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Lowe's To Close 34 Canadian Stores

Lowe's storefront - carpark 725 x 500.jpg

Lowe's has reported on third-quarter trading, covering the three months ended 1st November 2019.

Lowe's Companies, Inc. today reported net earnings of $1.0 billion and diluted earnings per share of $1.36 for the quarter ended Nov. 1, 2019, which included non-cash pre-tax charges of $53 million further described below, compared to net earnings of $629 million and diluted earnings per share of $0.78 in the third quarter of 2018.  Excluding the impact of these charges, adjusted diluted earnings per share increased 35.6 percent to $1.41 from adjusted diluted earnings per share1 of $1.04 in the third quarter of 2018.

The $53 million non-cash pre-tax charges referenced above resulted from the company initiating a strategic review of its Canadian operations during the third quarter. This review led to long-lived asset impairments and a change to the Canadian leadership team in the third quarter. Based on the findings of the strategic review, in the fourth quarter, the company decided to take the following actions to improve future sales performance and profitability:  

  • Close 34 underperforming stores in Canada;
  • Undertake a process to simplify multiple Canadian store banners to drive efficiency and reduce operational complexity;
  • Reorganize the corporate support structure across Canada to more efficiently serve stores; and
  • Rationalize the product assortment across the simplified Canadian store banners, to present a more coordinated assortment to the customer.

Additional pre-tax operating costs and charges of $175 to $225 million consisting of inventory liquidation, accelerated depreciation and amortization, severance and other costs are expected to be incurred in the fourth quarter of 2019, and have been reflected in the company's updated GAAP business outlook.

Sales for the third quarter were $17.4 billion and consolidated comparable sales increased 2.2 percent. Comparable sales for the U.S. home improvement business increased 3.0 percent.

"We were pleased with the performance of our U.S. home improvement stores, which reflects a solid macroeconomic backdrop and continued progress in our transformation driven by investments in customer experience, improved merchandise category performance, and continued growth of our Pro business. Due to improved execution, we delivered strong earnings per share growth, and as a result, we are raising our adjusted earnings per share and adjusted operating income guidance for 2019," commented Marvin R. Ellison, Lowe's president and CEO.

"Although we still have work to do, I am confident we are on the right path to build a better Lowe's and generate long-term profitable growth. We are committed to the Canadian market and are taking decisive action to improve the performance and profitability of our Canadian operations.  We also have a detailed roadmap and a very experienced team in place to repair our business. As we enter the fourth quarter, we are building strong momentum in the U.S. and are well positioned to deliver strong topline performance, while also driving margin improvement and operational efficiency.  We are excited about the progress we've made and the opportunity that lies ahead.  I would like to thank our associates for their commitment and dedication to serving our customers and communities," added Ellison.

Delivering on its commitment to return excess cash to shareholders, the company repurchased $835 million of stock under its share repurchase program and paid $428 million in dividends in the third quarter.

As of Nov. 1, 2019, Lowe's operated 2,004 home improvement and hardware stores in the United States and Canada representing 208.9 million square feet of retail selling space. 

Lowe's Business Outlook

The company has updated its GAAP business outlook to reflect pre-tax operating costs and charges associated with its Canadian restructuring, as well as its expectations for fourth quarter operating results.  

The company has raised its 2019 adjusted operating margin and adjusted diluted earnings per share outlook, reflecting its expectations for fourth quarter operating results.

Fiscal Year 2019 (comparisons to fiscal year 2018)

  • Total sales are expected to increase approximately 2 percent.
  • Comparable sales are expected to increase approximately 3 percent.
  • Operating income as a percentage of sales (operating margin) is expected to increase 290 to 320 basis points.
  • Adjusted operating income as a percentage of sales (adjusted operating margin1) is expected to increase 40 to 60 basis points.
  • The effective income tax rate and adjusted effective income tax rate are expected to be approximately 24%.
  • The target leverage ratio is 2.75x, therefore the company expects to repurchase approximately $4 billion of stock.
  • Diluted earnings per share of $5.35 to $5.47 are expected for the fiscal year ending Jan. 31, 2020.
  • Adjusted diluted earnings per share1 of $5.63 to $5.70 are expected for the fiscal year ending Jan. 31, 2020.

Source : Insight DIY Team and Lowe's

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21 November 2019

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