Which is a better long-term buy? In general, Lowe’s holds a higher valuation than Home Depot. Home Depot has lower operating margins and has a weaker future return for investors. Nevertheless, Home Depot has outperformed Lowe’s equity returns over longer periods of time. Hence, it’s probably better to own Home Depot stock over Lowe’s.
The two home improvement retailers have different customer demographics. While Home Depot has a higher customer base and more purchasing power, Lowe’s appeals to hobbyists. Also, Lowe’s has a better display presentation, which is more likely to attract home improvement enthusiasts. Both companies are doing well in the short term, but Lowe’s is losing market share and profits.
Both companies have diversified their product lines. While Lowe’s appeal is geared more toward homeowners and DIYers, Home Depot’s core business is building and renovating. In fact, it accounts for 45 percent of its total sales. And both companies have spent heavily on distribution networks. However, The Home Depot is focused on large builders and contractors. This strategy has paid off in the short term, as it has improved the company’s sales growth by nearly 2%.
Home Depot offers lower prices and better inventory, but Lowes has a loyal customer base. Both stores also offer 5% off their credit card, but this isn’t enough to compensate for the difference in price. Home Depot has a more impressive price match guarantee, but Lowes’ employees will negotiate to get their prices lower. In the long run, which is better?