LOW Lowes Companies Inc

By Dave Sebastian 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 21, 2019).

Lowe's Cos. reported another quarter of soft sales but raised its adjusted full-year earnings targets and said it would trim its store fleet in Canada as part of the home-improvement chain's broader turnaround.

The company said Wednesday that it is closing 34 Canadian stores early next year as part of its wide-ranging efforts to simplify and improve its business. The company said it also plans to reduce the number of banners it operates under in that country.

The Canadian restructuring is the latest of President and Chief Executive Marvin Ellison's cost-cutting measures since he took the helm last summer. Mr. Ellison was most recently chief executive of the struggling department-store chain J.C. Penney Co. and was previously a senior executive for Home Depot Inc.

In the past year, Mr. Ellison has closed other underperforming stores and tried to improve the company's supply chain, customer experience and merchandising.

The latest round of closures include 26 Rona stores, six Lowe's and two Reno-Depot locations, the retailer said. The stores are expected to close by Feb. 19.

The company booked a $53 million noncash charge related to the Canadian strategic review in the third quarter.

Lowe's reported third-quarter earnings of $1.36 a share, up from 78 cents a share in the year-ago period and more than the $1.34 a share that analysts polled by FactSet had expected. Adjusted earnings were $1.41 a share, ahead of the $1.35 a share analysts were anticipating.

Sales, however, declined 0.2% to $17.39 billion and missed the consensus estimate of $17.69 billion.

The Mooresville, N.C., company lowered its full-year earnings expectations, but raised them on an adjusted basis, as it anticipates additional charges in the fourth quarter related to the restructuring.

Shares of Lowe's were up 3.9% Wednesday.

Lowe's said sales at stores that have been open for more than 13 months were up 2.2% in the quarter, compared with rival Home Depot's same-store sales growth of 3.6%. Lowe's sales growth in recent years has lagged behind Home Depot, but during the first quarter, Lowe's sales growth outpaced Home Depot for the first time since 2016.

Comparable sales in the U.S. home-improvement business were up 3% in the third quarter.

The company attributed the growth in the U.S. to improved customer experience, better merchandise category performance and the continued growth of its business with professionals.

The company is now eyeing how it might expand the professional business further. This quarter it rolled out a loyalty program for its professional customers that it plans to take national in the first half of 2020. The program, with the help of a customer relationship management program, should allow it to be more strategic with its marketing.

In the latest quarter, online sales in the U.S. grew 3%, adding no real benefit to sales, Mr. Ellison said, adding that the industry standard is closer to 20% growth. It is in the midst of a major overhaul, including moving its website to the cloud in the first half of 2020, Mr. Ellison said.

On a call with investors, Mr. Ellison said the company underestimated the complexity of rebuilding its online business.

"It's not difficult to grow dot-com sales. It's difficult to do it correctly," he said. "Rather than having a bunch of nonproductive promotions and other couponing events, we shut that down and we basically said, 'How do we structure this business in the right way?' "

In addition to the complexities of a turnaround, Mr. Ellison said the company this year has faced other uncertainties such as U.S. tariffs on trading partners.

"Overall, I feel great," Mr. Ellison said. "I think that we have identified most of the surprises because we spent a lot of time really digging into the areas of the business that carry the most financial risk and the most financial benefit."

Write to Dave Sebastian at dave.sebastian@wsj.com

(END) Dow Jones Newswires

November 21, 2019 02:47 ET (07:47 GMT)

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