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Lowe's Outlines Expansion Plans

At its annual conference with investors and analysts late last month, Lowe's Companies Inc. outlined its expansion plans into U.S. high-density metro markets and internationally, a renewed focus on lower to middle price points and enhancements to its internet site in the coming months.

Lowe's plans to open 62 to 66 stores by the end of this fiscal year, reflecting total square footage growth of approximately 4%. The company expects total sales to decline approximately 3% and comp-store sales to dip 7% to 9%.

Addressing analysts' and investors' earlier concerns about Lowe's real estate expansion plans during this challenging economic period, the home improvement chain unveiled its plans to open 35 to 45 new stores — 10 of them in international markets — in 2010 as a means of growing total sales and comp-store sales.

"Our growth [next year] will be fueled by prudent store expansion into underserved markets as well as the exploration of international opportunities that allow us to capitalize on our strengths," said Gregory Bridgeford, evp of business development. He later added, "In 2010 new store sales productivity will be well in excess of 100%, driven primarily by new store volumes in these metro markets."

These new store openings next year, which will reflect total square footage growth of about 2% to 2.5%, related to an estimated total sales increase of approximately 3% to 4%, and a comp-store sales increase of 1%.

Accelerating the growth will be a concentration on "high density" U.S. markets that are largely untapped as of yet by Lowe's.

"We will focus in 2010 on high-volume, metro-market opportunities — high-density markets where we have minimal coverage, like Washington D.C., New York, Boston, San Francisco, San Jose, Denver and Baltimore," Bridgeford said. "We have far fewer stores in these markets than our major competitor."

International expansion is another focus next year, when Lowe's will for the first time enter Mexico with the opening of two 110,000-square-foot stores in Monterrey in January.

Earlier this year, in the spring, Lowe's partnered with another retailer in Australia and New Zealand for a home improvement store retail business.

"We believe international markets are part of our future, and to meet this long-term challenge we need a constant stream of knowledge and innovation," Bridgeford said, explaining that while the chain's business in Australia and New Zealand is a smaller format retailer, it serves as a vital educational tool as Lowe's looks to grow elsewhere beyond U.S. borders.

Bridgeford further added that the time is ripe for growing store count.

"Because of pressure on commercial real estate, we are now ale to review opportunities that were previously unavailable at prices and terms that are much more favorable than in previous years," he added.

Having recently closed one unit that has consistently underperformed since it opened in 2005, the company said it continues to evaluate the cash flow performance of existing stores.

In merchandising, president and coo Larry Stone cited improvements at the store level in customer service and product presentation, a stronger focus on lower and middle price points in the assortment as some higher-ticket items and services are moved to special order and custom offerings, and enhancements to the www.lowes.com website as other vehicles driving growth in the coming year.

"We are taking advantage of opportunities to drive efficiencies in all aspects of our business, while continuing to deliver our commitment to customer service," Stone explained. "Additionally, we are implementing cross functional initiatives that position Lowe's to profitably grow market share and meet the evolving needs of home improvement consumers."

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