Lowe's goes global

By Lisa Girard

With the economy and housing industry continuing to slump here at home, Lowe’s is putting more emphasis on international growth -- particularly north and south of our borders.

While scaling back on new store openings in the United States, the Mooresville, N.C.-based retailer is forging ahead into Canada and Mexico, president and COO Larry Stone confirmed last month at the Raymond James 30th Annual Institutional Investors Conference in Orlando, Fla.

In February, Lowe’s announced it would open three more stores in Canada by the end of the second quarter -- in South Oshawa, North Scarborough and West Scarborough -- bringing the total number of locations there to 14. The company’s long-awaited entry into Mexico, first announced in January 2007, will take place during Lowe’s 2009 fiscal year, Stone said at the March 11 conference. Two stores are slated to open in Monterrey in January 2010.

In the United States, Lowe’s will open 60 to 70 new stores this fiscal year, compared to 115 in fiscal 2008.  

Stone said he still thinks there’s an opportunity for 100-plus Lowe’s locations in Canada, though it might take five to seven years to complete. “[Given] everything that has happened the first full year of operations, as we head into our second year, we don't see any problem in getting to 100 stores,” he said.

Lowe’s first announced in 2005 its intentions to expand into Canada and opened its first three stores in the greater Toronto area in December 2007. The stores, located in South Brampton, Brantford and Hamilton, offer 117,000 sq. ft. of retail sales space, with an additional adjacent garden center of approximately 31,000 sq. ft.

Each new Canadian store represents an average investment of at least $18.5 million and creates up to 175 local jobs, the company said.

Lowe’s also confirmed last month it is looking at six recently closed Sam’s Club stores in Canada as possible future Lowe’s locations. Maureen Rich, a Lowe’s spokeswoman, confirmed with HCN that the company has been talking to Wal-Mart Stores regarding the sites, which are located in the Ontario-based cities of Pickering, Vaughan, Richmond Hill, London, Etobicoke and Cambridge. Rich also said that Lowe’s Canada “continues to evaluate [other] sites” as well as the Sam Club’s locations.

All 11 of Lowe’s Canada-based stores -- plus the three under construction -- are in the province of Ontario. Stone added that the company is making plans to open stores in the Calgary area in fiscal 2010. But, he added, Lowe’s will continue to look at Ontario and other western Canada territories. “We think there’s good opportunity in Canada,” he said. “The customers have received us extremely well, and we are very pleased with our performance in Canada the first year of operation.”

Calgary has become a hotbed for U.S. expansion in recent months, with Gap Inc., the world’s largest clothing retailer, opening it’s first two Canadian factory outlets in Edmonton last month. Retail sales in the province of Alberta will fall by 2.9% year-over-year in 2009, but are expected to grow by 5.4% in 2010, the Royal Bank of Canada predicted in a recent report.

On a national level, Canada’s retail sales will fall 2.2% in 2009 and rise 5.2% in 2010, RBC projected. Canadian sales grew 3.2% in 2008.

According to Paul McElhone, associate director of the University of Alberta’s School of Retailing, the recession in Canada has, in fact, opened up opportunities for home centers there. Whereas contractors were tough to come by during the hot economy in recent years, rising unemployment has freed them to do smaller jobs, he said.

“We’re seeing a real shift, with people cocooning and staying in their homes,” McElhone said. “For those who have saved money, this is a great time to invest in their homes, and a company like Lowe’s could benefit from that.”

For Lowe’s, the keys will be hiring knowledgeable employees and presenting a consistent message to the Canadian consumer, who normally prefers to buy from Canadian companies, McElhone said.

“Is there room for Lowe’s? I think so. It’s an excellent company whose boutique style merchandising resonates with female consumers,” he said. “What Lowe’s has to do is to communicate that message to the consumer to differentiate itself from Rona and Home Depot.”

Rona, a Canadian company, has 700 locations across Canada, while Home Depot Canada operates in all Canadian provinces with more than 176 stores.

And then there’s Wal-Mart, which entered the Canadian market in 1994 and now has 318 stores with 77,000 employees. “Wal-Mart is hugely successful in Canada, but it did take time,” McElhone added.

Lowe’s is also trying to take advantage of some of the growth opportunities in Mexico -- with plans to open two stores in Monterrey in early 2010. Again, this comes at an investment of $18 to $20 million per store.

Many U.S. retailers have been expanding their presence in the growing Mexican marketplace. In fact, Wal-Mart Mexico -- or Wal-Mex -- has become Mexico's No. 1 retailer with 1,175 stores. Home Depot, which entered Mexico since 1994, shored up its presence there with the acquisition of Home Mart, Mexico’s second largest home improvement retailer, in 2004. The retailer currently operates more than 60 stores there.

Lowe’s has taken its time getting into the Mexican market, but chairman and CEO Robert Niblock explained why this is an opportune time for the move when the company announced its plans to expand there. “With homeownership rates in the market growing at a rapid pace, we see Monterrey as a tremendous opportunity to offer Lowe’s products and services to homeowners and commercial customers in a superior shopping environment with customer service that is recognized as among the best in retail,” he said.