Lowe’s to exit its Mex­ico busi­ness, shed two op­er­a­tions

Re­tail chain looks to re­fo­cus core op­er­a­tions and help it com­pete with ri­val Home De­pot

The Peterborough Examiner - - Business - KIM­BERLY CHIN

Lowe’s Cos. plans to exit its re­tail busi­nesses in Mex­ico and shed two of its lower-per­form­ing home-im­prove­ment busi­nesses in a bid to re­fo­cus its core op­er­a­tions and help it com­pete with ri­val Home De­pot Inc.

Lowe’s has more than 2,240 stores through­out North Amer­ica, al­though Mex­ico ac­counts for the small­est chunk of the port­fo­lio. There are cur­rently 13 Lowe’s stores in Mex­ico. Lowe’s also said Tues­day that it would exit its con­tract­ing ser­vice, Alacrity Ren­o­va­tion Ser­vices, and its Iris Smart Home busi­nesses in the U.S.

Chief Ex­ec­u­tive Marvin El­li­son said the com­pany sought to iden­tify in the third quar­ter un­der­per­form­ing or non­core busi­nesses and stores for di­vesti­ture.

“We’re re­ally fo­cused on cre­at­ing a sus­tain­able foun­da­tion,” he said on an earn­ings con­fer­ence call with an­a­lysts. “We made a con­scious ef­fort not to chase short-term fixes or short-term re­sults.”

Mr. El­li­son joined Lowe’s in July to help stream­line the com­pany.

With just a few months on the job, he had re­cruited David Den­ton from CVS Health Corp. to serve as Lowe’s fi­nance chief and pushed for changes in­side of stores. The chief ex­ec­u­tive has called for more prom­i­nent place­ment of new prod­ucts, and in­creas­ing the stock of faster-sell­ing items while re­duc­ing in­ven­tory on lower-per­form­ing ones.

Lowe’s said sales in stores open at least a year grew slowly in its lat­est quar­ter, ris­ing 1.5%, while over­all sales rose 3.8% from a year ear­lier to $17.42 bil­lion

(U.S.). An­a­lysts polled by Refini­tiv had ex­pected $17.36 bil­lion.

Last week com­peti­tor Home De­pot said its quar­terly same­store sales rose 5.1%, and a range of re­tail­ers in­clud­ing Wal­mart Inc., Tar­get Corp. and Macy’s Inc. have re­ported strong sales in re­cent weeks.

The slower growth at Lowe’s stemmed largely from sup­ply­chain weak­ness that led to con­tin­ued out-of-stock prob­lems, trou­ble adding new prod­uct lines to shelves and as­sort­ment chal­lenges, ex­ec­u­tives said.

The com­pany said it is de­ter­mined to fix those is­sues.

Lowe’s said its profit fell 27% to $629 mil­lion, or 78 cents a share. The re­sults in­cluded $280 mil­lion in pre­tax charges from clos­ing all of the com­pany’s Or­chard Sup­ply Hard­ware stores, clos­ing some un­der­per­form­ing stores in the U.S. and Canada, im­pair­ments on the Mex­ico busi­ness, and an in­ven­tory write-down re­lated to ex­it­ing its Alacrity and Iris busi­nesses.

Ex­clud­ing cer­tain items, Lowe’s posted a profit of $1.04 a share. An­a­lysts ex­pected 98 cents a share.

The com­pany’s shares were off 5.1% early Tues­day af­ter­noon.

Lowe’s ex­pects to record pre­tax charges of $460 mil­lion to $580 mil­lion in the fourth quar­ter re­lated to the clo­sures.

For the full year, Lowe’s re­duced its sales-growth tar­get to 4% from a pre­vi­ous fore­cast of 4.5%. Com­pa­ra­ble sales growth is ex­pected to come in at 2.5%, down from the com­pany’s prior tar­get of 3%.

It also ex­pects per-share earn­ings be­tween $4.08 and $4.24, down from be­tween $4.50 and $4.60 as pre­vi­ously fore­cast.

On an ad­justed ba­sis, the com­pany said it ex­pects earn­ings of $5.08 to $5.13 a share.

RICK WILKING TRI­BUNE NEWS SER­VICE

Lowe’s has more than 2,240 stores through­out North Amer­ica. Mex­ico ac­counts for the small­est chunk of the port­fo­lio.

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