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Lowe’s Closes Orchard Supply Hardware Stores in Attempt to Compete with Home Depot

Lowe’s to Close Orchard Supply Hardware StoresAs a major player in the home improvement industry, Lowe’s has been struggling to keep up with its main competitor, Home Depot. With declining growth and lagging same-store sales, the company has made the decision to close all of its Orchard Supply Hardware stores in an effort to reduce inventory and cut costs.

In this article, we will take a closer look at the reasons behind Lowe’s decision and what impact it will have on the company’s future.

Background Information

Lowe’s has been facing a tough market as consumers increasingly turn to do-it-yourself projects. Unfortunately for Lowe’s, Home Depot has been doing much better than them in this market.

The company’s same-store sales, a key measurement of retail performance, have been lagging compared to those of Home Depot. While same-store sales at Home Depot have been consistently growing, Lowe’s has seen declining growth.

The company’s sales performance in the first quarter of 2018 was disappointing, with same-store sales increasing by just 0.6% compared to analysts’ estimates of 4.1%.

Closing of Orchard Supply Hardware Stores

To address its lagging sales, Lowe’s has made the decision to close all of its Orchard Supply Hardware stores. The company will shutter 99 OSH stores, a move that is expected to have a significant impact on its same-store figures.

The closures are expected to result in a $230 million pre-tax charge for Lowe’s. However, the company hopes that the inventory reduction measures taken as a result of the closures will lead to cost savings in the long run.

Following the closures, Lowe’s will be focusing on its core business, which is comprised of Lowe’s Home Improvement stores and its online presence. These two areas have shown more promising growth rates than OSH stores.

It is expected that the closures will free up resources that can be put towards improving customer experience and investing in new technology.

Potential Pricing Changes

With the closure of OSH stores, Lowe’s is expected to adjust its pricing strategies to remain competitive. Pricing is an area where Home Depot has been doing a better job than Lowe’s, with the former’s lower prices being a factor in its stronger sales performance.

Lowe’s has not yet announced what changes will be made to its pricing strategy, but it is expected that they will be looking to offer more competitive prices in order to better compete with Home Depot. Lowe’s Quarterly Earnings and Analysts’ Estimates

Positive Quarterly Earnings

While the closure of OSH stores has been a difficult decision for Lowe’s, the company’s recent earnings report showed some positive news. The company beat analysts’ estimates for earnings per share, reporting earnings of $2.07 per share compared to the estimated $1.97.

Sales for the quarter also rose, coming in at $20.89 billion compared to last year’s $19.5 billion. This growth was welcome news for Lowe’s, as it showed that the company is capable of competing with Home Depot in the core areas of its business.

Analysts’ Consensus

Following the positive quarterly earnings report, analysts have been generally positive on Lowe’s future prospects. The consensus among analysts is to either buy or hold Lowe’s stock, with no sell ratings coming out after the earnings report.

The average price target for Lowe’s stock is currently $117.11, a figure that is slightly higher than the stock’s current trading price of around $109. Comparison to Home Depot’s Stock Performance

While Lowe’s stock has been performing well recently, it has a long way to go to catch up to Home Depot’s stock performance.

Home Depot’s stock has been outperforming Lowe’s for several years now in terms of growth and analyst support. Home Depot’s stock has grown by 28.4% over the past year, compared to Lowe’s 7.9%.

Analysts have also been more bullish on Home Depot, with an average price target of $211.28 and only buy or hold ratings.

Conclusion

Lowe’s has been facing some tough competition from Home Depot in recent years, with declining growth and lagging same-store sales. However, the company’s decision to close all of its Orchard Supply Hardware stores and focus on its core business has shown some promising results.

The company beat analysts’ estimates for earnings per share and reported increased sales for the quarter. While Lowe’s still has a way to go to catch up to Home Depot’s stock performance and analyst support, the company is taking the right steps to remain competitive in the home improvement market.

