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Common Stocks and Common Sense by Edgar Wachenheim III

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9 LOWE’S

Lowe’s is the second-largest home improvement retailer. Through about 1,850 stores spread throughout the United States and Canada, Lowe’s sells roughly 40,000 house-related items, including lumber, wallboard, flooring, appliances, kitchen and bathroom cabinets, plumbing fixtures, lighting fixtures, paint, power tools, outdoor furniture, grass seed, plants, and fertilizer. The company’s sales volumes closely track with the strength of the housing industry.

Lowe’s was founded in 1921 when Lucius S. Lowe opened a hardware store in North Wilkesboro, North Carolina. After Lucius Lowe died in 1940, the store was owned and operated by several family members, and especially by Carl Buchan, a son-in-law. In the 1950s, Buchan opened several new stores that sold building supplies as well as hardware. Buchan died suddenly in 1960. Robert Strickland, the new CEO, took the company public in 1961 and continued to expand its footprint. Lowe’s revenues increased from $25 million in 1960, to more than $150 million in 1970, and to nearly $900 million in 1980.

Historically, Lowe’s had concentrated on selling to the professional builder. But when the market for new houses weakened in 1980, the company started redesigning its stores to appeal to the do-it-yourself homeowner. At about that time, a new competitor, The Home Depot, started opening big-box warehouse stores that typically were five times larger than the stores operated by Lowe’s. By 1989, it was clear that Home Depot’s large ...

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