(LOW 107.19, +7.45, +7.47%)
is trading higher after reporting its first quarter since Marvin Ellison took
over as CEO last month. He was Chief Executive at JCPenney after a long stint
as an executive at Lowe's rival Home Depot (HD).
Second quarter results were mixed, but investors are looking forward to a chance for the company to close the performance gap versus rival Home Depot (HD) which also had strong Q2 results with comparable store sales growth of 8%.
The company reported second quarter adjusted EPS up 32% to $2.07, just above estimates. Same store sales grew 5.2%, which was just shy of estimates. Just like its rival, Lowe's befitted from a rebound in seasonal gardening items in May after a cool April.
As a result, Chief Executive Marvin Ellison is taking swift action. In an attempt to simplify the organizational structure and improve execution, Lowe's announced it will close all 99 Orchard Supply Hardware stores in order to focus on its core business. The company is also eliminating $500 mln in capital projects that will instead go to share repurchases.
Marvin Ellison stated, "We are committed to driving even stronger performance in the future by sharpening our focus on retail fundamentals and by limiting any projects and initiatives that take us away from our core mission of being a great omni-channel home improvement retailer... In addition to the decision to exit Orchard Supply Hardware, we are developing plans to aggressively rationalize store inventory, reducing lower-performing inventory while investing in increased depth of high velocity items... Our strategic reassessment is ongoing as we evaluate the productivity of our real estate portfolio and non-retail business investments. We will update you on the changes to our strategy at the upcoming analyst and investor conference in December."
The CEO position isn’t the only management position in the midst of transition. Lowe's hired CVS CFO David Denton as its CFO this morning and the company is still searching for a Chief Information Officer.
As a result of the Orchard Supply and inventory adjustments, Lowe's lowered guidance for the year. The company lowered fiscal 2019 EPS to $4.50-4.60 from $5.40-5.50 (including Orchard supply write-downs), revenue growth to 4.5% from 5% and comparable store sales to +3% from +3.5%.
Lowe's is expecting continued growth in the home improvement sector as the housing market remains strong. Mr. Ellison thinks the company can take market share despite stiff competition from its rival. Investors are looking forward to the Investor Conference in December, when the company will provide more details on its strategic priorities.
- OUR VIEW
- LEARNING CENTER