Home Depot, an ongoing discussion....

[fenders53]

Yes the Pro accounts are growing but HD is spinning it some. 80% of those Pros are small-time Pros, not house builders with twenty house builds in progress at any given time. But the small-time Pros show up on the way to the jobsite to start their day like clockwork and get some materials. What these small-time Pros don't need is a clueless kid that will be gone in a couple months, making $9.50 an hour, screwing up their order with wrong product and messing up their day by requiring a return trip. That is exactly why they tell us they are here. They want to tell the Pro desk what they need, and leave without triple checking their order. They wish to check out in the Pro lane where Candy will be there giving them their daily smile, just like everyday the last 5 years because she isn't job hunting because she has good benefits for a retail job. Building materials are frequently scuffed because getting it here cheap is the priority for most suppliers. It's just how it is. That will be handled by an empowered cashier who can give a small discount to make it right. Jsut make the Pro happy without giving away the store. Pros have no time for the lowest wage employee and they are OK with paying some premium for less hassle. I truly think this is HD's secret to success. Get some decent help and keep them. VERY few chain retailers have figured this out. Practically none actually. Trying to even find a cashier at local Lowe's during rush hour is a challenge. They are chasing the Wal-Mart, almost no live cashiers model. I hear that constantly at work. I've lived it myself and it is aggravating.

[fenders53]

Check out Lowe's earnings. Same deal as the past few quarters. Tracking HD's general direction, falling short of HD's metrics for same store sales etc. They are still wannabees. I do think they will get it right eventually. In my mind it just proves improving same store sales numbers is a VERY complicated matter that requires the entire team on board right down to the kid helping people load their cars in the parking lot. The old guy mixing paint knows he will get a profit sharing check twice a year if we make our sales number goals, or at least get close. Are the other retailers doing that? That is an honest question because I truly don't know.

[Roadmap2Retire]

Yeah saw the numbers on LOW this morning. I agree that by most metrics over the years, LOW has not been able to catch up to HD.

On another note, this divi raise from HD moves it from the Challenger list to the Contender list in the Dividend CCC list.

[fenders53]

(02-27-2019, 02:58 PM)Roadmap2Retire Wrote: Yeah saw the numbers on LOW this morning. I agree that by most metrics over the years, LOW has not been able to catch up to HD.

On another note, this divi raise from HD moves it from the Challenger list to the Contender list in the Dividend CCC list.

And they probably don't have to as long as they follow the general trend in earnings growth and dividend.  The market is being a little rough on HD this week.  I think their is one more light quarter due to weather so it may be appropriate.  The two months of non-stop bad weather happened in this next quarter, and not the one they just reported.  I'll be ready to pounce on some shares next quarter.  I've accepted what I believe is the reality going forward.  These stocks will become little more cyclical.  Economicaly and seasonally.  It's not too easy to grow after you have 2,200+ stores so you can't meaningfully cover up any drop in organic growth through expansion.

[Roadmap2Retire]

I havent really dug too deep into this, but is there any push from management to expand globally? Seems like the HD (and LOW) are too focused on the N.American market and international expansion would help with the growth.

[crimsonghost747]

(02-28-2019, 10:10 AM)Roadmap2Retire Wrote: I havent really dug too deep into this, but is there any push from management to expand globally? Seems like the HD (and LOW) are too focused on the N.American market and international expansion would help with the growth.

From what I can remember, LOW has tried it in Canada, Mexico and Australia. None of those have really worked out.

[fenders53]

(02-28-2019, 11:47 AM)crimsonghost747 Wrote:

(02-28-2019, 10:10 AM)Roadmap2Retire Wrote: I havent really dug too deep into this, but is there any push from management to expand globally? Seems like the HD (and LOW) are too focused on the N.American market and international expansion would help with the growth.

From what I can remember, LOW has tried it in Canada, Mexico and Australia. None of those have really worked out.

This is accurate.  The disposable income for your average household in Mexico doesn't fit their business model so well.  The true necessities are low margin commodity products.  I spent a few months on a cash register at HD and I assure you 75% of the items in the basket are luxury purchases you can do without if necessary.  Not sure about Canada, other than the very frequent brutal winters.  That is hard on home construction products.  The garden centers are very profitable for both companies as well.  That works a lot better with an extended gardening season.  Establishing the logistics of moving heavy items around in a day or two would be very expensive.   Part of the secret to success is HD and LOW's ability to move stuff fast for calamity of the month.  Plywood for hurricanes, sump pumps for floods, ice melt for ridiculous winters etc.  That's a lot easier with thousands of stores, and many regional warehouses. Reasonably easy to move emergency supplies around when it's only a few hundred miles.  It can and does happen in just a few days.

[Roadmap2Retire]

LOW ended up buying a chain here in Canada called Rona a few years ago and have been converting all the stores to LOW brand (and closing some other ones). There are still a few leftover called Rona, but I believe they are being converted to LOW brandname.

I hear you that the disposable income is probably higher in US, but an economically rising demographic such as Asia probably provides a good opportunity for companies like HD/LOW to enter the markets. I just did a quick search and looks like HD has tried some expansions in intl markets, but continue to focus on US market instead....perhaps a lack of traction in business internationally.

