Lowe's on Wednesday reported net sales in the fourth quarter rose 1% to $15.65 billion, up from $15.49 billion a year ago. Comparable sales increased 1.7%, while U.S. home improvement comp sales rose 2.4%.
The company's net loss was $824 million in the quarter compared to a net income of $554 million in the year-ago period, according to a company press release.
Lowe's noted that its fourth quarter results include a $1.6 billion charge before taxes, which includes $952 million "related to a non-cash goodwill impairment charge associated with the company's Canadian operations," $208 million in lease obligations related to the closing of its Orchard Supply Hardware unit and $222 million in asset impairment charges related to the exit from its Mexico operations.
Lowe's has run into trouble both north and south of the border. In a statement noting that "U.S. macroeconomic fundamentals remain sound for 2019," CEO Marvin Ellison also said that he anticipates a weak housing market in Canada in the near term, but remains "confident in our market position in Canada and the long-term potential of that business."
Performance at the Canadian unit, as well as the decision to exit its Mexico and Orchard Supply businesses, contributed to "the rather meagre total sales uplift," according to GlobalData Retail Managing Director Neil Saunders.
"The costs associated with the closure of Orchard Hardware along with a number of asset impairment charges, including for the Canadian and Mexican operations, resulted in exceptional charges of $1.6 billion," he said. "At net income level, this pushed Lowe's into the red by a painful $824 million. At operating profit level, the company posted a $567 million loss."
The home improvement retailer is also struggling to remain competitive with rival The Home Depot, which on Tuesday reported a 3.2% gain in same-store sales. The weak housing market, as well as snow and ice that impacted much of the country early in the year, posed challenges to both retailers, but Home Depot was able to capitalize on the demand for ice melts and shovels "far quicker off the mark than many of its rivals," Saunders said.
Lowe's also fell behind its main competitor during the holiday season, where Home Depot was able to increase the number of customers buying holiday gifts, due in part to special offers on DIY kits and tools. "Our data show that over the holidays Lowe's did much less well at drawing in and converting shoppers buying decorations and gifts. The same held true for those buying winter products during the cold snap at the start of the year," Saunders added.
Lowe's expects total sales in fiscal 2019 will grow 2%, while same-store sales are projected to increase 3%. Comparatively, Home Depot's sale outlook is 3.3% for fiscal 2019, while its same-store sales are projected to increase 5%.
"Operations are being improved and the sector it plays in is reasonably robust, even with a slowdown in growth," Saunders said. "Nevertheless, Lowe's desperately needs to become a sharper player."