Lowe's says redesigned website will help it catch up, fend off rivals such as Home Depot

Key Points
  • sales grew 3% in the fourth quarter, a slower pace of online growth than rival Home Depot. 
  • Lowe's is overhauling its website and adding new features such as a one-click checkout and developing collections of products that go together.
  • It forecast that its website sales will see "high single-digit growth" in the second half of 2020.
Source: Lowe's 

Lowe's CEO Marvin Ellison said the home improvement retailer will soon be unshackled from its outdated website, which will make shopping easier for customers and give the company a sales boost.

The North Carolina-based retailer is banking on a website makeover and other digital improvements to play a meaningful role in its turnaround, which began when Ellison took the helm in 2018. Lowe's said Wednesday that sales will have "high single-digit growth" in the second half of the year, as its old site gets a new look and additional features.

With the new website, customers will be able to check out with one click. Items that tend to go in the same room or same part of the house will be listed on a single webpage.

Lowe's already added items that need special handling to the website, such as fire extinguishers, batteries and cleaning supplies. And it's changing the way item prices are listed online, by breaking out the cost of the item and the cost of shipping.

Lowe's leaders hope the changes will bring its website more in line with competitors. The company is rolling out the improvements over time.

In an interview with CNBC on Wednesday, Ellison said the company's current website is "really clunky." For example, he said, customers have to click to three different places to pick chairs, a table and an umbrella as they shop for their patio. Those items will be grouped together in an online collection in the future, he said.

"We have [website] traffic, but because functionality isn't great, you may not get the whole way to checkout," he said.

Lowe's has intentionally pulled back on couponing and site-wide promotions because it was "driving traffic to an inferior experience for customers," he said.

Lowe's has trailed behind other retailers with online sales growth, Ellison said. And as Home Depot's e-commerce has picked up, the gap has widened. Home Depot reported online sales growth of about 21% for the fourth quarter versus Lowe's, which reported a 3% increase. Neither retailer discloses the total value of its digital sales.

Home Depot has also said its online sales have driven foot traffic, since more than 50% of the time customers choose to pick up their online orders in store.

But Ellison, a Home Depot veteran, said its rival got a headstart. He said Lowe's is just one year into a multiyear transformation, and he said he's pleased with the progress.

Lowe's fourth-quarter sales fell short of analysts' expectations Wednesday and its outlook for the 2020 fiscal year was weak. In a Wednesday earnings call, Ellison attributed the disappointing sales to poor timing of marketing over the holiday season and problems with its website.

"If you have limitations online, not only does it hurt your dotcom sales," he said in an earnings call, "it actually hurts your brick-and-mortar sales, because it limits the amount of traffic where people will show up after having quality efficient research and decide to buy."

In the interview with CNBC, Ellison said Lowe's will also update its marketing approach. He said it's usually advertised with a single message on traditional channels, such as TV or radio. Going forward, he said it will target different customers with personalized messages on digital platforms, such as social media.

That's why Ellison said he hired Marisa Thalberg as the new chief brand and marketing officer for Lowe's. Thalberg came from Yum Brands' Taco Bell, where she was its global chief brand officer. She stepped into the role in mid-February and will report directly to Ellison.

Lowe's shares were down more than 4% on Wednesday, while Home Depot shares edged up less than 1%. Home Depot shares, which have a market cap of $259 billion, have gained more than 26% over the past year. Lowe's shares are valued at $87 billion, and are up about 9% over the same period.

Lowe's Q4 same-store sales: 2.5% increase vs 3.6% expected