Lowe's Investors Cheer New CEO Search After Trailing Home Depot

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(Bloomberg) -- Investors in Lowe’s Cos. are hoping a new leader can bring the mojo back to a chain that has spent years in the shadow of rival Home Depot Inc.

Shares of the home-improvement retailer jumped the most in more than a year on Monday after Lowe’s said Robert Niblock, a 25-year veteran of the company, will retire as chairman and chief executive officer. He will remain in those roles until a successor is found.

Niblock, 55, is stepping aside as activist investor D.E. Shaw & Co. pushes Lowe’s to match growth at Home Depot. While sales at Lowe’s have risen, they continue to trail gains at its larger competitor -- a sign it’s not doing as good a job capitalizing on the housing boom, which has prodded Americans to spend more on renovations.

“The market is likely excited for new leadership,” said Seema Shah, an analyst at Bloomberg Intelligence. “It is hoping for a leader who can better capitalize on the macro tailwinds and drive improved bottom-line performance.”

Shares of Lowe’s surged as much as 7.8 percent to $90.33, the biggest intraday gain since March 1, 2017. They had dropped 9.9 percent this year through Friday’s close.

Under Niblock’s 13-year tenure as CEO, Lowe’s store count almost doubled to 2,152, but many of them are located in less lucrative areas than Home Depot. Niblock said last month that Lowe’s will accelerate growth by boosting capital spending and working to get employees to spend more time interacting with customers.

Activist Criticism

Lowe’s said in January it would appoint three new directors to its board after D.E. Shaw took an active stake in the company worth about $1 billion, people familiar with the matter said at the time.

D.E. Shaw believes Lowe’s is underperforming Home Depot and could triple its value if it were to focus on improving sales, including its online offerings and marketing, the people said. Higher shipping costs than Home Depot and a less flexible labor structure are also contributing to the gap in value, they said.

Among the nominees for Lowe’s board was David Batchelder, co-founder of Relational Investors, who also sat on Home Depot’s board between 2007 and 2011 when the when that company underwent a dramatic transformation, including removing the CEO and several new directors.

The board’s search committee will be led by Batchelder, Lowe’s said in a separate email. The committee will also include Rick Dreiling, Angela Braly, Eric Wiseman, Bertram Scott and Lisa Wardell.

‘Excellent Condition’

“We applaud Robert for his successful career with Lowe’s, which was dedicated to serving customers, empowering associates and delivering returns to shareholders,” said Quentin Koffey, a portfolio manager at the D. E. Shaw group. “Robert leaves Lowe’s in excellent condition to execute on the tremendous value-creation opportunities ahead of the company. We wish him well in his retirement.”

While Lowe’s shares have dropped in recent months, their value has still more than tripled in value since Niblock took over as CEO and chairman in 2005. However, Home Depot shares have more than quadrupled over the same period.

To replace him, Lowe’s is likely to look outside the company, said David Schick, director of research for Consumer Edge Research. A “fresh set of eyes” would be good in an industry that’s been upended by online shopping, he said.

©2018 Bloomberg L.P.

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