HD vs. LOW: Which is the Better Bet in the Home Improvement Space?

Globe and Mail

6 hours ago

In the high-stakes arena of home improvement retail, two titans dominate the landscape — The Home Depot Inc. HD and Lowe's Companies, Inc. LOW. These industry heavyweights have long been locked in a competitive duel, each carving out a formidable presence in a sector that thrives on consumer demand for housing upgrades, DIY trends and professional construction projects. While both operate within the same core business — selling tools, appliances, building materials and services — their strategic playbooks, market positioning and financial trajectories reveal key differences.
Home Depot continues to lead in market share and professional customer penetration, while Lowe's has been reshaping its model with targeted investments in digital infrastructure and store productivity. As macroeconomic conditions shift and consumer behavior evolves, this face-off explores how each retailer is positioned for sustained dominance and which is better built for long-term growth.
The Case for HD
As the largest home improvement retailer in the United States, Home Depot commands an estimated 25% share of the highly fragmented $1-trillion home improvement industry. In first-quarter fiscal 2025, the company posted $39.9 billion in sales, a 9.4% year-over-year increase, with strong performance across categories like appliances, electrical and building materials. Despite a slight comp decline of 0.3%, Home Depot's deep market penetration and diversified customer base — from DIYers to large-scale Pros — continue to reinforce its leadership.
The retailer's portfolio, including its 2,350 stores and rapidly expanding SRS division, positions it to tap into a significant pool of deferred demand, estimated at $50 billion in home improvement spending. Home equity remains strong, as more than 55% of U.S. homes are more than 40 years old, signaling ongoing structural tailwinds. Home Depot is investing in the Pro ecosystem, enhancing order management, pricing and credit solutions. The SRS acquisition, spanning roofing, pool and landscaping, boosts organic growth while expanding reach into complex, large-ticket projects.
Simultaneously, Home Depot is doubling down on digital innovation. Its 'Magic Apron' generative AI tool boosts e-commerce engagement, while fast, reliable delivery and strong in-stock rates elevate customer satisfaction. Digital sales rose 8% year over year, and features like AI-powered associate tools are sharpening execution at scale. The brand's trusted image, wide assortment and premium positioning ensure that Home Depot remains the go-to destination for home upgrades and contractor-grade solutions alike.
HD is well-positioned to manage tariff headwinds, with more than 50% of sourcing in the United States and diversified supplier bases, where no single country outside the United States will account for more than 10% of purchases by fiscal 2026. The company plans to maintain stable pricing, leveraging productivity and SKU rationalization rather than passing on broad cost increases, potentially widening its advantage over smaller, less agile competitors. As market dynamics evolve, Home Depot's scale, strategy and innovation keep it firmly anchored as a long-term investment cornerstone.
The Case for LOW
Lowe's, the second-largest player in the U.S. home improvement market, holds 17-18% of the $1-trillion industry, with a strong focus on both DIY and Pro customer segments. In first-quarter fiscal 2025, the company generated $20.9 billion in sales despite 1.7% comps decline, which was largely attributed to soft early spring weather and reduced big-ticket DIY demand.
With more than 1,700 stores nationwide and growing brand equity, Lowe's has a distinct market position focused on value, innovation and helpful customer service. Its recent acquisition of Artisan Design Group adds a growth lever, giving Lowe's access to the $50-billion planned Pro spend segment linked to home construction. Lowe's is scaling its Total Home strategy with targeted investments in Pro, online and in-store experience. The company saw mid-single-digit Pro comp growth in the fiscal first quarter and is expanding its reach through initiatives like MyLowe's Pro Rewards and the rollout of AI-powered tools to assist both customers and associates.
Lowe's localization strategies and productivity efforts, including rural-specific assortments and private label innovations, position it to tap into underpenetrated and high-potential geographies and categories. These moves are building a more responsive and digitally connected omnichannel network for the future.
