Lowe’s Cos Inc said on Tuesday it was looking to shed its retail operations in Mexico and two of its smaller U.S. businesses as the country’s second-biggest home improvement chain strives to compete with rivals including Home Depot.
Shares of the Mooresville, North Carolina-based company fell nearly 3.6 percent in morning trading after Lowe’s blamed inventory missteps for a smaller-than-expected rise in comparable store sales. Larger rival Home Depot Inc shares were also down nearly 2 percent.
Under Marvin Ellison, Lowe’s newly-appointed chief executive officer, the company has been streamlining its business by shutting underperforming stores and cutting back on slow-moving inventory.
The company has perennially lagged Home Depot in same-store sales, despite having roughly the same number of stores.
Lowe’s said it was looking at all options for its chain of 13 stores in Mexico and that it was “exiting” its U.S. contracting services business Alacrity Renovation Services and security and smart home app Iris Smart Home.
Earlier this month, the company announced the closure of 51 underperforming stores in the United States and Canada, which followed the shutdown of 99 Orchard Supply stores in California.
“We believe Lowe’s is moving in the right direction, but this quarter’s results show that change is not linear or quick in large retail organizations,” Wedbush Securities analyst Seth Basham said.
Sales at stores open for more than a year rose 1.5 percent in the third quarter, well below analysts’ expectations of a 2.93 percent increase, according to IBES data from Refinitiv.
Ellison said the company failed to sell more due to the assortment of merchandise and an inability to restock shelves with the right kind of inventory, despite a rise in customer visits.
“We see the issue as poor execution, not a macro concern,” Ellison said on a post-earnings call, referring to the company’s third-quarter sales.
“Although interest rates have ticked up and housing turnover has been pressured, the home improvement backdrop remains strong.”
The company cut its forecast for full-year sales growth to about 4 percent from 4.5 percent and comparable sales growth to about 2.5 percent from 3 percent.
Lowe’s net earnings fell to $629 million, or 78 cents per share, from $872 million, or $1.05 per share, a year earlier.
Excluding items, Lowe’s earned $1.04 per share, beating estimates of 98 cents. Net sales rose nearly 4 percent to $17.42 billion, edging past expectations of $17.36 billion.
Reporting by Aishwarya Venugopal in Bengaluru; Editing by Anil D’Silva