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Stores retool for the holidays

With home sales weaker, Home Depot and Lowe's expand offerings of decorations and gifts.

December 04, 2006|From Reuters

ATLANTA — Home Depot Inc. and Lowe's Cos. hope to entice consumers to buy more than just tools and gift cards this holiday season as the slowing U.S. housing market dulls demand for home-improvement projects.

The retailers have expanded their product assortment to include Christmas decor and gift giving. Home Depot is selling interior holiday decorations -- a category it has traditionally shunned -- and offering plasma televisions and DVD players in its stores for the first time to try to cash in on the popularity of electronics.

Lowe's added ornaments in new colors such as gold and blue this year and was selling lamps and clocks and more appliances, such as mixers and coffee makers.

The chains, which make the bulk of their profits in warmer months, want to extract more holiday sales. Last month Home Depot and Lowe's cut their full-year profit forecasts, saying weaker home sales and construction were hurting business.

"Both retailers need to find ways to be more relevant throughout the whole year," said Steve Spiwak, senior consultant with Retail Forward, a retail and consumer products research firm.

"The beefing up of the seasonal offering is a good way to boost sales and margins as the housing market takes some of the sizzle out of the growth they've seen," he added.

Home Depot has moved into interior decor, expanding beyond outdoor decorations to candles, ornaments and tree skirts. The Atlanta-based retailer is devoting nearly four times the floor space to holiday decor than last year, and added 320 items to each store in this category.

"This year, we made up our mind to get full-fledged into the holiday decorating business," said Scott Manning, a Home Depot merchandising vice president. "The home has become a show palace. People are looking for things that differentiate them from their neighbor."

Holiday shoppers at Home Depot also will find plasma televisions, iPod speaker systems and digital music players this year. Manning said Home Depot decided to sell a few electronics items just for the holiday but had no intention of expanding into that category full time.

Consultant Spiwak said with the expanded decor offerings, Home Depot was looking to draw more female shoppers -- customers it had not historically courted -- especially because it had scaled back plans for new store growth.

"Home Depot is facing market saturation ... it really needs to find new ways to mine growth," Spiwak said.

Lowe's, based in Mooresville, N.C., didn't increase the space devoted to holiday decor but ensured that stores were stocked by Oct. 1 with an assortment of decorations and holiday items, including lighted and inflatable decorations for the outdoors as well as cards, bows, lights and holiday music.

"Lowe's hasn't made big changes [for the holiday]. It's simply refining and tweaking its offers," Spiwak said. "It has a lot more room to open stores to bolster growth."

Both chains have expanded their selection of holiday decor and gift items that are always popular, such as tools, gift cards and Christmas trees.

"Every category in tools sells well at the holidays, with hand-held power tools probably leading the pack," said Craig Webber, Lowe's vice president of merchandising for tools.

Artificial Christmas trees that have the look and feel of a freshly cut tree have been a hit as have trees of various sizes and in colors, such as red and white, the chains said.

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