On the tariff front, LOW has been proactive: nearly 60% of its sourcing is U.S.-based, with China exposure trimmed to 20%, and ongoing diversification is underway. Management has emphasized that it will remain price competitive, using a portfolio-based approach and deep vendor relationships to mitigate margin impacts. With strategic clarity, prudent financial management and a long runway for growth in Pro, digital and marketplace offerings, Lowe's presents a compelling investment case in a maturing but opportunity-rich sector.
How does Zacks Consensus Estimate Compare for HD & LOW?
Home Depot's fiscal 2025 sales are projected to grow 3.1% year over year to $164.5 billion and EPS is expected to decline 1.3% year over year to $15.04. HD's EPS estimates for fiscal 2025 moved up by a penny in the last 30 days. Home Depot's annual sales and earnings are slated to increase 4.4% and 9.2% year over year, respectively, in fiscal 2026.
HD's Estimate Revision Trend
Meanwhile, Lowe's fiscal 2025 sales are expected to increase 0.7% year over year to $84.3 billion, and EPS is anticipated to rise 2.4% to $12.29. LOW's EPS estimates for fiscal 2025 have moved up 0.4% in the past 30 days. Lowe's annual sales and earnings are slated to increase 3.4% and 9.2% year over year, respectively, in fiscal 2026.
LOW's Estimate Revision Trend
This clearly illustrates that both Home Depot and Lowe's have witnessed upward estimate revisions in the past 30 days. However, LOW's estimates indicate year-over-year increases in sales and earnings for fiscal 2025, whereas HD's EPS estimate suggests a decline.
Price Performance & Valuation Comparisons of HD & LOW
In the past year, Home Depot's stock had the edge in terms of performance despite recording a decline of 1.8%, including dividends. This has noticeably lagged the benchmark S&P 500's return of 9.5% but has outperformed Lowe's 7.3% decline.
1-Year Price Performance
From a valuation perspective, Home Depot trades at a forward price-to-earnings (P/E) multiple of 22.31X, which is above its 5-year median of 22.28X, and Lowe's is trading at 16.58X, below its 5-year median of 17.59X.
Home Depot stock seems pricey. Its premium valuations reflect its superior alignment with Pro customers, and well-recognized and trusted private-label portfolio, reinforcing its market leadership. If the company sustains its aggressive focus on Pro contractors and investments in supply-chain efficiency, the premium can be warranted.
Conversely, Lowe's stock looks cheap from a valuation perspective. LOW has made significant strides in recent years by refining its operations, expanding its Pro segment and enhancing digital capabilities, aiming to close the gap with its bigger rival, highlighting its growth prospects. Lowe's appears more attractively valued on a relative basis, suggesting an upside if execution improves.
Dividend Analysis: HD & LOW
Apart from stability and growth potential, Home Depot and Lowe's tend to attract investors with their strong record of paying out regular dividends. These companies have consistently raised dividend payouts, reflecting their confidence in their earnings growth potential.
Home Depot offers a dividend yield of 2.64%, supported by a payout ratio of 61%, signaling a balance between rewarding shareholders and reinvesting in the business. HD has a five-year dividend growth rate of 10.6%. (Check HD's dividend history here)
Lowe's, with a dividend yield of 2.17% and a lower payout ratio of 39%, provides more room for dividend growth. LOW has a five-year dividend growth rate of 19.1%. (Check LOW's dividend history here.)
Conclusion
Home Depot and Lowe's demonstrate solid fundamentals, strong brand equity and deep industry expertise. Home Depot remains the market leader with a broader scale, a dominant Pro business and robust financial efficiency. However, Lowe's is quickly narrowing the gap through targeted investments in digital innovation, marketplace expansion and strategic acquisitions. Its sharper focus on store productivity, a revitalized Pro strategy and growing online presence position it well to capitalize on the evolving demands of both DIYers and professional contractors.
What ultimately strengthens the investment case in favor of Lowe's is its compelling valuation and stronger upside potential. Still, in the early stages of its transformation, Lowe's has several self-driven growth levers that appear underappreciated by the market. Recent upward revisions to earnings estimates further underscore growing investor confidence in the company's long-term trajectory, even amid macro uncertainty. With a disciplined strategic roadmap and improving operational execution, Lowe's emerges as the more compelling opportunity for investors seeking value and momentum in the home improvement space.
Both HD and LOW currently carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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