The Chairman of Lowe’s has characterized the home improvement industry as a “two horse race” between his company and Home Depot. Lowe’s has indicated that it intends to spend $4 billion to open 222 new stores in 2000 and 2001. But some market watchers say before they invest all this new capital in putting up more buildings, they should get better at paying off their vendors. According to the January, 2001 Lumbermens Red Book, which is published by the Lumbermens Credit Association of Chicago, Lowe’s credit rating dropped from an L1 (discount or prompt pay), to an L2 (medium pay). To people in the industry, this means that Lowe’s is not paying their suppliers promptly, and such a downgrading in the Red Book would give suppliers pause before inking a deal. “It’s a warning sign to suppliers,” explains Ben Cassinerio, owner of Diablo Timber in Napa, California, an outspoken critic of the giant discount chain stores. “It could suggest that a company is in a cash crunch.” Cassinerio said lumbermen use the Red Book to measure a company’s credit references. He said dropping to an L2 is a “big deal” for people in the business.
Cassinerio points out that Lowe’s has said it wants to be the “500 pound gorilla of the 21st. Century”, and has very ambitious expansion plans. “But even a 500 pound gorilla has to pay its bills,” Cassinerio added.
