Yes, Lowe's was pounded yesterday in the market. The main culprit appears to be their shrinking gross margins. On the positive side, same store sales increased 4.1% while the GNP is only increasing at less than 3%.
That said. I believe, while Home Depot and Lowes are in the same industry, they serve very different customer segments.
I do all my own work on my home. Yes, I am a DIY'er. When I want quantity and cheap prices, I shop Home Depot. When I want a wider and diverse selection, I shop Lowes. Home Depot primarily focuses on people in the construction businesses while Lowes serves home owners. Home Depot is very price driven while Lowes is selection driven. Two totally different markets with different market segment characteristics.
Same store sales increasing is a good thing. I wouldn't expect Lowes to move in lock step with Home Depot for the above reasons. Quite frankly, sometimes Lowe's prices are often too high for my liking, but there are segments of the population that are willing to pay up for a more differentiated product line. I would expect construction people to look for cheap because that affects their gross margins. I would also think that construction (DIFY - Do It For You) would lead home owners in an up home improvement market.
Finally, does the market determine the value of a security in the short run or is it the company's fundamental performance. I would say that the market determines the value of a security well in the long term, but not so much in the short term. The market in the short term and in a bull market has a tendency to over value and under value securities.
Mr. Market can and is very erratic in the short run, but that is where opportunities are at.
