More pressure for HD
Tuesday February 6, 11:33 am Eastern Time
Lowe's to Expand in Northeast
By Jean Scheidnes
NEW YORK (Reuters) - Lowe's Companies Inc. (NYSE:LOW - news), the world's second-largest home improvement retailer, said Tuesday it plans to invest about $1.3 billion to expand in the U.S. Northeast region over the next five years, in line with an aggressive growth plan announced previously.
The Wilkesboro, N.C.-based company has a capital expenditure budget of $2.3 billion for fiscal 2001 alone, most of which will come from cash flow from operations, according to Carson Anderson, assistant treasurer for Lowe's. A debt offering will likely be needed in the next year for additional funds, he added.
Although the home improvement sector has been under the strain of deflated building materials prices and a sluggish retail climate, analysts said it was prudent of the company to push into the Northeast, where the presence of Lowe's stores is paltry compared with that of Atlanta-based sector leader Home Depot Inc. (NYSE:HD - news).
``Lowe's has had very good results of late competing with Home Depot,'' industry analyst Dan Wewer of Deutsche Banc Alex Brown said, adding that the Home Depot stores tend to lose about 10 percent of sales for a year when Lowe's comes to town.
``When they move in there's probably an initial little hit in sales,'' said Home Depot spokesman John Simley. ``But we find ways to adjust and recover pretty quickly. It's a big market out there. It seems the pie just gets that much bigger,'' he said.
Indeed, analysts say the two companies combined have not even 20 percent of the do-it-yourself market, and there is much room for both to grow.
``There could be near-term issues because of the costs of getting in to those markets, but the good will outweigh the bad,'' said analyst Brian Postol of A.G. Edwards.
As part of the plan, Lowe's plans to invest more than $430 million in the Boston area alone to build 25 home improvement superstores over the next five years. Each store will employee about 175 people, creating more than 4,000 new jobs throughout the region.
Home Depot said it already has 14 stores within 20 miles of downtown Boston, and 240 stores in the Northeast from Fredericksburg, Va., through Maine.
Shares of Lowe's rose 31 cents to $53.41 shortly before midday, Home Depot slid 11 cents to $46.50, both on the New York Stock Exchange.
With 1999 sales of $15.9 billion, Lowe's is the 15th largest retailer in the United States and operates more than 650 stores in 40 states.
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