Shares of home improvement retailer Lowe’s (LOW) were bucking the market’s downward slide on Monday, as a it announced it would shutter 20 underperforming stores and slow the pace of new openings by nearly half.
Half of the locations shut their doors on Sunday, with the remaining 10 locations expected to close within the month. (This comes after Lowe’s slashed seven locations in August.) Moreover the company said it now expects to open 10 to 15 stores each year from next year forward in the North American market, down from a prior estimate of 30 store openings per year.
The store closings will affect approximately 1,950 employees, and Lowe’s will book a related second-quarter charge in the range of 17 cents to 20 cents a share.
Janney Montgomery Scott analyst David Strasser noted that while he expected more of the store closing to be concentrated in areas of the country that were worst hit by the real estate bubble, Home Depot‘s (HD) dominance in the Northeast may account for the otherwise outsize number of closings in this relatively strong area of the housing market.
He maintained his Neutral rating on the stock, writing:
In addition to these real estate changes, LOW has reorganized its store operations and merchandising departments by consolidating store operations into three geographic regions, and the merchandising department into two product divisions. LOW is also revisiting its pricing strategy, and focusing on building out its online capabilities. The company is clearly searching for the right formula to get back on track. While these actions appear sensible to us, the true test of success will be in executing these changes. We remain Neutral, but clearly are intrigued by the opportunities that these changes can have on returns going forward.
In recent trading Lowe’s shares were up 0.8% to $21.
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