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Lowe's distribution center on track to open in Q3 FY'18

One of the nation's largest home improvement chains is on track to open its first Amazon-like centralized order fulfillment center after years of using its stores to process customer orders.

Executives at Lowe's Cos. Inc. said Nov. 21 that they are planning to open a previously announced order fulfillment center in a suburb of Nashville, Tenn., during the third quarter of the company's 2018 fiscal year that will end Oct. 31. Executives confirmed the expected opening date during a call with analysts to discuss the company's third-quarter financial results.

When it opens, the $112 million center will expand Lowe's ability to mail orders directly to customers and to stores. When completed, the center will be about 1.1 million square feet and rank among "the most technologically driven and sophisticated operations the company has built," Lowe's said in a July statement.

The retailer began building the distribution center in August 2016.

Currently, customers pick up about 60% of online orders at a Lowe's store, executives said on the earnings call. Between 10% and 15% are delivered to customers from a store, while packages mailed to customers make up between 25% and 30% of online orders.

The company's reliance on in-store pickup allows Lowe's to sell additional products to some customers, CFO Marshall Croom told analysts. About 40% of customers who visit a Lowe's store to pick up an order end up buying additional items, Croom said.

During a call Nov. 14 to discuss its own fiscal third-quarter financial results, executives at Home Depot Inc., a rival of Lowe's, said the company is experimenting with multiple options for delivering customer orders, adding that they would offer more details at the company's investor conference in December. Home Depot offers free shipping when customers order more than $45 in merchandise.