Analyst Insight by Jared Koerten, Senior Analyst, Euromonitor International
Yesterday, Lowe's Companies Inc agreed to buy Orchard Supply Hardware Stores Corp for US$205 million. This agreement brings 60 of Orchard’s 91 stores under Lowe’s control and provides an option for the company to buy the remaining outlets. With an average selling area of only 4,100 sq m, Orchard Supply Hardware outlets are significantly smaller than Lowe’s traditional stores and – save two newly-opened stores in the Portland, Oregon area – are all located in California.
Lowe’s hopes that the addition of Orchard Supply Hardware can help reverse its relatively disappointing performance in recent years. From fiscal 2010-2012, Lowe’s net sales climbed only 3.5% while its chief rival, The Home Depot Inc, grew its net sales by more than 9.9% during the same period. As the housing market in the US continues to recover after its recessionary collapse, consumers are once again looking to invest in their homes. In this environment, Lowe’s realises that it is vital to remain competitive with its larger rival in order to fully capitalise on the recovery of the US housing market.