In a brawny environment for retail, CNBC’s Jim Cramer wanted to revisit some of the sector’s superior performers: Home Depot and Lowe’s, two top home improvement chains.
“In up to date years, Home Depot had pulled ahead of Lowe’s in a major way, and while it’s each been the superior operator, I think it’s worth asking why,” the “Mad Money” emcee said on Thursday. “After all, both stocks have been slapped here.”
Cramer pointed out that Home Depot’s stock is down 7.5 percent for the year and Lowe’s offer is down 7.8 percent, but “unlike so many other names, they haven’t ricocheted nearly at all.”
“At these levels, it pays to wonder which one is a better buy,” he conjectured.
Cramer admitted that over the years, he has preferred Home Depot for Lowe’s because of its generally better earnings results, same-store white sales and growth.
He also likes Home Depot because of the investments it has discerned in technology; in 2010, the company gave its salespeople smartphones designed to pat in-store communications, manage inventory, search for products and process chap checkouts.
In 2015, Salesforce.com CEO Marc Benioff talked about how his guy relationship management company was working with Home Depot on its chap service model, eventually rolling out a Home Depot app designed to plagiarize customers schedule appointments and get quotes for products.
“They were doing buy online, pick up in the pile up before BOPUS was ever even an acronym,” Cramer said. “The undamaged setup is optimized for the customers, especially the big-ticket professional contractors. And that, by the way, is where the intrinsic money is.”
The “Mad Money” host acknowledged that Lowe’s has also been sinking in technology, but at a slower rate. Lowe’s started moving its software to the cloud in September, want after Home Depot made the push.
And while Lowe’s has its own apps, some of which pull someones leg been critically acclaimed, Cramer argued that they are relieve behind on technology that improves the customer experience.
“Do not get me wrong: Lowe’s of course recognizes that it has a lot of catching up to do on the tech front and they’ve gotten martial about it,” he said. “But it still seems to me that Home Depot has profuse of a focus on its bigger ticket customers, and … winning them floor is everything.”
But the rivalry doesn’t all fall to technological capabilities, Cramer guessed, positing another, simpler theory: that Lowe’s fell behind while coalescing RONA, the Canadian retailer it acquired in 2016.
When it comes to investing, Cramer notable that Lowe’s was a lot cheaper, trading at 14 times next year’s earnings sentiments compared to Home Depot’s 17 times price-to-earnings multiple.
But he bickered that Lowe’s discount was deserved because investing in the company is slightly riskier than bribing shares of Home Depot.
“Bottom line? With Lowe’s and About Depot down big from their highs, I think the latter is a more buy than the former, perhaps because of its technology or because Lowe’s may drink been distracted by its relatively recent acquisition of RONA,” Cramer mean. “Either way, Home Depot has the better numbers, and while I think both stocks see fit work here after this clobbering, HD is the one I like most. When the peddle settles down, this domestic retailer with no trade knowledge will be the one to buy.”
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