I always enjoy a good read about how other companies overcome challenges or find new ways to improve their business or bottom line. A lot of industries, businesses, and people are having supply chain or shipping issues based on global trade challenges. I found an interesting article on how Home Depot and Lowe’s home improvement businesses are changing how they ship products to improve their profit margin. (Lowe’s is headquartered in Mooresville, NC, close to our Braxton at Lake Norman apartment community.) Below is an excerpt from a CoStar article written by entrepreneurship writer Richard Lawson.
Change to Gain
The nation’s largest home improvement chains are changing how they distribute big, bulky items from their warehouses, putting less in their stores and instead shipping directly to consumers to join other types of retailers in boosting their financial performance through changes in logistics and how they use their property. That strategy is paying off for Atlanta-based The Home Depot and Mooresville, North Carolina-based Lowe’s Cos., with both companies reporting higher sales and improved delivery speeds in their latest quarter despite clogged supply chains and rising inflation. Marv Ellison (CEO of Lowe’s) said, “This new delivery model is already driving higher sales and appliances, improved operating margins, reduced inventory, and higher on-time delivery rates.”
Bob McNab (economist and director of Old Dominion University’s Dragas Center for Economic Analysis and Policy) said, “Retail sales data shows that consumer spending is outpacing inflation, retailers are lifting expectations, and job gains are being revised upward, again. There is a lot to suggest that the national economy is not being weighed down by inflation, yet. We are seeing more data that suggests that we are in for a period of higher growth and higher prices.” Both companies reported higher average ticket sales, with some of the increase attributed to buying items such as appliances. Inflation commodities prices also contributed, such as higher costs for copper and building materials. The major drop in lumber prices muted the impact of those rising costs.
Supply Chain At-a-Glance
Part of how Lowe’s is navigating the supply chain crunch is by ordering inventory much earlier than in the past, such as for the holiday season in 2021 and 2022. Bill Boltz (executive vice president for merchandising at Lowe’s) said, “This gives us more time to manage through any unforeseen delays in either the production or the distribution of our orders.”
As you can see from the above excerpt, the economic recovery is continuing even as the pandemic has a (hopefully) slight resurgence. It’s just one reason the PassiveInvesting.com team is optimistic that 2022 will be an exceptional year for our investors.