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The company's shares fell nearly 3 percent to $97.03 in
premarket trading as the retailer missed Wall Street estimates
for same-store sales in the second quarter.
Lowe's said it would shut all 99 stores of hardware and garden
chain Orchard Supply by the end of the fiscal year, leading to
between $390 million and $475 million in charges in the second
half.
It also said it would seek to cut back on inventory of
slow-selling product lines and reinvest in faster-moving goods.
"Exiting Orchard Supply Hardware and rationalizing inventory are
the driving force behind the changes to Lowe's business
outlook," Chief Executive Marvin Ellison, who took charge in
July, said in a statement.
Orchard's 4,000 employees were informed of the permanent
shutdown only on Tuesday, according to local media reports.
Orchard, which was spun off by Sears Holdings Corp <SHLD.O> in
2011, was bought https://reut.rs/2w3wBvy by Lowe's in 2013 to
take advantage of its prime locations in areas such as
California, where its bigger rival Home Depot <HD.N> has a
strong presence.
But Lowe's has struggled to keep margins up and its same-store
sales growth has trailed Home Depot's for many years.
U.S. homebuilding rebounded less than expected from a nine-month
low in July, suggesting the housing market was likely to tread
water for the rest of this year against the backdrop of rising
construction costs and labor shortages.
The No.2 U.S. home improvement store said it expected sales to
grow about 4.5 percent for fiscal 2018 and sales at stores open
at least a year about 3 percent, below the company's previous
target.
It also cut its full-year profit forecast by 90 cents to
$4.50-$4.60 per share.
In the second quarter, same-store sales rose 5.2 percent but
missed the average analyst estimate of a 5.34 percent increase,
according to Thomson Reuters I/B/E/S.
Last week, Home Depot's results topped estimates as it benefited
from a rebound in demand for seasonal products.
Lowe's net income rose 7 percent to $1.52 billion in the second
quarter. Excluding one-time items, the company earned $2.07 per
share, topping estimates of $2.02. Net sales rose 7 percent to
$20.89 billion, beating expectations.
Lowe's also named David Denton as its new chief financial
officer. Denton, currently CFO of CVS Health <CVS.N>, will join
in the second half of 2018.
(Reporting by Aishwarya Venugopal in Bengaluru; Editing by Anil
D'Silva and Arun Koyyur)
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