[fenders53]

(02-28-2019, 02:01 PM)Roadmap2Retire Wrote: LOW ended up buying a chain here in Canada called Rona a few years ago and have been converting all the stores to LOW brand (and closing some other ones). There are still a few leftover called Rona, but I believe they are being converted to LOW brandname.

I hear you that the disposable income is probably higher in US, but an economically rising demographic such as Asia probably provides a good opportunity for companies like HD/LOW to enter the markets. I just did a quick search and looks like HD has tried some expansions in intl markets, but continue to focus on US market instead....perhaps a lack of traction in business internationally.

I think it comes down to the high cost of establishing new distribution, and the near-term cost on profits.  I would have thought Canada would be fairly easy, but I think Lowe's missed there again, as recently as yesterday.  Your point remains valid though.  The US market is saturated.  These companies find a way to meaningfully grow revs some year soon, or they cease to be a great investment.

[fenders53]

Designed and sold a $5300 custom door at HD today. Installation and tax not included. Now some poor guy can keep his Harley in the basement instead of the garage. At HD, I like to think I'm solving the world's real problems one at a time.

[NilesMike]

I am an HD investor and yes they have knowledgeable help, less than in the past IMO. And self checkout, uggh

Menard's actually pays quite well too and has profit sharing.

Lowe's blows and I WILL NEVER shop there again. I wanted an exterior door installed that I would purchase from them $200 +/- door. They charged me a $30 fee for a guy to come measure to make sure it will work. This guy says the height isn't the required 81.5" and we will need a custom door for $850! I come home and measure, the rough opening is more than sufficient for the door. Spoke to everyone up to the store manager, sorry we stand behind our contractors! Non refundable measuring fee and we think our guy is right. Now, had I known nothing about doors I would have paid an extra 650 and then the guy would have had to fur down to make my undersized door fit!

I bought the door, my carpenter nephew installed it for $125. Horrible experience with Lowe's.

You should read the Ken Langone book about HD founding. Good read

[fenders53]

(03-03-2019, 09:43 AM)NilesMike Wrote: I am an HD investor and yes they have knowledgeable help, less than in the past IMO. And self checkout, uggh

Menard's actually pays quite well too and has profit sharing.

Lowe's blows and I WILL NEVER shop there again. I wanted an exterior door installed that I would purchase from them $200 +/- door. They charged me a $30 fee for a guy to come measure to make sure it will work. This guy says the height isn't the required 81.5" and we will need a custom door for $850! I come home and measure, the rough opening is more than sufficient for the door. Spoke to everyone up to the store manager, sorry we stand behind our contractors! Non refundable measuring fee and we think our guy is right. Now, had I known nothing about doors I would have paid an extra 650 and then the guy would have had to fur down to make my undersized door fit!

I bought the door, my carpenter nephew installed it for $125. Horrible experience with Lowe's.

You should read the Ken Langone book about HD founding. Good read

Yes I should read that book.  I only know a few facts from the very early days.  I know the founder pushed his vendors to provide him with empty product boxes.  He kept them on the top shelf so it wouldn't look like he couldn't afford to properly stock his store.  That isn't a rumor, to my surprise it is specifically mentioned in an HD orientation training vid.   

The non-fitting custom doors, windows and kitchen remodel thing is a big deal for everyone as this stuff is VERY cashy.  Anyway, Mike, here is how it works at my HD.  I try to convince you to drop $30 on a professional measure from our installer that I know is good, but I warn you he is expensive on the install.  If you don't like his install bid, then feel free to tell him to go pound sand, but I now have a measurement I can trust and I can sell you a door in confidence.  Our door will fit, and I would be sick about it if it didn't because that is a lot of money.  That said, you will review the order with me line by line before you pay, and if you wanted an oak door but read my mistake, and then signed off on an ebony door, then you are going to be said because we have your money.  In the absence of a pro measure, I'm not going to sell you a $4000 door if I have any hint you don't know what the hell you really need.  It's just better that way.  Knock yourself out if you want to guess and buy a $200 door.  We'll take it back and throw it in the discount rack if you don't trash it trying to install it.  We'll probably take it back every if you mess it up.  

As far as competency, it no doubt varies from store to store. We are fine until 5-6 PM when most of us go home.  Right or wrong we are staffed too thin at night and customers aren't pleased.  Pressure to make numbers every quarter causes that, and HD hit's their numbers.  We now have "assisted checkout" instead of self checkout. They actually painted over the old "self" checkout signs because they knew it was ticking people off. There is still somebody there to check you out in this lane if you desire. There are almost always more than enough regular cashiers as well, and wait time is rarely over a minute or two. That is Lowe's biggest fail. It's like Wal-Mart, even during peak hours sometimes.   That's a bad idea and customers tell me so.          

I finally read the quarterly today.  My only concern is debt.  They repurchased about $7B in shares in 2017, $9B in 2018 and planning on another $15B in 2019, and the Div just got raised big time.  They could have cut their debt in half, hiked the dividend considerably, and still bought a considerable number of shares.  That's not a great decision IMO.  They are apparently betting the recession is not coming soon.  I am going to guess they repurchased billions in shares north of $200 in 2018.  If so, I disagree with that plan when you have debt as high as HD, and the PE was obviously higher than average.