In early November 2018, the international home improvement chain Lowe's announced that
it would be closing a significant number of its stores.
Now shoppers in the US and Canada will have to find somewhere else to pick up their tools
and construction supplies.
But why?
Here's the real reason why so many Lowe's stores are suddenly shutting down.
When retail chains announce store closings, they often haven't yet determined what stores
specifically will end up on the chopping block.
That's not how Lowe's went about things, though.
The company announced exactly which stores they planned on shuttering, adding up to a
total of 47 branches - 20 in the United States, and 27 in Canada.
The closing stores are spread across 13 states and five provinces, not concentrated in any
one region.
According to a company statement, the stores are being shut down for underperforming financially.
Marvin Ellison, Lowe's CEO and president, said in the statement,
"The store closures are a necessary step in our strategic reassessment as we focus on
building a stronger business."
So why are these stores underperforming?
Are they getting run out of business by the competition?
Not exactly.
According to the company, most of the closing stores are located within 10 miles of another
Lowe's location.
In other words, the company considers the stores on the chopping block to be redundant.
According to CNBC, the company is aiming to have all the stores shut down by February
2019.
The company says most of the workers at the closing stores should be able to transition
to similar positions at other locations, but even if that works for 100% of the affected
employees, it's still a stressful time to be working at one of the stores getting shuttered.
Especially so close to the holidays.
When it comes to big-box hardware and home improvement stores, The Home Depot and Lowe's
are the only names in the game.
But there can be only one market leader, and for now, that's the Home Depot.
According to CNBC, Home Depot not only does better business than Lowe's, it also controls
better retail real estate, and has a more robust e-commerce fulfillment sector.
At the time of Lowe's announcement, Home Depot had more than twice the market value of its
main competitor, coming in at $207 billion compared to Lowe's $79 billion.
It seems to mean that even if the store-closing measure pays off, the company still has a
long way to go to close the gap between itself and its corporate rival.
Anticipating the 2018 holiday season, Lowe's won't close most of the 47 stores currently
marked for death until after the turn of the new year.
They can't leave that Black Friday money on the table, after all.
Lowe's fiscal year ends on February 1, 2019, by which time the company projects that all
47 stores marked for closure will be closed.
To that end, the corporate office has enlisted the help of Hilco Merchant Services, a retail
liquidation company that clears as much merchandise out of shuttering stores as quickly as possible.
If you're lucky and you keep an eye out, maybe you can pick up some sweet savings for yourself
as your local store's last days draw closer.
Cutting the costs associated with the 47 affected stores, the company believes, could theoretically
make Lowe's as a whole more profitable, and its stocks more valuable.
The company reportedly believes that the move will add 28 to 34 cents of value to each share
of stock, potentially boosting the company's overall worth by as much as $274.8 million.
Hey, it's a start.
More to come?
The accelerated closure of 47 Lowe's locations may sound drastic, and it's certainly an incredible
disruption to the hundreds of people who work at those stores - especially anyone who might
not be able to transfer to another store so easily.
But employees of the international chain shouldn't worry too much yet, as this initial run of
closures only covers a tiny percentage of Lowe's outlets overall.
In North America, the company operates about 2,100 stores, divided between 1,800 locations
in the United States and 300 more in Canada.
That means only 2 percent of Lowe's branches are shutting down, which is significant, but
not the end of the world.
Could more closures be coming in the future?
It's possible.
Either way, it makes a stressful winter for the workers - but consumers probably don't
have much to worry about.
If worse comes to worst, there's always Home Depot.