Key insights
- The author argues Lowe's is exhibiting similar patterns to companies like JC Penny, Sears, and Bed Bath & Beyond before their decline. These patterns include a disconnect between stated identity and business reality, reliance on adjusted metrics, aggressive buybacks over reinvestment, and cost-cutting measures that harm the core business. While not explicitly bearish, the analysis suggests potential underperformance for Lowe's.
JC Penny, Sears, and Bed Bath & Beyond all followed a pattern that Lowe's is also following.
Before JC Penny collapsed, the language never moved. They claimed to be the "middle income family shopper" while they were actually gutting that identity for years. Adjusted metrics filled the gap. Aggressive buybacks followed. By the time it was a story, their company moved on without them.
Sears ran the same thing. "America's store" language outlasted the actual store itself. Store level decay was visible long before any narratives mentioned it. Adjusted EBITDA did whatever work real results couldn't. Capital went to buybacks while the core was eroding. Language never changed.
More recently, Bed Bath & Beyond. The "destination for home" identity was long gone. $12B in buybacks while the stores deteriorated. Non GAAP figures to the front when they helped, buried behind when they didn't. Heavy associate based language while the workforce reality was the opposite.
Once the core business starts to fade from the identity, the language doesn't follow. Adjusted metrics start popping up. Cap allocation starts to go towards financial engineering instead of the business. Exec salary stays tied to adjusted numbers & stock price so the incentive to change is usually gone or not realized.
Lowe's is on this path.
DIY been in decline for years. Pivot to Pro is real but has never really been named as a pivot. GAAP to adjusted op margin gap always moving. $42B in buybacks vs $38B in case flow in 5 years while net debt doubles? Four rounds of layoffs and a 5k person offshore build sitting underneath "investing in our associates" messages every quarter. Employee sentiment at all time lows. And a corporate cost saving strategy that is gutting the core in the name of operational excellence.
Not short. Not long. Just spent time tracking this pattern and Lowe's is the cleanest live example I've found. Wanted to share and see what gaps/trends im missing.