Lowe's to close 20 stores, scale back expansion
10/18/2011 12:00 AM
10/18/2011 12:08 AM
CHARLOTTE, N.C. —Lowe's Inc. is closing 20 stores and opening fewer than half of the new stores it had planned in the coming years, the company said Monday.
Monday's move will cost 1,950 workers their jobs, the company said. Lowe's will pay costs between $100 million and $130 million to exit leases for the affected stores, adjust inventory and terminate employees.
None of the three Lowe's stores in Wichita or the store in Derby is slated for closure.
"Closing stores is never easy, given the impact on hard-working employees and local communities," said Lowe's CEO Robert Niblock. "However, we have an obligation to make tough decisions when necessary to improve profitability and strengthen our financial position."
Lowe's, the nation's second-largest home improvement store, has also shaken up its top management recently, streamlining its structure as the company seeks to improve its performance against larger rival Home Depot.
Lowe's has already closed 10 of the stores, which the company said were underperforming, and the remaining 10 will close within a month after selling off their inventory. Lowe's is on track to open 25 stores this year, and will operate about 1,725 stores after the closings.
The company also issued a gloomier outlook for the rest of the year, cutting its earnings forecast for the second time in two years. When the company announced second-quarter results in August, it lowered its fiscal year outlook by 10 to 14 cents, to between $1.48 and $1.54 per share. Monday, Lowe's said the store closings could lop off an additional 17 to 20 cents from the year's earnings.
Lowe's also said Monday that it has "discontinued a number of planned new store projects" and will open only 10 to 15 new stores in North America in the coming years. That's down from the retailer's former goal of 30 new stores a year.
Lowe's has trailed Home Depot recently. While Lowe's posted an $830 million profit last quarter — down $2 million from the year before — the company said sales at stores open a year or more also fell slightly.
Home Depot, on the other hand, posted results that beat analysts' expectations, with profits and same-store sales growing. The retailer also raised its forecast for the rest of the year.
Lowe's has announced a string of changes to boost its performance over the past few months. Three senior vice presidents recently left the company in a management reshuffling, and the company cut the number of geographic regions its stores are divided into from 21 to 14 — a structure that more closely resembles Home Depot. Lowe's also laid off about one manager in each of its stores, flattening the in-store management structure.
Lowe's also issued 42,000 iPhones to in-store associates, which they can use to answer customer questions, track inventory and complete sales. And last month, Lowe's debuted a new advertising and branding campaign, with the tagline "Never Stop Improving."
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