Lowe’s Companies, Inc. (LOW), The Home Depot, Inc. (HD): Home Improvement Retail RIP

Competition with Home Depot or Lowe’s is risky

The Home Depot, Inc. (NYSE:HD) and Lowe’s Companies, Inc. (NYSE:LOW) are a rough neighborhood to move into. They serve homeowners, dedicated DIY customers, and Contractors (Pros) of various sizes. Orchard is much smaller, with sinking sales at about 660 million, down 15 million year over year with no earnings. Lowe’s Companies, Inc. (NYSE:LOW) and Home Depot are about 100 times larger, at 50 billion and 74 billion (yes that’s Billion with a B). A retail investor’s delight, The Home Depot, Inc. (NYSE:HD)Earnings Per Share (EPS) is up 10.45% over 5 years and is priced about a 24 P/E with a 2.1% yield after surviving the worst conditions for home retailers I can recall. Home Depot and Lowe’s often go head to head with stores located close to each other. A pair, one The Home Depot, Inc. (NYSE:HD) and one Lowe’s Companies, Inc. (NYSE:LOW) near my home are adjacent and you can drive or walk 50 yards from one lot to the other. It’s hard to imagine Orchard breaking into that duopoly. If Orchard expects to play in this league, even as a bit player in specialty areas, it needs more cash, better sales, and a unique proposition.

One quick way to measure retailing talent

One measure of retailing effectiveness is annual inventory turnover, because it gives you a sense of how effective a business might be in moving merchandise relative to its resources. The Home Depot, Inc. (NYSE:HD) leads the pack at 4.6, Lowe’s Companies, Inc. (NYSE:LOW) a respectable 3.9 and Orchard a dismal 2.6, likely shrinking with their declining sales.The Home Depot, Inc. (NYSE:HD) and v were busy turning those inventories for the past 4 weeks as I and other homeowners put a patch of dry spring to good use. Lots of customers in the stores I visited. Orchard is still a few days from opening their first store in the area as of April 15- about 2 weeks late I assume.

It’s hard to see how Orchard survives in this scenario- ten days late, ten dollars short…Osh__.

The article Home Improvement Retail RIP originally appeared on Fool.com and is written by Charlie Wagner.

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