Lowe's store closures and exits
"Non-core" activities
Lowe's has exited its Mexican stores
Lowe's has exited its Mexican stores
 
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Managing inventory, building efficiency in-store and driving increased sales per square foot
HNN Sources
US home improvement chain, Lowe's announced that it is closing 20 of its most underperforming stores around the United States and an additional 31 stores in Canada.

The stores set to close may have been hurt by their proximity to Home Depot stores and other Lowe's stores, according to Credit Suisse analyst Seth Sigman. He noted that of the US stores being closed, 75% have another Lowe's within 10 miles, and 90% have a Home Depot store within 10 miles.

The majority of the Canadian stores that are being shut down are under the Rona banner, a chain that Lowe's bought in 2016 for USD2.3 billion.

Lowe's currently operates 2,390 home improvement and hardware stores, including 1,740 in the US. The shuttering of the stores is expected to take place by February, the end of its 2018 fiscal year.
Mexico, "non-core" exits

Lowe's said it is exiting its retail business in Mexico, where it operates 13 stores, and exploring alternatives for the business, including a sale.

The company also said it has identified "certain non-core activities" to exit including its contracting service, Alacrity Renovation Services and Iris Smart Home businesses.

Lowe's CEO Marvin Ellison, in pursuing a buyer for the Iris home automation business, said the company will no longer pursue ventures that dilute its return on capital.

Lowe's decision to sell its smart home Iris platform is a major shift for the company. It was the first major home improvement retailer to target the mass consumer market with a broad home automation solution using the open platform by Iris for devices from different brands to connect with each other. Back in 2015, Lowe's Innovation Lab launched leading edge technology including robots at CES (Consumer Electronics Show).

While Lowe's plans to sell its Iris business, it will continue to sell smart home products. A Lowe's spokesperson said:
We will continue to carry Iris and other smart products on our shelves. However, we will focus on the retail side of the Iris business, not on supporting our own smart home platform. The smart home category continues to be an important part of our customers' home improvement journey, and Lowe's remains committed to carrying the breadth and depth of smart home products and brands to meet our consumers' needs now and in the future.

The moves to exit Mexico and divest its contracting and smart home businesses came as it reported a sluggish third quarter. Same-store sales rose 1.5%, trailing analysts' estimates of 2.9%.

However the home improvement retailer posted revenue of USD17.42 billion in the period, up 3.8% from the same period year ago, and beat analysts' forecasts who expected USD17.33 billion.

Lowe's said earnings for the quarter were USD629 million, down from USD872 million during the same quarter of 2017, mostly because of costs related to store closures recently announced.
CEO priorities

This was the first full quarter under Mr Ellison since becoming CEO in July. He has told investors that he needs time to focus the company on improving core operations, and he's removing distractions and underperforming assets to do that. The review of the business has been "substantially" completed, Lowe's said.

In an interview with the Charlotte Business Journal, Mr Ellison said making changes quickly was part of the plan.
It's best to do a detailed assessment of the business as quick as you can to limit the disruption over the long-time horizon.

After thinning executive positions at the company, Mr Ellison began paring away what he sees as non-essential in the aisles of Lowe's. That means rethinking some of the goods it sells, getting rid of lower-selling items, and focusing on the top 2,000 products it carries. Lowe's also wants to bolster its business with professionals, something that has been Home Depot's forte. He said:
The pro customers are looking for a great price, service that saves them time and brands they want.

Lowe's is working to regain those customers by expanding its offering of brand-named tools and through other methods.

In another interview with The Observer, Mr Ellison said he considers Lowe's a "transformation" and not a "turnaround" like J.C. Penney, where he spent the last three years as CEO. The priority for Lowe's right now, he said, is improving basic "retail fundamentals".

Retooling inventory is one of the "retail fundamentals" Mr Ellison said has to be addressed first. Another "fundamental" to be addressed is a need for basic engineering standards for unloading large trucks so as to make the best use of workers' time.

Home Depot, where Mr Ellison spent 12 years, including six as executive vice president of stores, has launched same-day and next-day delivery in a handful of markets. He said Lowe's is testing that service in select places, but that the company's supply chain isn't "mature enough" to roll it out chain-wide. He said:
I call it 'second mover advantage'. Sometimes it's not terrible that you're behind if you have the capital to catch up quickly. So we're going to learn a lot from our competition. And we'll be right there with them, if not right in front of them, in a few years.

However Mr Ellison believes that when its recently opened USD150 million direct fulfillment centre in Tennessee is in full operation, two-day deliveries will be possible to 75% of the continental US.

Down the line, Lowe's also will be looking at how to better position itself with social media, Ellison says, especially to appeal to young customers and first-time homeowners undertaking do-it-yourself projects. YouTube, for instance, is a huge opportunity for Lowe's to grow in, Mr Ellison said, as it helps to de-mystify DIY projects.
We're going to do a much better job of leveraging social media ... so that we can be more active and make sure customers know that we are relevant and we want to help them to make choices.
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