In other words, Home Depot is willing to take a hit on profit margins to provide customer-friendly pricing. That means Home Depot absorbs higher prices for a while before passing them along to customers and drops prices soon after commodity prices decrease. we always have a philosophy that we want to lead the market down and lag going up to remain as competitive as possible for our customers, and that actually created an impact which in this quarter was unique that we normally don't see. Here is CEO Craig Menear addressing the company's stance on lumber-price volatility: The company has a customer-friendly policy on the matter that could be detrimental to near-term profitability. While commodity price volatility is harmful to Lowe's, it is more so for Home Depot. Home Depot has a customer-friendly policy on lumber prices Still, the rapidly changing prices and especially increases in lumber prices are not good news for Lowe's, and it's likely discouraging some customers from going forward on projects they would otherwise undertake. That capability might be paying for itself during all the lumber price volatility. Thankfully, Lowe's has implemented digital pricing protocols at most of its stores, reducing the time employees spend walking around adjusting the prices of products to account for changes in materials cost. However, management also noted that when the cost of lumber was falling in the first few weeks of August, customers were spending more on the commodity. That's a typical consumer response when prices go up, quantities purchased decrease. Lowe's merchandise inventory was already up to $17.3 billion as of July 30, an increase from $13.8 billion the same time last year, and $655 million of that was related to higher prices for commodities primarily attributed to lumber.įrom a customer viewpoint, management noted that folks pulled back spending on projects that required lumber in the mix. Lowe's investors are hoping management secured purchases for large quantities of lumber at those prices. So for the first half of its third quarter, lumber prices hovered at lower levels. And the price of lumber did not start rising again until mid-September. Its fiscal third quarter will include results for August, September, and October. Lowe's last reported quarterly financial results on Aug. Increasing lumber prices decrease spending at Lowe's
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