For Lowe’s (LOW), 2011 was a year of hard lessons. The hardware retailer found itself taking hard hits from the competition. But management appears to have quickly turned to focus on more online offerings to drum up customer loyalty and to segment its buyers, and it rolled out a cloud home-automation line.
In October, Lowe’s announced the closure of 20 stores — 18 of which were five years old or less — and laid off 2,000. Third quarter net earnings down by more almost half on the year, while its main competitor Home Depot (HD) seemed to be just fine.
In early December, however, the company announced a change in strategy that would focus on long-term sales growth, increased profitability and enhanced shareholder value. Shortly thereafter, the company introduced its “smart home” concept and has been adding to it ever since.
“Smart home” is marketing products designed for intelligent networking of a house. At the start of the year, Lowe’s announced it had teamed with U.K. company AlertMe to sell start-up kits, including wireless thermostats and alarm systems that connect to a home network and are accessible via the cloud. Google’s (GOOG) Android@home program is a competitor.
Shortly after the AlertMe announcement, the company said it had teamed with California’s Genability, whose technology will be the foundation for Lowe’s energy management system. It will allow customers to not just control what energy they are using but also to know what their choices are costing them.
Bundled under the name Iris, this “smart home” system will be available in stores from mid-2012 and will be key to growth, management contends. It also will be the foundation for future products as Lowe’s pushes suppliers make sure new products are “smart.”
Lowe’s admits that only about 1 percent of its sales come from online purchases, so to expand significantly in the online arena, the company has bought Washington State’s ATG Stores. The company’s first purchase in 12 years, ATG is an online retailer that offers 3.5 million items on its sites, compared to just 220,000 on Lowes.com.
The acquisition allows Lowe’s and ATG Stores to capitalize on complementary strengths and employees’ extensive expertise by sharing best practices for online marketing and merchandising.
Collins Stewart downgraded its rating on LOW to neutral and changed its price target to $26.
The company next reports earnings on Feb. 27.
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