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Lowe's, based in Mooresville, said Tuesday earnings and sales exceeded expectations for the third quarter. However, the company has announced that it will be leaving its operations in Mexico as part of its ongoing efforts to improve profitability.
Lowe's reported a $ 629 million profit for the quarter, compared to $ 872 million for the same quarter in 2017, mainly due to the costs of closing recently announced stores. Adjusted for non-recurring costs, earnings were $ 1.04 per share. Analysts surveyed by Zacks Investment Research estimate 97 cents per share.
Sales for the quarter were $ 17.4 billion, up 3.8% from a year ago and above the $ 17.33 billion estimated by Wall Street analysts. Comparable store sales, an industry term that measures the health of the retailer and refers to sales in stores open at least a year, increased by 1.5%. In the United States, same-store sales increased 2%.
Lowe's said it was leaving retail in Mexico, where it operates 13 stores, and is studying a wide range of alternatives, including a sale, Chief Executive Marvin Ellison told the Observer newspaper on Tuesday. "Of course, if the reseller sells his business, the new owner will decide what to do with those stores," Ellison said.
The company also said it identified "some non-core activities of its US home renovation business to leave," including its Alacrity Renovation Services and Iris Smart Home businesses.
Lowe's decision to leave Mexico comes weeks after the company announced plans to close nearly 50 underperforming stores in the United States and Canada by Feb. 1.
And this summer, Lowe's announced that it would close its Orchard Supply Hardware chain, purchased by the company in 2013 for $ 205 million, in order to "focus on its core business of improving the business." # 39; habitat ". Lowe's is closing 99 Orchard Supply stores – which are in California, Oregon and Florida – by the end of the year.
"Our top priority in the third quarter was to position Lowe for its long-term success by identifying underperforming and non-core businesses and stores," said Lowe CEO Marvin Ellison. "As our strategic re-evaluation is nearing completion, we can now focus more on the retail sector."
In pre-market transactions, Lowe's shares fell 2% to $ 91.35.
In a research note on Tuesday morning, Seth Sigman, an analyst at Credit Suisse, wrote that, although encouraged, Lowe is moving away from his activities in Mexico, he is concerned about the potential weakening of demand in the banking sector. residential renovation next year.
"The results seem weak and continue to underperform the growth of the category, although it is difficult to read this quarter, because it is clearly a period of transition for the company, because it reduces non-core activities and refocuses on boosting the productivity of its US businesses. home improvement, "wrote Sigman.
Last week, Atlanta – based Home Depot 's main rival, Lowe, announced profits and sales exceeding expectations as buyers continued to spend money on home improvement projects. Same store sales increased 4.8% across the company.
Since taking office as CEO in July, Ellison has initiated significant changes for Lowe, including in the ranks of his leaders.
For example, in early July, Lowe's stated that several important positions, such as the Chief Operating Officer and Development Officer, would be eliminated and that the responsibilities previously held by these positions would be assumed by other senior officials. reporting directly to Ellison. This month, Lowe's has recruited Seemantini Godbole, Target's Senior Vice President of Digital Technologies and Marketing, as the new Chief Information Officer.
"Our transformation will take time, but we have assembled an experienced team and developed a detailed plan to make steady progress, "said Ellison in a statement on Tuesday.
The Associated Press contributed.
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