Summary
Lowe's Companies, Inc. announced on November 5, 2018, a strategic decision to close 20 underperforming stores in the U.S. and 31 locations in Canada, impacting a total of 51 stores. This initiative is part of an ongoing strategic reassessment aimed at improving the overall health and profitability of the company's store portfolio by focusing on its most successful locations. The store closures are expected to be completed by the end of fiscal year 2018 (February 1, 2019). Investors should note the financial implications of these closures. Lowe's anticipates recognizing pre-tax exit costs ranging from $300 million to $365 million, encompassing asset impairments, lease obligations, accelerated depreciation, and severance. Furthermore, the company estimates a significant impact on fiscal year 2018 diluted earnings per share, projected to be between $0.28 and $0.34. These charges are expected to be recorded in the third and fourth quarters of fiscal 2018. While the company is taking steps to streamline operations, the financial impact and execution of this strategy will be key areas to monitor.
Key Highlights
- 1Lowe's to close a total of 51 underperforming stores (20 in the U.S. and 31 in Canada) by February 1, 2019.
- 2The closures are part of a strategic reassessment to focus on more profitable stores and improve portfolio health.
- 3Estimated pre-tax exit costs are between $300 million and $365 million.
- 4These costs include long-lived asset impairments ($85-$100M), lease obligations ($145-$180M), accelerated depreciation/amortization ($45-$55M), and severance ($25-$30M).
- 5The company expects a pre-tax charge of approximately $170 to $210 million in net future cash outflows.
- 6The estimated financial impact on fiscal 2018 diluted earnings per share is $0.28 to $0.34.
- 7These charges are expected to be recorded in the third and fourth quarters of fiscal 2018.