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Lowe's Looks to Improve, Picks Orchard

Of this deal Lowe's CEO Robert Niblock said:
"Strategically, the acquisition will provide us with immediate access to Orchard's high density, prime locations in attractive markets in California, where Lowe's is currently underpenetrated, and will enable us to participate more fully in California's economic recovery."

I'm inclined to agree with Niblock. Plus, this move should help Lowe's reach a different type of customer, the type who prefers a more "intimate" experience. I believe that this is one of the reasons why Lowe's plans to have Orchard operate as a separate, standalone business.

Still, I wonder whether this will be enough. Even after this deal, Lowe's will still trail Home Depot in the number of California stores by a meaningful margin.

Investors will be curious as to why Lowe's bid for only a portion of Orchard's stores and not all of them. But I believe it has to do with strategic overlapping. It wouldn't make sense to buy Orchard stores in areas where Lowe's already has a presence.

The struggles that Lowe's is experiencing are not going to be overcome overnight. The good news is that the company is willing to think outside the box and look for ways to leverage the things it already does well.

From an investment perspective it comes down to how much do investors believe in the housing recovery. This offer for Orchard suggests that Lowe's firmly believes in it.

At the time of publication, the author held no position in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Richard Saintvilus is a private investor with an information technology and engineering background and the founder and producer of the investor Web site Saint's Sense. He has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
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