- Lowe's is expanding a "one-stop shop" concept that's aimed at attracting rural customers.
- Up to 300 stores will feature new items like Carhartt apparel as well as products for farm, ranch, and outdoor needs.
Retail chain Tractor Supply Co. may need to watch its back, as home improvement store Lowe's is trying to appeal to more rural customers.
Lowe's announced Wednesday "a new one-stop shop concept" to attract customers in rural areas by providing farm, ranch, and outdoor products. They will roll out in up to 300 Lowe's stores by the end of the year and include new Carhartt apparel, an expanded Wrangler lineup, as well as items for pets, livestock, and trailers.
"Our penetration of rural stores gives us an opportunity to drive sustainable profit growth due to the much lower expense base that's required to operate these stores," Lowe's CEO Marvin Ellison said during an earnings call this week.
"As an example, what we spend to operate our store in Philadelphia, Mississippi, is significantly less than the cost to operate one of our stores in Philadelphia, Pennsylvania," he continued.
"While in years past our penetration of rural and remote stores was viewed as a competitive disadvantage, we now expect that these stores will be a key component of our operating profit growth over the next three to five years."
According to a recent analyst note from investment banking group Jeffries, Lowe's operates three times as many stores as rival Home Depot in North Carolina, West Virginia, and Kentucky; twice as many in South Carolina, and 1.5 times as many in Virginia, Alabama, Tennessee, and Mississippi.
Lowe's push to expand farm and ranch offerings could be troubling news for Tractor Supply Co., which has more than 2,000 stores nationwide. The Tennessee-based business is doing a lot of what Lowe's is looking to do: reach rural customers through a variety of product offerings that can help them with their day-to-day jobs and lives.
Lowe's did not immediately respond to a question on which towns and states it would be operating its new concept. The company said in a press release that the stores are predominantly located in the South, Midwest, and Northeast.
Per the Jeffries report, Lowe's rolled out a pilot of its rural concept in two stores in rural parts of Tennessee in 2020. Jeffries estimates that more than 50 stores nationwide now include the new concept.
According to the investment bank, Lowe's workers in Tennessee, Kentucky, and North Carolina say their stores are "next in line" to undergo a refresh with the goal of "imitating Tractor Supply."
Jeffries analysts are still bullish on Tractor Supply Co., noting in the report that the company "has built a loyal following in rural communities across the United States.""Given the retailer's micro-merchandising, exclusive product, and loyalty program, we believe they've built an impressive moat in small town America," according to the Jeffries analyst note. "That said, we do see the opportunity for market share shift as Lowe's takes a page out of Tractor Supply's playbook."
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