Mooresville, NC, January 27--At the beginning of the decade, Lowe's chairman and chief executive Robert L. Tillman declared his goal for the home-improvement giant to become the top major appliance retailer by 2006.
Now, five years later, in Tillman's final week with the company, Lowe's has clearly established itself as the second-biggest U.S. appliance seller.
Lowe's probably won't unseat Sears Roebuck & Co. by 2006, something company executives attribute more to optimistic goals than any shortfall in achievement. But Tillman remains confident in his view of the eventual outcome. The timing, he said in an interview this week, just "depends on how quickly Sears goes out of business."
No one suggests that's imminent, but it's something Tillman predicts will happen eventually, given that Lowe's and others continue to nibble away at the market share held by Sears and its powerful Kenmore brand. And he doesn't expect the pending merger of Sears and Kmart Holding Corp. to reverse that trend.
A Sears representative wasn't immediately available to comment.
Tillman, who retires Friday after nearly nine years as chief executive and eight as chairman, spoke about Sears, Home Depot Inc. (HD) and other rivals faced during his 42-year career with Lowe's. The 61-year-old Tillman, who was chief operating officer before taking the top posts, played a lead role in transforming the Mooresville, N.C., company from a regional chain of 299 small stores aimed at professional builders in 1989 to a national chain of more than 1,000 big-box stores that pioneered an industry focus on attracting women shoppers.
"We knew that if we didn't change the company, the company wouldn't survive, as none of our competitors in the '70s and '60s have survived," he said. Since 1994, when Lowe's completed its shift from small to large stores, the company has posted 20% compound annual sales growth and 27% compound annual growth in earnings.
Reflecting on his competitors and company, Tillman said there's room for both Lowe's and Home Depot and suggested Lowe's won't rush to begin expanding internationally. Of course, many decisions will lie with Robert Niblock, Lowe's president and former chief financial officer and a 12-year employee. He assumes the titles of chairman and chief executive Friday.
Lowe's, the second-largest home-improvement retailer behind Home Depot and the 10th-largest U.S. retailer, had fiscal 2004 sales of $30.8 billion and $1.9 billion in net income. The company won't comment about recent earnings until it posts results for the Jan. 31-ended fiscal year, but analysts expect revenue of $36.3 billion and earnings of $2.2 billion, according to the mean estimates from Thomson First Call surveys.
Appliances are now Lowe's largest product category, generating $3.5 billion in sales during 2003. Executives wouldn't estimate current annual sales of appliances, pending fourth-quarter results.
Lowe's leap-frogged Circuit City, Best Buy and others in appliance sales over the last decade, growing its market share to nearly 15% in the fourth quarter, up from less than 10% in 2001.
Meanwhile, Sears' market share in major appliances has dipped from nearly 40% to 37.5%, according to figures provided by Lowe's from market researcher Stevenson Co.
Tillman admires the Kenmore brand, which has had roughly 27% market share alone. But he believes making Sears' appliances and other so-called hardlines merchandise available outside of the chain's mall-based stores - a move some analysts expect after the merger closes - would hasten the entire chain's demise. Those products are key to drawing shoppers to the malls.
"Redistributing their product to give more customers access to it in the Kmart stores or in more Sears stores is not going to be the resolution," Tillman said. "They're going to continue to lose market share."
