Lowe’s Companies Inc. (LOW), the home improvement retailer, recently announced a bid to tempt the small business houses, who are willing to work with Lowes.com as affiliates. Affiliates are the associate sites, who make money through commissions by promoting or connecting to an online retailer’s products and transferring traffic to their sites.
On the other hand, the move will open a wider market for Lowe’s as the backdrop of each affiliate vendor will be different. Further, the revelation of the products is nearly unlimited on the web, thus providing Lowe’s with thousands of people, who are promoting its products.
Lowe’s following Sears Holdings Corporation (SHLD) and Wal-Mart Stores Inc. (WMT), also invited Amazon affiliates, the e-commerce giant to join them as a partner site.
Related to the story, Lowe’s expecting a reasonable atmosphere for all retailers, supported the online retail tax equality legislation, which requires the company to accumulate state sales tax for its association with affiliates. Lowe’s currently collects and dispatches sales tax for every retail operations, which includes Lowes.com.
However, this direction will adversely affect the affiliate fee earnings of many small businesses and would put them in jeopardy as some retailers have specified that they will end their association with the affiliates in the states passing the legislation.
Incorporated in 1952 and based in Mooresville, North Carolina, Lowe’s is the world’s second largest home improvement retailer operating in the United Statesand Canada. The company offers services to homeowners, renters and commercial business customers.
Being the world’s second largest home improvement retailer, Lowe’s boasts of a proven strategy of investing in stores to enhance customer-shopping experience by improving point-of-sale and directional signage, and adding more product selection. The company’s sustained focus on Everyday Low Prices, New Lower Price, Go Local and Specialty Sales initiatives, have helped it to grow its market share.
We appreciate the company’s rational approach of cutting new store growth targets, given the sluggish consumer environment and the trends in the housing market. Lowe’s opened 42 stores in 2010, significantly down from 62 stores opened in 2009 and 115 stores opened in 2008. The company now expects to open 25 to 30 new stores during fiscal 2011.
However, job losses and reduced access to credit have lead to a sharp fall in consumer discretionary spending on big-ticket items. Although the economy is showing signs of revival, we believe that spending on big remodeling projects will likely remain under pressure until the housing market stabilizes and consumer-spending rebounds.
At present, we have a long-term ‘Neutral’ recommendation on the stock. Moreover, Lowe’s holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.
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