What is the best buy?

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Although the economy may seem a little worrying now, it’s worth paying attention to in a few years. Take the home improvement market, which is expected to grow at nearly 5% through 2028. The two industry Goliaths – and longtime rivals – are Home Depot(NYSE:HD) and Lowe’s Companies(NYSE: LOW).

Read on to see which of these two home improvement giants makes a more compelling purchase in today’s market.

1. Home Depot is on the rise

Founded in 1978, The Home Depot transformed the hardware store as we know it. Now the world’s largest chain of home improvement stores, it operates more than 2,300 stores in North America, employs half a million associates and generated more than $151 billion in revenue last year.

When founders Bernie Marcus and Arthur Blank opened their first Home Depot stores in Atlanta, Georgia, they realized their vision: a one-stop shop for all things home improvement. With around 60,000 square feet each at the time and offering a greater variety of products, the first Home Depot stores instantly eclipsed the existing hardware stores of the 1970s.

Today, the average Home Depot store spans 105,000 square feet and contains more than 35,000 products for sale. And Home Depot claims to offer over a million products online through its online store. The company also offers home improvement and other services, boasting “the industry’s largest installation company for the Do-It-For-Me customer.”

Home Depot has shown exceptional strength this year, posting its highest ever quarterly sales and profit in the second quarter. According to CEO Ted Decker, “Our performance reflects the continued strength in demand for home improvement projects.” The company posted record revenue of $43.8 billion, an increase of 6.5% over the same period last year. For the full year, Home Depot expects total sales to grow about 3% from 2021 numbers, with an operating margin of about 15.4%.

2. Lowe’s sees strong sales growth

More than 50 years before Home Depot opened, Lowe’s began as a general store in a small town in North Carolina. In addition to sewing supplies, horse gear, and snuff, LS Lowe’s original 1921 store also sold hardware and building materials. Today, Lowe’s serves about 19 million customers a week in its nearly 2,200 stores, and the company posted sales of more than $96 billion in fiscal 2021.

However, it was not until 1946 that Lowe’s became exclusively a hardware store. It was then that the company adjusted its inventory to accommodate a surge of construction after World War II. Lowe’s went public in 1961 and has since become one of the largest home improvement store chains in the world. Like Home Depot, it also operates in the United States, Canada, and Mexico.

Joining the metaverse revolution this summer, Lowe’s unveiled its virtual reality platform, Lowe’s Open Builder. This new tool allows shoppers to download digital versions of Lowe’s products — home decor products and furniture, for example — and then preview those items in their home or yard with augmented reality. By using Lowe’s Open Builder, customers can get a realistic idea of ​​what items will look like before making any buying decisions.

Lowe’s hasn’t done as well as Home Depot this year, and in the second quarter it saw a slight drop in sales from a year ago. Although DIY sales were below expectations, Lowe’s managed to compensate with a 13% increase in the “Pro” customer category, i.e. sales to contractors, professional remodelers and businesses. maintenance of facilities. Looking ahead, CEO Marvin R. Ellison remains committed to the company’s ability to capture additional share of the home improvement market.

What’s the best buy?

To help assess whether Home Depot or Lowe’s is the best buy, let’s look at current market caps, price/earnings ratiosand dividend yields.

Metric Home deposit Lowe’s

Market capitalization

$296.7 billion

$123.5 billion

Price/earnings ratio

17.8

15.7

Dividend yield

2.62%

2.11%

Source: E-Commerce

For one, Lowe’s has a slightly lower price-to-earnings ratio than Home Depot, at 15.7 versus 17.8. On the other hand, Home Depot offers a higher price dividend yield to shareholders and is having a record year.

With the current momentum in his favour, Home Depot is making a better buy than Lowe’s right now. However, as the two largest competitors in a market that is expected to reach over $1 trillion by the end of 2028, these two home improvement actions show a long-term promise.

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Lowe's associate helps shopper with flowers at garden center.
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