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Lowe's Plans Supply Chain Expansion, to Add New Facilities

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Lowe's Companies, Inc. (LOW - Free Report) provided an update on its supply chain transformation initiatives, which includes opening new delivery and distribution facilities. The move is expected to enable providing improved home delivery services as well as efficiently cater to the rising demand from Pro and DIY customers.

Per the recent disclosure, Lowe's plans to open seven bulk distribution centers, four e-commerce fulfillment centers and 50 cross dock delivery terminals over the next 18 months period. In the second half of 2020, the company targets to open about 20 cross dock terminals and one West Coast e-commerce fulfillment center.

The West Coast fulfillment center will be based in Mira Loma, California. This facility is likely to be opened by October 2020, enabling faster shipping options to consumers. In fact, the center is likely to help in growth of two-day delivery options to reach almost 100% of customers across the United States.  The Mira Loma facility will be the company’s second fulfillment center, after the first one that opened in 2018 in Nashville, TN.

Bolstering Supply Chain is a Prudent Move

Lowe’s latest supply chain expansion initiatives are expected to enable greater number of same-day and next-day service offerings and ramp up e-commerce shipping. These initiatives essentially add on to the company’s supply chain transformation efforts that are being taken over the past 18 months, including the development of more than 13 different facilities in different markets.

In 2018, the company had announced investments worth nearly $1.7 billion to expand its distribution network through 2023. Moreover, Lowe’s along with third-party partners will generate roughly 5,000 jobs to support this initial expansion.

Markedly, a solid distribution structure is likely to strengthen Lowe’s online business. It is worth noting here that the company’s first-quarter fiscal 2020 results had reflected certain gains from rise in online demand due to the coronavirus pandemic.

Altered shopping patterns and greater importance of digital marketplaces have compelled companies to push forward their e-commerce presence. Lowe’s ongoing efforts also indicate that the company is striving to bolster its foundations for meeting online customers’ delivery needs efficiently. Well, one of Lowe’ close peers — Home Depot (HD - Free Report) — has also been undertaking well-woven steps to enhance delivery and fulfillment options amid the pandemic.

A report by Technavio indicates that DIY home improvements market are likely to grow by $143.3 billion during 2020-2024. These statistics also align well with Lowe’s plans to boost its supply chain offerings as it will be able to better cater to customers’ needs.

Wrapping up, we expect that Lowe’s effective moves to bolster distribution capabilities along with investments in technology, merchandise category and strength in Pro business will continue to yield well. This Zacks Rank #3 (Hold) company’s shares have gained 24.8% in the past six months compared with the industry’s 14.6% rise.

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