Winning Colours, Kind, and Clean1 hopefully will be seen on these 4 new stores' shelves...
Lowe’s Plans Four New Stores
Home improvement retailer Lowe’s Companies, Inc. is beginning to follow through on predictions it made about opening 35-45 new stores by January 2010 at its annual investor conference last month. Lowe’s will open four new stores on Friday, October 29, 2009, with official grand openings occurring six days later on Thursday, October 29.
The stores will open in Paso Robles, CA, Philadelphia and Reading, PA, and Glenville, NY. Combined, they represent 454,000 square feet of retail space and will create an estimated 645 new jobs.
Lowe’s, which expects to add a total of 62-66 new stores during fiscal 2009 (ending January 2010) and another 38-48 new stores during fiscal 2010 (ending January 2011), is committing to store growth despite its soft fiscal 2009 financial performance and general weakness in the home improvement retail market. The retailer expects total fiscal 2009 sales to decline about 3% from fiscal 2008 sales of $48.2 billion to about $46.7 billion, and comparable store sales to decline 7-9%. Total store opening costs are expected to be about $50 million. Lowe’s also plans to close one unprofitable store in Milwaukee, WI. In addition, Lowe’s anticipates possible impairment costs related to store operations of up to $100 million during the second half of fiscal 2009.
However, Lowe’s also released financial guidance for fiscal year 2010 that anticipates financial growth following the contraction of 2009. Lowe’s expects total sales to grow 3-4%, from approximately $46.7 billion to approximately $48-49 billion, and comparable store sales are expected to rise about 1%. Store opening costs are expected to be about $30 million.
At the investor conference, Lowe’s executives said that store expansion into underserved markets, exploration of international opportunities, and cross-functional efficiency initiatives should result in market share gains, improved customer service and sales growth. Lowe’s also expects consumers to resort to more do-it-yourself home repair projects in light of the difficult economy.
Lowe’s chief rival The Home Depot also reported disappointing Q2 2009 results. Net earnings declined 8.3%, from $1.2 billion to $1.1 billion. Net sales for the second quarter totaled $19.1 billion, a 9.1% decrease from $19.9 billion Comparable store sales for the second quarter were negative 8.5%, and comparable store sales for U.S. stores were negative 6.9%. Gross profit declined 8.3%, from $6.9 billion to $6.3 billion. As in Q1, Home Depot cited pressures on the market and consumers in contributing to the decline in these figures. Home Depot confirmed previously issued guidance that fiscal 2009 sales will decline by about 9% from fiscal 2008.
The U.S. home improvement market does not show any indications it will improve this year, and should meet expectations of declining performance. Both Home Depot and Lowe’s had relatively quiet second quarters, perhaps reflecting their soft performance. In June, Home Depot publicly discussed financial expectations, strategic priorities and long-term operating targets during its 2009 investor and analyst conference In addition to its expectations for a 9% drop in sales, Home Depot also predicted comparable store sales to decline in the high-single digit area and gross margin expansion to be flat to slightly positive.
Like Lowe’s, Home Depot sees improvement coming after this year. In the long term, Home Depot, which has not publicly discussed any plans for new store openings, said it believes that its strategic priorities, along with a correction in the home improvement market, will allow it to achieve an operating margin of approximately 10% and a return on invested capital of approximately 15%.
Lowe’s operates more than 1,675 stores in the U.S. and Canada. Fiscal 2008 sales were $48.2 billion.
