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How Lowe’s Stock Has Outpaced Home Depot — And What’s Next?

There’s been a quiet competition brewing in the home improvement world. For the longest time, Home Depot (HD) was the go-to favorite for investors — the “safe” pick with its massive presence and strong margins. But if you’ve been keeping an eye on the market lately, you’ve probably noticed something surprising: Lowe’s (LOW) stock has been pulling ahead by a good margin over the past year.

The numbers tell an interesting story

Over the last 12 months, Lowe’s shares climbed almost 16%, while Home Depot only managed around 4%. That’s a pretty big gap, especially since these two giants sell mostly the same stuff to similar customers.

So what’s behind this divergence? It boils down to how each company is executing its game plan. Lowe’s has been more nimble — and that shows up in everything from spruced-up stores to smart digital moves.

What’s really driving Lowe’s outperformance?

It’s easy to just say “better management,” but there’s more going on here.

First, since Marvin Ellison took the helm in 2018, Lowe’s has sharpened its focus on cutting costs and streamlining operations. Fun fact: he actually came from Home Depot, bringing a disciplined, numbers-driven mindset. But this isn’t just about trimming expenses — it’s about doubling down on what customers care about: accurate inventory, smoother in-store experiences, and seriously growing sales to professional customers (the “Pro” crowd).

Second, Lowe’s has stepped up big on technology. Their e-commerce used to be an afterthought, but now it’s growing fast. Things like curbside pickup, upgrades to their mobile app, and trustworthy online stock info might not sound flashy, but they make a huge difference for shoppers. Meanwhile, Home Depot’s sheer size makes it tougher for them to roll out these changes quickly. Remember, turning around a giant like Home Depot is more like steering an aircraft carrier than a speedboat.

The housing market’s role — a mixed bag

Of course, the housing market always plays a part. Both Lowe’s and Home Depot benefit when people renovate their homes. But with mortgage rates still high and home sales slowing, you’d think both stocks would be struggling.

Here’s the twist: more folks are choosing to stay put and spruce up what they’ve got instead of moving. Lowe’s has embraced this “improve, don’t move” trend with marketing and product lines geared toward smaller DIY projects. Home Depot, with its stronger focus on big Pro customers, feels the slowdown more.

What’s on the horizon?

Lowe’s is on a roll right now, but the story isn’t finished. Both companies face a challenging economic backdrop for the rest of 2024. If interest rates drop, home sales could jump, which benefits Home Depot’s Pro-heavy business. If rates stay high, Lowe’s consumer-focused approach might keep paying off.

Watch out for private label products, too. Lowe’s has quietly expanded its own brand lineup — paint, flooring, outdoor gear — giving them better margins and some protection against inflation and supply chain hiccups. Home Depot is working to catch up here, but it takes time.

Where this strategy might hit snags

It’s not all smooth sailing. Lowe’s does best when consumers feel comfortable spending on smaller upgrades. If the economy takes a nosedive, even these projects could dry up fast. Compared to Home Depot, Lowe’s has less of a buffer because it leans more on everyday consumers, while Home Depot’s Pro customers tend to stick around even during downturns.

Plus, although Lowe’s has upped its profitability, it still trails Home Depot on operating margins and return on capital. If inflation spikes or supply chains get messy again, Lowe’s could feel the squeeze harder.

What investors and teams should take away

The key isn’t to jump on the latest winner without thinking. I’ve seen plenty of folks ditch Home Depot right as it starts winning again. Both Lowe’s and Home Depot are solid for the long haul — the edge goes to whoever adapts faster to shifts in digital tech, supply chains, and customer needs.

Keep an eye on the next few quarters. Lowe’s has raised the bar, but keeping up this pace won’t be easy, especially if the housing market cools off. Home Depot has deep pockets and a history of bouncing back — don’t count them out just yet.

Most successful investors spread their bets across both. But if you want to know what’s working right now, Lowe’s sharper execution and customer-first approach are tough to ignore.

The bottom line

Lowe’s has outperformed Home Depot’s stock recently by staying flexible, focusing on its core customers, and investing in tech that really improves the shopping experience — both in-store and online. Will this momentum last? Hard to say. It depends on whether Lowe’s keeps out-executing the competition and navigating the unpredictable housing market.

There’s no magic trick here, just smart management, adaptability, and a clear-eyed view of potential risks. As always, watch the fundamentals and don’t get caught up chasing the hype without knowing what could go wrong.

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