Lowes

Lowes

Daniela Alvarez

Camila Maillard

Juan Carlos Fernandez Cueto

Executive Summary

35 years old investor wants to invest for her retirement

Long term investments

Investment in home improvement retail Lowes

Thinks about Lowes since they are going to expand to new markets

Stocks with moderate volatility

Risk tolerance

Home improvement retail industry

Very concentrated

Extremely competitive

Sales risks increase with weather conditions and changing seasons (lower sales in first quarter)

Economic sensitivity (more homes more sales)

Innovating industry

Previously depressed (2008)

Four industry leaders in de US (Home Depot, Lowes, Menards, Ace Hardware)

Competition

RONA

Founded in 1939 (oldest one in the industry)

Canadas largest retailer and distributor of home renovations

Best costumer service

Confusing banners

Small specialized stores

HOME DEPOT

Do it yourself stores before Lowes

Provide costumers the know how of the task

Fastest growing retailer in US

Largest home improvement retailer in the world

Client loyalty

Lowes

Expansion to different markets (Australia, Canada)

Close stores to improve operations and increase profitability

Difficulties with entry barriers (Rona, Home Depot)

Training to provide better costumer service

Expansion with premium stores

Aggressive growing strategies

Selected financials

Current ratio The company hasnt reached a current ratio below 1 that would show that the company is not in good financial health, but it is a lot below the industry which means that in the short term the company could not be able to pay back its liabilities if they are facing a fall in their sales or an external matter.

Acid test The companys ratio is below 1 which means that the company has not enough short-term assets to cover its immediate liabilities (short term) and even though the industry isnt reaching 1 Lowes is below them.

Inventory turnover The company has better ratio than the industry this is because they are having strong sales and their supplies are being used in a given time.

Interest coverage The company is below the industry ratio this means that the ability to pay their interest expenses may be affected in the long term, but the company is capable at the moment to pay with their revenues.

Age of account payable The company has more days to pay their accounts than the rest of the industry which means that they can finance themselves during a longer period with that money, it means that they have more cash available than the industry.

Returns on equity The companys returns are above the industry which means that the company has more profitability than the industry, they are generating more profit with the money that the shareholders invested.

conclusion

The company had a year without growth in 2011 because they wanted to close some of their stores and focus on their operation, this strategy could be a benefit for Anderson since the company is planning on improving its performance over the long run so if Anderson decides to invest her money today she would have increasing earnings per share each year and until she decides to get her money back in 20 or 30 years.

Lowes could be a good investment option for Anderson because its not a stock with a high volatility expected, according to the financial statements, Lowes has plans to grow and increase their market share throughout the world.

Lowes has ratios below the industry but this doesnt mean that they are having bad financial health, they can still pay their obligations but they need to grow not only on operation but in their finances.

Compared to the industry Lowes has better operation and their current assets can still support their liabilities in the short term.

Exhibits