Less than a month after introducing a 5% everyday discount on all private-label credit card purchases, Lowe’s Cos. on May 16 said the program is helping to shift certain sales from bankcards to its proprietary card.
Although the company’s sales and income for the period declined, its private-label card traffic is picking up, thanks in part to the discount program, Lowe’s executives told analysts during a conference call to discuss fiscal first-quarter earnings.
The Mooresville, N.C.-based home-improvement center operator introduced the discount on April 22, backed by a national TV campaign (
One reason Lowe’s introduced the discount is because use and issuance of its private-label credit card have declined over the past year, Rick Damron, executive vice president of store operations, told analysts.
Noting that its private-label credit card offers “a lower cost of tender” for the company compared with interchange-based bankcards, Lowe’s introduced the 5% discount “to drive customers back” to its private-label card program, Damron said.
In just the first few weeks of the promotion, Lowe’s has observed an increase in purchases initiated with its private-label card, including a shift in purchases from bankcards to its store cards, he said.
Lowe’s also has seen an immediate improvement in the credit quality of private-label card applicants, Bob Hull, Lowe’s chief financial officer, told analysts.
“We are seeing a little bit higher FICO score (of new customers) coming into the program, which tells us we are seeing some shift from the bankcard,” Hull said. Moreover, since the discount began customers have tended to use the private-label card for smaller, routine purchases and for those exceeding $299, he added.
Lowe’s expects the 5% discount to help the company’s bottom line by driving more incremental store sales and by shifting purchases to the less costly private-label credit channel, Hull said.
For the quarter ended April 29, Lowe’s said its net income fell 5.7%, to $461 million from $489 million during the same period a year earlier, fueled by tough economic conditions and unfavorable weather, including a tornado that forced one store to close. Sales during the quarter decreased 1.6%, to $12.2 billion from $12.4 billion.
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