As Lowe’s reported a solid second quarter, the home improvement retailer said it will close its Orchard Supply Hardware store division.
Lowe’s said that it expects to close all 99 Orchard Supply Hardware stores, which are located in California, Oregon and Florida, by the end of fiscal 2018, as well as the distribution facility that services those stores. The company will conduct store closing sales in partnership with Hilco Merchant Services to ensure an orderly wind-down process.
As it took a $230 million pre-tax charge to exit the Orchard Supply Hardware business, the Lowe’s posted net earnings of $1.52 billion, or $1.86 per diluted share, for the second quarter ended August 3, versus $1.42 billion, or $1.68 per diluted share, in the year-earlier quarter.
With the impact of one-time charges excluded, adjusted diluted earnings per share was $2.07 versus $1.57 in the quarter a year prior. Lowe’s topped a MarketBeat published second quarter consensus analyst estimate of $2.02 per adjusted share.
Overall comparable sales increased 5.2%, while comps for the U.S. home improvement business advanced 5.3% for the quarter year over year. Net sales in the quarter were $20.89 billion versus $19.5 billion in the year-previous quarter. Operating income was $2.16 billion as compared to $2.38 billion in the year-before period.
Marvin Ellison, Lowe’s president and CEO, said, “We posted solid results this quarter by capitalizing on delayed spring demand, 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 omnichannel home improvement retailer. While it was a necessary business decision to exit Orchard Supply Hardware, decisions that impact our people are never easy. We will be providing outplacement services for impacted associates, and they will be given priority status if they choose to apply for other Lowe’s positions.”
He added, “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. Exiting Orchard Supply Hardware and rationalizing inventory are the driving force behind the changes to Lowe’s business outlook. 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.”