Lowe’s U.S. home improvement stores progressed in the third quarter, while the retailer said it is undertaking a strategic review to improve its Canadian operations.
The company reported net earnings of $1 billion and diluted earnings per share of $1.36 for the quarter ended November 1, 2019, which included non-cash pre-tax charges of $53 million, compared to net earnings of $629 million and diluted earnings per share of $0.78 in the third quarter of 2018. Excluding the impact of these charges, adjusted diluted earnings per share increased to $1.41 from adjusted diluted earnings per share of $1.04 in the third quarter of 2018.
The $53 million non-cash pre-tax charges resulted from the company initiating a strategic review of its Canadian operations during the third quarter. The review led to long-lived asset impairments and a change to the Canadian leadership team in the third quarter. Based on the findings of the strategic review, in the fourth quarter, the company decided to close 34 underperforming stores in Canada; undertake a process to simplify multiple Canadian store banners to drive efficiency and reduce operational complexity; reorganize the corporate support structure across Canada to more efficiently serve stores; and rationalize the product assortment across the simplified Canadian store banners, to present a more coordinated assortment.
Additional pre-tax operating costs and charges of $175 to $225 million consisting of inventory liquidation, accelerated depreciation and amortization, severance and other costs are expected to be incurred in the fourth quarter of 2019.
Sales for the third quarter were $17.4 billion and consolidated comparable sales increased 2.2%. Comparable sales for the U.S. home improvement business increased 3%.
“We were pleased with the performance of our U.S. home improvement stores, which reflects a solid macroeconomic backdrop and continued progress in our transformation driven by investments in customer experience, improved merchandise category performance, and continued growth of our Pro business. Due to improved execution, we delivered strong earnings per share growth, and as a result, we are raising our adjusted earnings per share and adjusted operating income guidance for 2019,” said Marvin Ellison, Lowe’s president and CEO.
Ellison added, “Although we still have work to do, I am confident we are on the right path to build a better Lowe’s and generate long-term profitable growth. We are committed to the Canadian market and are taking decisive action to improve the performance and profitability of our Canadian operations. We also have a detailed roadmap and a very experienced team in place to repair our Lowes.com business. As we enter the fourth quarter, we are building strong momentum in the U.S. and are well positioned to deliver strong topline performance, while also driving margin improvement and operational efficiency. We are excited about the progress we’ve made and the opportunity that lies ahead.”