Lowe’s needs a new, more dependable engine for growth as sales slow in its vast fleet of urban and suburban retail stores. It appears to have found it: rural America.
The home improvement chain said it’s rolling out a one-stop-shop store concept tailor made for shoppers living in rural communities. New or revamped stores will cater to that market’s indoor and outdoor needs with expanded product categories in pet, livestock, trailers, fencing, utility vehicles like ATVs, clothing and specialized hardware.
The company’s enthusiasm for pushing aggressively into smaller rural communities comes as its sales in larger metropolitan markets have slowed as the pandemic emergency has come to an end.
On Tuesday, Lowe’s reported slightly better-than-expected quarterly earnings but lowered its profit and sales outlook for the year, saying consumers were spending less on home improvement. It comes on the heels of rival Home Depot also posting disappointing sales and a somber forecast last week.
Lowe’s told analysts that it had piloted the rural store concept a year ago with successful results and was now expanding the idea into existing Lowe’s stores, primarily in the South, Midwest and Northeast throughout the summer.
“While in years past, our penetration of rural and remote stores was viewed as a competitive disadvantage, we now expect that these stores will be a key component of our operating profit growth over the next 3 to 5 years,” Lowe’s CEO Marvin Ellison, said Tuesday during the company’s earnings call with analysts.
Lowe’s (LOW) said it was scaling its rural store format to as many as 300 additional stores by year end for rural customers.
“When we look at the pilot stores where we’ve been very diligent on going after those specific categories of apparel, farm and ranch types of itemsas part of our expansion opportunity, we actually saw sales per square foot improve,” said Ellison.
Ellison said it might even make sense for Lowe’s to introduce specific products that outperfomed in sales with rural shoppers into its nonrural store locations.
“We’re seeing things like ATVs, having no idea if customers will respond, and it’s been an incredible growth category for us,” said Ellison. “We are finding categories in these rural stores that we think will be relevant in nonrural locations.”