8-KFinancial EventsOther EventsExhibits & Filings

LOWES COMPANIES INC 8-K Report, Exit or Disposal Costs (Oct 17, 2011)

Filed October 17, 2011For Securities:LOW

Summary

Lowe's Companies, Inc. (LOW) announced on October 17, 2011, a significant strategic initiative involving the closure of 20 underperforming U.S. stores and the discontinuation of numerous planned new store openings. This move is part of a broader effort to realign store operations, focus resources on more profitable areas, and ultimately enhance shareholder value. The company anticipates incurring substantial exit and impairment charges as a result of these decisions. Investors should note the estimated financial impact of these actions. Lowe's expects to recognize total exit costs of $100 to $130 million, primarily related to lease obligations, employee terminations, and inventory adjustments. Additionally, non-cash impairment charges of $245 to $285 million are anticipated for long-lived assets associated with closed stores and abandoned projects. The combined financial impact for fiscal year 2011 is estimated to be between $0.17 and $0.20 per diluted share.

Key Highlights

  • 1Lowe's to close 20 underperforming U.S. stores, with 10 closing immediately and 10 within a month.
  • 2Company is discontinuing a number of planned new store projects, reducing future North American store openings to 10-15 per year from a previous assumption of ~30.
  • 3Total estimated exit costs for store closings range from $100 million to $130 million.
  • 4Exit costs include lease obligations ($80-$100 million net of sublease income), employee terminations ($10-$15 million), and inventory adjustments ($10-$15 million).
  • 5Non-cash impairment charges of $245 million to $285 million are expected for long-lived assets and discontinued projects.
  • 6The combined financial impact for fiscal 2011 is estimated at $0.17 to $0.20 per diluted share.
  • 7These actions are aimed at realigning store operations and focusing resources to generate greater shareholder value.

Frequently Asked Questions

Lowe's is closing 20 underperforming stores and scaling back new store expansion plans as part of a strategic realignment of its store operations. The company states this is intended to focus resources more effectively on profitable areas and enhance shareholder value.

The company expects a combined financial impact of $345 million to $415 million for fiscal year 2011. This includes estimated exit costs of $100 million to $130 million for store closures and non-cash impairment charges of $245 million to $285 million for asset write-offs and discontinued projects.

Lowe's anticipates these actions will result in a negative impact of $0.17 to $0.20 per diluted share for fiscal year 2011.

Charges related to store closings (exit costs) are expected to be recorded in the third and fourth quarters of fiscal 2011. The non-cash impairment charges related to store closures and discontinued projects are expected to be recognized entirely in the third quarter of fiscal 2011.