Lowe’s says it will close 34 ‘underperforming’ stores across six provinces
By Chris Reynolds, The Canadian PressConstruction
Lowe’s Companies Inc. said Nov. 20 it will close 34 “underperforming” stores across six provinces as part of a restructuring of its Canadian business.
The stores include 26 Ronas, six Lowe’s and two Reno-Depots spread across British Columbia, Alberta, Saskatchewan, Ontario, Quebec, and Nova Scotia.
“Closing underperforming stores is a necessary step in our plan to ensure the long-term stability and growth of our Canadian business,” said Tony Cioffi, interim president of Lowe’s Canada in a statement.
Lowe’s did not say how many staff would be affected by the latest round of closures, which will see stores close in January and February. The company says eligible employees will be offered jobs at nearby stores, given its need for workers throughout its network.
The closures, set for early next year, add to its announced closure of 31 Canadian locations, including 27 stores and four other facilities, in November last year. At the time the company also announced the closure of 20 stores in the U.S.
Cioffi said the latest restructuring also includes investment in its supply chain capabilities, web platforms, and existing corporate stores and affiliated dealer network.
A “very complex business model” inhibited the retailer’s ability to provide smooth service to customers up north, said chief executive Marvin Ellison.
“We’re operating five banners, all with legacy systems, all with different back-end systems,” Ellison said on a conference call with investors Wednesday. “It made it very difficult to create synergies from a marketing, merchandising, sourcing perspective and even in IT systems infrastructure.”
The company plans to move its Canadian information technology platform to the U.S. “to eliminate inefficiencies and unnecessary technology duplication,” he added.
The North Carolina-based company has been undergoing a wider restructuring since Ellison stepped into the CEO role in July of last year.
Lowe’s remains in the midst of a catch-up period against chief competitor Home Depot “after underperforming for several years,” said Elizabeth Suzuki, an analyst at Bank of America Merrill Lynch.
Suzuki cited encouraging metrics such as sturdy household balance sheets, solid home sales “and economic drivers that are tied to renovation activity.”
“Unlike Home Depot, which appears to be moving past its peak in comps and earnings growth, Lowe’s still has a turnaround story that has yet to play out,” she said in an investor note.
Driving the perky home-renovation sales trends are core maintenance and repair work in an aging U.S. housing market, “rather than the remodelling ups, downs and recovery processes that have characterized most of the last 15 years,” said analyst Scot Ciccarelli of RBC Capital Markets.
Lowe’s bought Rona in 2016 in a deal valued at $3.2 billion.
Most of Lowe’s recent success has come from improving conversion — the proportion of visitors who put down cash — and spending amounts among existing shoppers, said Neil Saunders, managing director of research firm GlobalData Retail.
Better stock levels and product display have helped boost sales, Saunders said. Tactics like a permanently staffed “pro-desk” and dedicated parking spaces for professionals have helped the company build up its base of home reno professionals to nearly one-quarter.
Lowe’s could attract more “regular shoppers” by distinguishing itself from Home Depot, he added, stressing “the softer side of home improvement.”
“The opportunity here is in retail occasions such as outdoor living or Christmas. Home Depot is reasonable in its execution of these opportunities, but it remains rather functional and sometimes lacks inspiration.”
In Canada, Lowe’s has more than 28,000 employees, while its independent affiliate dealers operating under the Rona and Ace name have another 5,000 employees.
The Canadian division of Lowe’s has more than 600 corporate and independent affiliate stores under the Lowe’s, Rona, Reno-Depot, Ace and Dick’s Lumber brands.
Ad Standards, the advertising industry’s self-regulatory body, said earlier this month that the company should stop using the phrases “truly Canadian” and “proudly Canadian” on its store signs as they were misleading. The company said it “strongly disagrees” with the conclusion.
Lowe’s third-quarter earnings of US$1.05 billion, or US$1.36 per share, beat the US$1.35 per share that analysts surveyed by Zacks Investment Research.
The company also boosted its full-year adjusted earnings outlook, in contrast to the larger Home Depot that missed analyst expectations and cut its full-year sales forecast Tuesday.