Lowe’s on Tuesday reports that third quarter sales rose 3.8% to $17.4 billion year over year as comparable sales rose 1.5%. U.S. home improvement comparable sales rose 2% in the period, according to a company press release.
Net earnings in the quarter fell to $629 million from $872 million in the year-ago quarter as operating income fell 38.1%.
The company also said it will exit its operations in Mexico and is exploring strategic alternatives. Previously Lowe’s said it will shutter its 90-store Orchard Supply unit and close 20 under-performing stores in the U.S. and 31 locations in Canada, including 27 under-performing stores there.
Despite its bumps in sales and comps in the third quarter, Lowe’s is clearly losing market share in several categories, warns Neil Saunders, Managing Director of GlobalData Retail.
The retailer’s 27.9% slide in net income is “a poor result that shows that Lowe's is going backward at a time when the market as a whole is advancing strongly,” he said in comments emailed to Retail Dive.
Lowe’s is grappling with "continued challenges with inventory out of stocks, poor reset execution, and assortment concerns in certain categories" that "pressured our ability to turn those visits into transactions," according to a statement from CEO Marvin Ellison, who took over the role in July.
Saunders said deeper issues like the lackluster omnichannel services, which need to improve in order to support the growing e-commerce sector, as well as its relatively poor ”brand image and status in the marketplace” played roles in the company's results.
“On the brand front, Lowe's still has to address its status as a second-fiddle retailer,” he also said. “On all metrics — brand recognition, visitation, satisfaction, range depth, professional customer numbers, and so on — Home Depot is way ahead. It remains the destination of choice for home improvement for most customers. Lowe's needs to find points of sustainable difference so that it not just a pale imitation of its larger rival.”
Ellison called the company’s strategic reassessment “substantially completed,” a top priority that necessitates the planned closures. “[W]e can now intensify our focus on the core retail business,” he declared.
Saunders expressed some confidence in that. “We are satisfied that Marvin Ellison and his team are aware of these issues,” he said, adding that shuttering the company’s Orchard Hardware business and the Mexican division will indeed allow for more focus on the core business. "However, we are still reserving judgment as to whether Lowe's is completely on the right track."