After Growing 16% In 2 Years, Why Did Lowe’s Number Of Stores Decrease?

by Trefis Team
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Lowe’s (NYSE: LOW) saw a fall of 6.4% in the number of operating stores in FY 2018. This was primarily as Lowe’s has decided to consolidate its current operations and to get rid of the under-performing stores in the U.S. and Canada. The company also declared that they were exiting their Mexico business in the last quarter of FY 2018.

Please refer to the Trefis interactive dashboard – Lowe’s Stores: What happened to Lowe’s Stores over the years? – to understand the annual change in Lowe’s stores.

What Happened?

  • The number of Lowe’s stores had a sudden increase in FY 2016 when it went up  from 1,857 stores in FY 2015 to 2,129 stores in FY 2016. This was an increase of 14.6% y-o-y.
  • In FY 2018 the company saw a negative growth as the number of stores fell from 2,152 in FY 2017 to 2,015 in FY 2018, a fall of 6.4% y-o-y.

 

 

 

Why?

  • The sudden increase of 14.6% in the number of stores in FY 2016 was due to Lowe’s acquisition of RONA which operates in Canada. The RONA stores represent various complementary store formats operating under various banners. The acquisition was completed for $2.3 billion in an all cash deal.
  • In FY 2018 the company had announced closing of certain under-performing stores in the U.S. and Canada which led to a decrease in the number of operating stores. The company also charged $150 million to their Income statement primarily due to the lease and severance obligations as well as accelerated depreciation and amortization, related to the store closures.

So What?

  • Sharp rise in Number of Stores also helped revenue as the Total Revenue increased from $59 billion in FY 2015 to $65 billion in FY 2016, up by 10.2% y-o-y.
  • But in FY 2018 Lowe’s more than offset the revenue loss from the fall in Number of Stores as Comparable sales increased and thus the revenue per square foot metric. For more details please visit our interactive dashboard: Lowe’s Revenue.
  • Going forward we expect Lowe’s to continue its consolidation and Top Line to be driven by its Comparable Sales growth.

 

 

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