Lowe’s Companies, Inc. (NYSE: LOW) announced that it would shutter more stores in its fiscal 2019 third quarter report. This round of store closures includes 34 retail locations in Canada.
The Mooresville, North Carolina-based home improvement retailer reported adjusted earnings per share (EPS) of $1.41 for its fiscal third quarter ended Nov. 1, higher than analysts’ expectations of $1.35 and 36% higher than the prior year period.
The company’s earnings were adjusted to exclude non-cash impairment charges associated with restructuring its Canadian operations, which include leadership changes and the closure of 34 underperforming stores. Some may view this as a continuation of the company’s shake-up that has included exiting retail operations in Mexico, shuttering non-core businesses and other store closures in the U.S. and Canada.
“We are committed to the Canadian market and are taking decisive action to improve the performance and profitability of our Canadian operations,” said Lowe’s president and CEO Marvin R. Ellison.
Lowe’s expects to incur $175 to $225 million in pre-tax operating expenses and charges in its fiscal fourth quarter to right-size its Canadian footprint.
Additionally, the company is planning $1.7 billion in supply chain investments, which include the addition of two new bulk distribution centers with three cross-dock terminals. Some of this investment is part of its initiative to overhaul its e-commerce delivery channel. Management believes that this will improve the company’s home and job site delivery capabilities.
The company reported net sales of $17.4 billion, which was basically flat on a year-over-year comparison, but $300 million lower than analysts’ forecasts. Same-store sales increased 2.2% with sales in its U.S. home improvement business increasing 3%. Management noted commodity pressures, namely declines in lumber prices, as a 95 basis point (bp) headwind in the quarter.
“We were pleased with the performance of our U.S. home improvement stores, which reflects a solid macroeconomic backdrop and continued progress in our transformation driven by investments in customer experience, improved merchandise category performance, and continued growth of our Pro business,” said Ellison.
“Due to improved execution, we delivered strong earnings per share growth, and as a result, we are raising our adjusted earnings per share and adjusted operating income guidance for 2019,” continued Ellison.
Management reiterated guidance calling for 2% sales growth and 3% same-store sales growth for fiscal 2019 ending Jan. 31, 2020. However, adjusted operating income margin is expected to increase 40 to 60 bps, up from prior guidance of a 20 to 50 bp increase. Adjusted EPS is expected to be in the range of $5.63 to $5.70 (prior was $5.45 to $5.65), bracketing the current consensus estimate of $5.67.
Shares of LOW are up more than 5% on the report.