Lowe’s Board Gets Grounded
It isn’t often that I note a board member of a retailer when analyzing a company. I pay little more attention when a company announces an addition to its Board of Directors. Finally I get to make an exception.
The other day Lowe’s announced the latest addition to its Board of Directors with the appointment of Richard W. Dreiling. Lowe’s newest board member, who will bring the board to 12 members, is Chairman and CEO of Dollar General Corporation, a position he has held since 2008. Previously he served as Chairman and CEO of Duane Reade Holdings.
Why do I note a board appointment for the first time? As noted in very recent Insights, Lowe’s has faced an unusual amount of challenges followed by negative press in the past few months. In addition to very troubling recent quarterly financials, which contrasted horribly with Home Depot’s strong recovery from near catastrophe, the company mishandled announced national closings of what Lowe’s termed under performing stores, late last year. Some employees were notified after finishing their Saturday shifts that their stores would not reopen the next morning.
Politicians publicly questioned just how much some of these stores had really underperformed. Local newspapers joined in to protest some closings. Community outrage was heightened as one of the closed stores, in upstate New York, had only been open since February 2009, took years of planning and zoning discussions, and enjoyed a payment-in-lieu-of-taxes agreement that gave it reduced taxes for 10 years.
As if months of this news wasn’t bad enough for this once Wall Street darling, what soon followed caused even greater controversy, if that was possible. Bowing to pressure from the Florida Family Association, a conservative Christian group, Lowe’s decided to end its advertising campaign on the TLC show “All-American Muslim”. The cancellation announcement created a media stir that only served to fan its own flames. Several religious, ethnic, consumer and political groups demanded Lowe’s withdraw its cancellation while others backed Lowe’s decision. Ultimately Lowe’s decided that backing down a second time to reverse the decision would seem weak and waited for the storm to subside on its own. The company received over ten thousand hits on its Facebook page both supporting and denouncing its decision.
Back to the importance of the board appointment of Richard Dreiling. His recent stewardship of Dollar General coincides with the coming of the current recession, our worst economic period since the Great Depression. During this time when many retailers have struggled to stay afloat and even luxury retailers have had to decide between unheard of discounting and maintaining brand value, Dollar General has aggressively grown. The company has cleverly and boldly acquired real estate, hired many new community based employees, branched out into new territories and states and posted financials that Wall Street envies even during strong economic times.
Noting Mr. Dreiling’s time with Duane Reade further emphasizes the extent of his touch. For years Duane Reade has been the drug store of choice for many New Yorkers. Like Dollar General this company has long been aggressive in opening locations, starting on the tough streets of Manhattan’s expensive real estate and eventually branching out into the complex neighborhoods of New York City’s other boroughs. The company cleverly first sought midtown and downtown locations and expanded snack and lunchtime food stocks to attract many office workers in the city for almost daily visits.
Such a pedigree is very much what Lowe’s needs to help ground the company. Dollar General’s investments in new locations in economically challenged neighborhoods, especially those recently established in territories new to the company, have made it the hero of its newly created workforce, their friends, families and ultimately their communities. As community members see this growth they have become ardent customers. All this adoration has led Dollar General to be admired as an almost recession conqueror and thus a darling of Wall Street. It has been quite a while since Lowe’s was the darling of anyone.