Any decisions on succession are likely to be consistent with this Lowe\u2019s philosophy.\u00a0 At a time where once downtrodden Home Depot is surging on all cylinders and the industry\u2019s long third-ranked retailer Menards continues to grow its regional store count with ever larger, unique big box locations, how long can Lowe\u2019s await improved merchandising execution.
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