Stairway to Retail Hell

Joined: 14 Nov 2008 Posts: 36

As I keep reminding everyone, Lowe’s corporate culture is going to kill a company that employs thousands. I know most you that read my posts might see me as being negative or sarcastic, but my main goal is to bring to light the lack of adaptation from this nasty corporate culture that has entrenched itself with the ranks at GO. Lowe’s, like other retailers, has modeled its expansion plans after WalMart. Clearly, this expansion strategy is backfiring and Lowe’s appears to be the last line of the major retailers to react accordingly. They’re not selling things, in general, that people need. They’ve continued the market strategy of store saturation & up selling overpriced items that no one is willing to buy. Why, because so many consumers have put themselves in high debt situations they don’t have available cash to go out and purchase because what they have been doing is overly using credit to live beyond their means. Now consumers can barely purchase necessities & unless they truly need something, they’re not going to go out and impulse purchase.

What this translates to is cutting prices & further reducing margin. This results in LOWer Sales Revenue & Gross Revenue & in order to keep the net in as good a position as possible, the only variable left is direct labor which is all the hourly associates. The expenses are going to continue constant at least for the next 9 months before any corrective action created today could truly have an impact on the company as a whole. The only immediate impact is hourly labor & salaried overhead.

Back to the Walmart market saturation strategy…a particular area has one store, then Lowe’s build another & another soon they have 5 – 6 locations. Lowe's likely spent $20 million to build each of those stores. It has now sunk $40 million into building the 5th and 6th stores, while reducing annual profits. These figures have also not taken into account the future reduction in consumer spending. Lowe's has replicated this error across the country, their future is not looking bright. Only in the last quarter of 08 did Lowe’s reduce or delay new store openings. The hubris and overconfidence of top retail executives will further result in existing store closings and big retail layoffs.

The retail layoffs for new stores started this week with New Store Set managers going to roughly 16 members from the previous bench of 35! We all know that loyalty never existed in retail, but now it’s going to come at the worst time ever. Most of these new & remerchandising managers are banking their retirements on Lowe’s stock with has now hit 52 week low 4 times in less than 2 weeks. Further, Lowe’s executives are finding that they’re not able to bully manufacturers any longer because they’ve been doing it since just before the Bakersfield California store. There is a well founded rumor that an email is currently circulating discussing the closure of historically poor performing stores… I hope it’s not too tough to believe that bankruptcy could very well be a reality.

Joined: 22 Dec 2007 Posts: 461

I can't picture bankrupcy...

I can pictures lower ended stores closing though. There's usually a few closings that are balanced with openings. However I think that ultimatly there MUST be some level of performance.

I know of a store that probably has not made payroll and I heard that from a dm who is connected with the district manager...and this was nearly a year and a half ago...the chain cannot afford to subsidize newer stores.

Back in late 1999 there was a barron article about the "burn rate" of dot coms. These companies lost money hand over fist to gain market share. I'm sorry but the fact of the matter is that a business has to make money..end of story.

If you don't at least get a breakeven level why bother having it open? Maybe you might have a situation where a store might only be viable part time. In other words if the bulk of money is made in the spring in summer instead of closing a store outright you just operate it during the spring and summer. Why bother running a loss for months?

Joined: 18 Jul 2008 Posts: 146 Location: Region 1

I can't picture bankruptcy either, at least not at this point and into the near foreseeable future. I have maintained for some time now that Lowe's needs to temporarily stop building new stores.

However, if we become entrenched in this dismal, falling economy into 2010 (or beyond), it's not out of consideration to see: (1) the closing of under-performing stores en masse, then (2) the talk of a merger between Lowe's and HD. The economy then may not support two specialty retailers who basically sell the same merchandise and continue to claw at each other for market share. At that point, the stock value of both companies would have fallen to such low levels that something would have to give. It's not out of the question.

Joined: 24 Feb 2009 Posts: 7

g-LUTZ-tonous,

I find your posts to be very well thought out and informative.

Samson

Joined: 22 Dec 2007 Posts: 461

I think that if lowes and hd even tried to merge it would be shot down. Even if that did happen there'd be so much overlapping stores that they would still close.

Joined: 18 Jul 2008 Posts: 146 Location: Region 1

Joined: 13 Mar 2005 Posts: 464

Closure of historically poor performing stores?

Yes, good possibility.

Bankruptcy very well a reality?

No, not very likely.

Joined: 01 Feb 2008 Posts: 546

What about closure of newer stores because they are slower than the established stores? Think that will happen?

Joined: 14 Nov 2008 Posts: 36

I do want to say again, I'm not here to bash anyone at the store level or that has made a carreer doing good at Lowe's. What Im so sick of and also firmly believe, is that the executives in their little "star chamber" are basically ruining what used to be good companies to work for. They haven't been there for the the employees in 6 years, they've only carred about their bonuses which is tied directly to shareholders expectations. They've lied to everyone for so long, now they believe their own lies.

On another note, if GM goes under, how many Lowe's & Depot stores do think would be impacted? Its that close people! Wells Fargo/Wachovia is letting go, Citi which has a huge base in Charlotte/Dallas/Phoenix is hoovering around a dollar. Home Depot is managing it short & long term debt...Lowe's is funding available cash by ever increasing its debt. You can make the call, but with unemployment at 8.1%, nobody is buying anything.

Joined: 04 Dec 2007 Posts: 76

HA! I dont even really know what to say to this posting...it is quite possibly the most absurd stuff i've heard concerning Lowe's... Ever...

You guys crack me up.

Joined: 08 Jan 2006 Posts: 26 Location: ny

Sounds like what's happening with a lot of companies. Lowes should cease opening new stores to allow revenue to maintain at the older more established stores. Some of our customers by-pass other Lowes to shop at our store.
Anyhow, I enjoy all the comments I read so let's keep up the chat. I'll bet the screenname"Lowes Manager" isn't.

Joined: 19 Oct 2003 Posts: 2801

I like how they spent MILLIONS for the Vegas week but can we get capital to fix the damn shit house up? I think an outhouse would be better than the bathrooms we have! Doh!

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