Lowe's to shoehorn new store near competitors
By Andrew Gomes
Advertiser Staff Writer
Lowe's appears ready for some in-your-face competition as it plans to squeeze a new hardware store between Home Depot and City Mill on Nimitz Highway.
Lowe's Companies Inc., the nation's second-largest home improvement retailer, is pursuing plans to buy land in Iwilei and open a store around 2007, according to more than one person familiar with the plan. Lowe's said it could not comment.
"To me that's throwing the gauntlet down to Home Depot and City Mill and saying we're going to take away your business and compete head-to-head," said local commercial real estate executive Steve Sofos of Sofos Realty Corp. "That's a hell of a gauntlet throwing."
The move is not surprising, analysts said, given that Home Depot and Lowe's, the No. 1 and No. 2 home improvement retailers in the nation, have developed neighboring sites on the Mainland.
The Iwilei area, just 'ewa of downtown Honolulu, has been drawing big box retailers in recent years and is reaching a critical mass that makes it more attractive.
The area will soon have a Best Buy electronics store in addition to Costco and Home Depot. Those three join older residents Hilo Hattie, Kmart and City Mill.
"You have a very strong retail corridor there," Sofos said.
The competition may be fierce, but there will also be more shoppers to attract.
City Mill says it's ready. The company has maintained profitability on increased sales over the last five years as Home Depot expanded, and that won't change if Lowe's opens more stores, regardless of how close they are, said Steven Ai, City Mill president and chief executive officer.
"We will continue to do what we do best," Ai said. "We'll continue to provide great service. We'll continue to offer a merchandising mix that will be competitive and will set us apart from other home improvement retailers."
The deal between Lowe's and landowner ConocoPhillips is in the early stages and could fall apart.
Lowe's spokeswoman Jennifer Smith said it is company policy not to discuss store development plans unless site acquisition is complete.
A spokesperson for ConocoPhillips, the Houston-based energy giant, could not respond to a request for comment yesterday.
People with knowledge of the deal said ConocoPhillips has been trying to sell the property it received in the 2002 merger of Conoco Inc. and Phillips Petroleum Co., which followed the 2001 Phillips acquisition of Iwilei property owner Tosco Corp.
The Iwilei site mostly contains fuel storage tanks, a petroleum truck filling station and a warehouse.
A 5-acre corner of the site fronting Nimitz is leased to environmental services firm BEI Hawaii and affiliate HT&T Truck Center, which would remain as a Lowe's tenant if the transaction is completed.
Challenges facing Lowe's completing the purchase include the extent and cost of measures necessary to clean the site, providing enough parking and agreeing on a purchase price.
Lowe's has been on an aggressive expansion push with expectations to open 140 stores this year and 310 more in the next two years.
"We certainly are evaluating additional opportunities in Hawai'i as part of our overall nationwide expansion plans," company spokeswoman Smith said.
Mooresville, N.C.-based Lowe's entered Hawai'i in 1999 with its purchase of Eagle Hardware & Garden, which operated stores in Waikele on O'ahu and Kahului, Maui.
A third Lowe's opened in Kailua, Kona, on the Big Island in December 2003, but the single O'ahu location remains farther from the Island's population center than Home Depot stores in Iwilei and Pearl City.
Local real estate experts said Lowe's has scoured O'ahu for an acceptable expansion site, including the former Costco store in Salt Lake and the Ke'eaumoku superblock where Wal-Mart and Sam's Club opened recently.
Before merging with Lowe's, Eagle had plans to develop a store in Kalihi that would have competed more directly with Home Depot in Iwilei, but Eagle could not reach a purchase agreement for the property.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
