During the early years of our current century, Lowe’s was commonly seen as a company which most effectively operated under a well-established set of core principles.  The world’s number two home center warehouse operator tended to build from the ground up and hire from within.  These principles can be clearly seen as Lowe’s designed plans to physically enter Canada and Mexico.  In both cases Lowe’s carefully executed plans of entry over the course of two to three years by constructing new stores based on the company’s studies of local communities and its successes in the United States.

Years earlier Home Depot had commenced its retail operations in both nations by acquiring and converting existing chains and as well as creating new stores.  Lowe’s approach was more methodical and time consuming but their plans were carefully fulfilled in accordance with the company’s corporate culture in the US.  These were prime growth years for the industry overall.  Lowe’s was increasingly seen as Wall Street’s darling.

At the same time Home Depot, under an administration which embraced a policy of being all things to all potential customers, essentially strayed from its deep Do-It-Yourself, warehouse roots.  The company went on an impressive and expensive acquisition spree and acquired several, well respected regional pro dealer chains.  Home Depot also opened retail locations which differed from its traditional warehouse approach but which it saw as ancillary compliments to its DIY concept.  The company’s EXPO Design Centers was the largest and boldest of these new concepts.

In 2007, after a series of troubling reports including financials, Home Depot management changed its course with the costly removal of then leader Robert Nardelli and his $121 million golden parachute.  As reported in this space earlier this year, Nardelli’s successor Francis Blake immediately embarked on several costly, bold moves including divesting the company of the pro dealers acquired by the previous administration, at a considerable financial loss.  In a clear effort to return to Home Depot’s previously successful and often ground breaking roots, Blake shuttered not core retail operations including the chain of EXPO Design Centers.  Recent quarterly financials reported by Home Depot have been invigorating, likely portending a prosperous future.

As noted in several CSG Insights over the past year, Lowe’s fortunes have not fared nearly as well.  In addition to far too many quarters of disappointing financials, Lowe’s seems to be, based on its earlier history, operating through an error prone mode.  As the company moved to improve its immediate financial status by dropping what it considered to be underperforming locations, Lowe’s ran into the headwinds of strong protest on successive rounds of closures.

Employees cried out not so much for the loss of jobs as for the way the store closures were announced.  Essentially some employees were notified there was no need to ever return to work as they signed out for an evening.  To make matters worse members of the local press and politicians in affected areas sharply questioned several closures by wondering if some relatively new stores had been given enough time to turn things around.  In some cases community leaders noted tax breaks given by local governments to encourage relatively recent store construction of those now closed.  These questions were then elevated by the national press and politicians including a US senator.  This embarrassment of execution was only compounded by increasingly optimistic financial reports and a solid turnaround by rival Home Depot.

As reported earlier in this space, a comprehensive redesign of executive functionality was accompanied by several, somewhat new age titles.  Current management titles include Digital Interfaces Executive, U.S. Stores Executive, and Business Development Executive.  As most top decision makers are executives, this nomenclature is perhaps a bit superfluous and likely not descriptive enough in terms of rank, tenure and purpose.  Either Lowe’s is leading the way to a new wave of title designations or financial pressures are seeping their way into basic corporate decision making.

Now reports have emerged that Lowe’s is considering a succession plan to determine an eventual successor to current CEO Robert Niblock.  Lowe’s indicates it is always considering future successors throughout its corporate structure.  However as Mr. Niblock’s background is accounting and financials have been troubling for some time, a look to the future must be embraced.

It seems that talk of succession revolves around finding a new chief merchandising officer.  This position has been vacant since May and it seems that Lowe’s search for a new merchandising leader is taking the company’s typically painstaking course.  It is however expected that frustrated by its current financial plight, especially in light of rival Home Depot’s contrasting trajectory, an incentive to a new merchandising chief would likely include the prospect of the CEO title down the line of a few short years.

Indeed the effects of the chief merchandising vacancy has been seen through several recent retailing gaffes.  This summer as Home Depot ceremoniously highlighted displays of air conditioners at the front of its stores during notable hot spells, Lowe’s units were largely hidden at the rear of its stores, at times strapped by out of stocks.  A number of consumer complaints were displayed on retailing web sites as appliance seeking customers were directed from out of stock Lowe’s stores only to be told that the lone remaining model in a second location was on display and not for sale.  Disappointing and declining financials are frequently a sign of weak or failed merchandising execution.

Lowe’s typically boasts of a venerable management cadre that is both loyal and long serving.  The company’s modus operandi is dedicated and methodical.  Any decisions on succession are likely to be consistent with this Lowe’s philosophy.  At a time where once downtrodden Home Depot is surging on all cylinders and the industry’s long third-ranked retailer Menards continues to grow its regional store count with ever larger, unique big box locations, how long can Lowe’s await improved merchandising execution.