Lowe's To Quit Mexico All Together, Shedding Further Ancillary Businesses

Home improvement chain Lowe's is planning to cease operations in Mexico, where the company currently has 13 stores. It is also exiting Alacrity Renovation Services and Iris Smart Home, two of its U.S. businesses.

Word of the change came as Mooresville, North Carolina-based Lowe's released its latest quarterly numbers, reporting earnings of $0.78/share for the quarter ended Nov. 2, compared with $1.05/share for the same period in 2017.

Same-store sales, while up 1.5% year over year during the quarter, didn't grow as much as analysts expected. 

The closures come in addition to the company's previous decisions to exit its Orchard Supply Hardware operations and close 20 underperforming stores in the U.S. and 31 stores and other locations in Canada.

“During the quarter, the favorable macroeconomic environment ... drove traffic to our stores and website,” Lowe's CEO Marvin Ellison said in a statement. “However, continued challenges with inventory out of stocks, poor reset execution and assortment concerns in certain categories pressured our ability to turn those visits into transactions."

Ellison reiterated that putting Lowe's on a stronger growth path will take time. “Rather than chase short-term solutions to these problems, we are redesigning processes and systems to deliver sustainable improvement, and expect to see positive trends as we enter 2019," he said.

In the home improvement sector, Lowe's plays Avis to Home Depot's Hertz, and No. 2 Lowe's effort to catch up with No. 1 Home Deport might prove to be difficult, even under the direction of Ellison, a former Home Depot exec.

The geography of store location is somewhat against Lowe's as it tries to grow, Bloomberg Opinion reports. There is much overlap, but Home Depot has a a stronger concentration of stores in the Northeast, where relative affluence means that customers are likely to spend more on home improvement.

Lowe’s, meanwhile, has a strong presence in the Midwest and South, making its customer base a bit less affluent.

Even so, Lowe's is aiming to grow. "We have work to do," Ellison said during the company's earnings call in August. 

"Specifically, we are significantly behind in our supply chain strategy, our in-store technology is dated, overall execution is impaired by complexity, we have a large number of out-of-stocks in our stores that must be addressed, and we need to increase the rigor with which we evaluate capital investments," Ellison said.