Lowe's Has the Right Man for Its Fix-Up Job
(Bloomberg Opinion) -- We now have a clearer sense of how Marvin Ellison plans to renovate Lowe's Cos.: By doing what Marvin Ellison does best.
In his first quarterly earnings call with investors since becoming CEO of the home-improvement giant, the retailing veteran held forth Wednesday on his vision for shoring up a chain that, while in good shape, has been outmaneuvered lately by Home Depot Inc. Essentially, Ellison said he'd be pushing the company to be a better operator and to fix its "self-inflicted" wounds.
A key focus will be doing a better job of managing Lowe’s inventory and supply chain, including making sure key items don’t run out of stock, an issue that’s likely costing the chain sales and dampening customer satisfaction.
He’s also aiming to boost store productivity by thinking differently about labor allocation. In the past, Ellison said, the chain has had a tendency to "throw payroll at problems," meaning it just adds more employees to stores indiscriminately in order to boost sales. He thinks that's unsustainable, and will instead try to identify the root cause of the problems in the stores. Indeed, Home Depot tends to have higher sales per square foot than Lowe's, suggesting the pre-Ellison approach hasn’t been adequate.
Everything about Ellison's resume makes me optimistic he can pull such changes off. Before his stint at the helm of J.C. Penney Co., he held senior operations roles at Target Corp. and Home Depot Inc. — highly relevant experience for the behind-the-scenes cleanup he plans for Lowe's.
It's also noteworthy that Lowe's announced on Wednesday it is axing its Orchard Supply Hardware business and closing all 99 of that brand's stores. That Ellison made such a decision so early in his tenure hints at the benefit of picking a CEO who already has such deep knowledge of the business. He can hit the ground running.
Of course, it remains to be seen whether Ellison's ideas will succeed. Lowe's simply has some built-in challenges that will be hard for him to address, such as the fact that Home Depot is widely perceived to have a stronger roster of store locations.
And let's be frank: While Ellison did plenty of good in his previous gig at J.C. Penney, that department store chain is still in crisis. Just last week, we got a clear snapshot of the shape he left it in, when the chain reported a meager increase in quarterly comparable sales and its shares plunged to historic lows. Ellison is a good retail executive, but he's not a magician.
For now, though, he’s got a good plan for Lowe’s and the right experience to execute it.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.
©2018 Bloomberg L.P.