Home Improvement Retailers

Preferences and loyalties are being tested this year as home improvement retailers slog through another summer of depressed activity in the housing market. Home Depot and Lowe’s have made moves to retrench a bit: Home Depot is closing 15 underperforming stores and reducing the number of new-store openings by more than half, while Lowe’s has postponed openings for 20 stores — primarily in Florida and California, where housing woes are particularly acute. Analysts suggest there’s a light at the end of the tunnel, but hedge their bets about the timing.

Still, a couple of non-Power Players are showing that the entire home improvement segment hasn’t fallen into disrepair. Menards is a Top 100 retailer that is employing a novel strategy in its site selection process by buying plenty of land around new stores. The Eau Claire, Wis., company puts in utilities and engages local home builders to develop the real estate with the understanding that materials will be purchased from Menards. In Yorkville, Ill., for example, Menards purchased enough real estate for more than 160 single-family homes and 69 townhouse condominiums. Once these units are occupied, Menards has a ready-made core group of consumers in the immediate vicinity.

Lumber Liquidators has carved out a specialty niche in this segment by selling flooring at deep discounts, whether it’s 80 cents per square foot for down-scale laminate or 10 times as much for tropical hardwoods. The 130-store retailer, headquartered in Toano, Va., generated just over $400 million in sales last year and plans to open stores at a rate of 30 to 40 annually until it reaches a minimum of 300 locations and its stated goal of becoming a billion-dollar company.