Lowe’s intends to exit Mexico as it continues shifting away from its underperforming businesses under the leadership of new CEO Marvin Ellison. The retailer will shutter all 13 of its stores in the country.
The exit will result in $22 million in charges for Q3, but Lowe’s will incur the remaining charges in later quarters. Since the results depend entirely on the plan executed, these amounts are not reflected in the company’s updated business outlook.
These exits are the latest moves by Lowe’s to shed operations that aren’t part of its core offering. In August, Lowe’s said it would close all Orchard Supply Hardware stores, the 99-store chain the company bought in 2013 for $205 million. The closing will cost Lowe’s an estimated $390 million to $475 million. Additionally, Lowe’s will be closing 51 underperforming locations by February 2019 — 30 in Canada and 21 in the U.S.
Lowe’s reported the exit in its Q3 earnings report, which also revealed that same-store sales rose 1.5%, while overall sales rose 3.8% from the same period a year earlier, to $17.42 billion. While Lowe’s remains the second-largest home improvement retailer by a large margin, it continues to linger in the shadow of market leader The Home Depot. Home Depot continued to dominate with its results, last week posting Q3 same-store sales increases of 4.8% and a net sales jump of 5% to $26.30 billion.
While Lowe’s saw Q3 net income fall 27% to $629 million due to $280 million in charges related to the Q3 exits and store closings, Home Depot saw a 32% boost of $2.87 billion.
“During the quarter, the favorable macroeconomic environment, combined with great values, drove traffic to our stores and web site,” said Ellison in a statement. “However, continued challenges with inventory out of stocks, poor reset execution and assortment concerns in certain categories pressured our ability to turn those visits into transactions. Rather than chase short-term solutions to these problems, we are redesigning processes and systems to deliver sustainable improvement and expect to see positive trends as we enter 2019.”
The changes Ellison alludes to have been starting at the top, where he has initiated a wholesale reshuffling of the retailer’s management. Under Ellison, the company eliminated four C-Level positions: COO, Chief Customer Officer, Corporate Administration Executive and Chief Development Officer.
In August, Ellison appointed a new EVP of Stores, Joseph McFarland, who worked under Ellison at his previous posts at JCPenney and The Home Depot. Marshall Croom, the retailer’s CFO, retired in October, making way for former CVS Health CFO David Denton to fill the position.
Most recently, Lowe’s hired Seemantini Godbole, Target’s Senior VP of Digital and Marketing Technology, as its CIO.