Lowe's will shutter 51 underperforming stores — 20 in 13 states in the U.S. (four in California) and 31 in Canada — as part of its ongoing strategic reassessment. Some U.S. stores will close immediately, while others will hold closing sales, the company said in a press release issued Monday.
Most of the closing stores are located within 10 miles of another Lowe’s store, and affected employees will have opportunities to work in a similar role at a nearby store, according to the company.
The home improvement retailer in August also said that by the end of its fiscal year it will shutter all 99 of its Orchard Supply Hardware stores, located in California, Oregon and Florida, along with the distribution facility that services those stores.
New CEO Marvin Ellison, who arrived in May from J.C. Penney, appears to be taking charge at Lowe's by shaking up his leadership team at a time when competition is heating up with rival The Home Depot.
Lowe's in August reported a second-quarter sales rise of 7.1% year over year to $20.9 billion. Comparable sales in the quarter rose 5.2% as U.S. comps rose 5.3% and net earnings rose 7.1% to $1.5 billion. The financial impact of the store closures wasn’t factored into its guidance released earlier this year, the company said on Monday.
At the time, Ellison said the company is "developing plans to aggressively rationalize store inventory, reducing lower-performing inventory while investing in increased depth of high velocity items."
That, plus the Orchard Supply closures, are examples of Ellison’s take-charge approach — short-term pain that could yield longer-term health, according to GlobalData Retail Managing Director Neil Saunders. But such moves are a balancing act, he said in comments emailed to Retail Dive earlier this year.
"[W]e believe that care needs to be taken not to dilute Lowe's specialist home improvement credentials," he said. "If the cutbacks are soft ones designed to reduce excessive and unnecessary choice, then they are sensible. If they go too far, then they will further undermine Lowe's destination status and are likely to drive more [customers] to Home Depot."
On Monday, the company said it expects the store closures to have an additional financial impact of 28 cents to 34 cents per diluted share.