Appointment of New CFO

Lowes has announced the appointment of David Denton as the company’s new Chief Financial Officer, effective August 20, 2018. Denton will be replacing Marshall Croom, who has announced his retirement after working with Lowes for 21 years.

Denton will report to Marvin Ellison, President and CEO of Lowes.

David Denton Background

Denton brings with him over 20 years of financial experience gained from serving in various senior executive roles in leading organizations. He is currently serving as the CFO of CVS Health, an American health care company, and has been in that role since March 2017.

Prior to his time at CVS, Denton was the CFO of Walgreens Boots Alliance, a global pharmacy-led healthcare company, for five years starting in 2012. On his appointment, Denton stated that he is delighted to be joining Lowes at such an exciting time, and he looks forward to playing an active role in driving positive change at the company.

Denton is expected to be responsible for overseeing the company’s financial matters, including financial planning and reporting, mergers and acquisitions, tax, and treasury.

Marshall Croom Retirement

The announcement of a new CFO comes after Marshall Croom announced his retirement after a two-decade tenure working at Lowes. Croom served as the companys CFO from 2016 until his retirement earlier this year.

He was in charge of balancing the company’s costs and growth, managing the company’s capital expenditure, and leading many strategic initiatives that supported Lowe’s long-term goals. During his tenure, Croom worked tirelessly to build a solid financial foundation for the company, leading initiatives that helped reduce the companys debt-to-EBITDA ratio and improve its credit rating.

Under his guidance, Lowe’s successfully implemented a significant program that eliminated unnecessary spending and improved the company’s operating efficiency.

Marvin Ellison on the Appointment of Denton

According to Marvin Ellison, Denton’s appointment highlights Lowes continued commitment to financial responsibility and efficient operations. In a statement, Ellison said that he is excited to welcome David Denton to the team.

He further went on to say that Denton has a proven track record of driving change and has extensive experience in finance, capital allocation, and strategic planning, which makes him the right person to lead Lowes during this critical time. Ellison added that Dentons broad experience in retail, health care, and finance, coupled with his strong leadership skills, make him an excellent addition to the company.

He believes Denton’s wealth of experience will be invaluable as Lowes continues its transformation journey towards becoming a better retailer and employer.

The Future of Lowes under David Denton

The appointment of Denton is expected to play a significant role in Lowes strategic transformation journey, as the company continues to focus on increasing operational efficiency, reducing costs, and investing in the future. Denton will be tasked with driving strategic growth initiatives, improving the company’s profit margins, and managing its financial resources to achieve long-term value creation for all shareholders.

With the retail industry constantly evolving, the competition can be fierce. As a result, Lowes will rely heavily on Denton’s financial expertise to keep the company ahead of the competition.

By leveraging his experience, Denton will be working closely with Ellison to guide Lowes in making data-driven decisions, expanding its digital capabilities, and enhancing its customer experience. As the new CFO, Denton will play a key role in ensuring that Lowes continues to grow sustainably while collaborating with his colleagues to identify new opportunities for growth.

Denton’s extensive experience in leadership and finance is expected to bring about more efficiency, accountability, and growth opportunities for Lowes. The company’s shareholders are eagerly anticipating the results of this appointment, and the impact that David Denton will have on the future of Lowe’s as a whole.

In conclusion, Lowe’s appointment of David Denton as the new CFO is a significant move that demonstrates the company’s commitment to its financial responsibilities and continued journey toward greater efficiency. Denton brings over 20 years of financial experience, and his appointment highlights the company’s efforts to drive positive change and growth in the future.

His task will be to oversee financial matters, including strategic planning, financial reporting, mergers and acquisitions, tax and treasury. Denton will be instrumental in guiding the strategic transformation journey of the company, as it focuses on providing a better customer experience, expanding its digital capabilities, and remaining competitive in the market.

The success of this appointment is eagerly awaited by shareholders and industry players alike.

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