Lowe’s to Build Up for Retail War in the West
Lowe’s Cos. today will announce plans to break ground next month on three Southern California home-improvement stores, the first of at least 50 planned in the region during the next three years.
The move launches the next big battle in Lowe’s nationwide retail war with the home-and-garden supply leader, Home Depot.
Lowe’s said it will build its first three stores in Long Beach, Rancho Cucamonga and Temecula, with plans to open those stores before Christmas. It also plans to convert existing Eagle Hardware & Garden stores, including those in Chino Hills, La Quinta, Norwalk and Westminster, after it completes its acquisition of Eagle.
Sources said Lowe’s also plans to erect a regional distribution center in Moreno Valley to support one of the largest retail expansions in Southern California history. The company would not confirm the location. It did say it will build such a facility in the Southland to supply its Southern California operations as well as stores it plans to build in Arizona and Nevada.
The distribution center will create 600 jobs. The new Southern California stores will create thousands of jobs, including 6,000 in the Los Angeles area alone, and add a new retail nameplate to a competitive home-improvement field that includes Home Depot and the Irvine-based HomeBase.
Lowe’s aims to get a slice of the nation’s largest home-improvement market in Southern California, which generates sales of about $9.4 billion annually, according to the Home Improvement Research Institute, a trade group based in Lincolnshire, Ill.
Home-improvement “sales in the area are growing 4% to 5% annually,” said company spokesman Brian Peace. “We feel very strongly that there is significant growth potential for our company in the region.”
Lowe’s initially announced it would enter California, Arizona and Nevada markets last spring. The proposed three-state expansion is priced at $1.5 billion.
North Carolina-based Lowe’s has 484 Lowe’s Home Improvement Warehouse stores in 27 states. It agreed in November to buy Renton, Wash.-based Eagle Hardware & Garden, which has 36 stores in 10 states, to speed its expansion into the West. Home Depot has 68 stores in Southern California and plans to build 20 to 30 more in the region during the next two years. It has 715 stores in 44 states nationwide.
Home Depot, based in Atlanta, has competed successfully with Lowe’s in other parts of the country and expects to do so in Southern California, said company spokeswoman Amy Friend.
Lowe’s expansion is more of a threat to many independent hardware stores, industry analysts said. “The mom-and-pop neighborhood stores have relied on convenience as a selling point,” said Don Spindel, an industry analyst at A.G. Edwards in St Louis. “But the big chains are becoming more convenient as they add more stores. This could be the straw that breaks the back of some independents.”
Lowe’s expansion, analysts said, will also put more pressure on regional chains such as HomeBase, which has 84 stores in 10 western states and 34 stores in Southern California.
“This is clearly a two-horse race involving Home Depot and Lowe’s,” said Alan Rifkin, an analyst at Piper Jaffray in Minneapolis. “Both chains compete effectively on price, breadth of inventory and service. HomeBase will be most adversely affected.”
Citing economic growth in the Southland, HomeBase President Allan Sherman said the company is prepared for new challengers. “HomeBase intends to participate in this growth by capitalizing on the strong name-brand recognition and customer loyalty we’ve been building since we entered this market 15 years ago,” Sherman said.
