Don’t Jump Over Lowe’s Online ‘Expansion’

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tdp2664 InvestorPlace Lowe’s (NYSE: LOW ), the nation’s second-biggest home improvement retailer after Home Depot (NYSE: HD ), made an under-the-radar acquisition in the sleepy days just ahead of the new year. In an effort to boost its e-commerce offerings, Lowe’s bought online home-improvement retailer ATG Stores. But although the acquisition is good news for Lowe’s customers (who now will have more product choices available online) and great news for ATG employees (all of whom will keep their jobs), it doesn’t really mean much to Lowe’s investors — or Home Depot’s. The funny thing is, despite both being retail behemoths, neither Home Depot nor Lowe’s online businesses contribute much to their total revenues. Prior to the ATG acquisition, only about 1% of Lowe’s annual sales came from the online channel, notes Collins Stewart analyst Laura Champine. Lowe’s had revenue of $48.82 billion last fiscal year, meaning the online business did less than $500 million in sales. Terms of the ATG deal weren’t disclosed, including the company’s revenue, so it’s impossible to know how much of a boost it will give to Lowe’s top line. But, heck, even if ATG doubled Lowe’s online sales, that still would represent a barely billion-dollar business. And no one, at least not yet, appears to be expecting that. Prior to the ATG deal, 26 Wall Street analysts, on average, forecast Lowe’s to generate $50.17 billion in revenue in the upcoming fiscal year, according to data from Thomson Reuters. That number hasn’t budged. As for the competition, online sales aren’t much of factor at Home Depot, either. The company generated about $70 billion in revenue last year. Meanwhile, Craig Menear, HD’s merchandising chief, told analysts on a conference call in November that the online business, while growing, still is doing less than $1 billion in sales. That means it account for roughly less than 1.4% of the company’s total revenue, at most. So who are the immediate winners here? Consumers. Home Depot offers about 300,000 items online. Lowe’s was in the process of doubling its online offerings to 260,000 before the ATG acquisition. Since ATG sells more than 3.5 million items through 500 websites, that’s a nice new portal for anyone shopping for home improvement products. But it’s hardly clear that the deal does anything to move the needle on Lowe’s fundamentals or share price, especially in the short term. When it comes to home improvement retailers, it’s still very much a brick-and-mortar kind of business. As of this writing, Dan Burrows did not hold a position in any of the aforementioned stocks.