Lowe’s announced on Wednesday that it will shut down all its Orchard Supply Hardware outlets across the nation come February 1, 2019. Orchard Supply Hardware was founded in San Jose, California as far back as 1931. It was bought by Lowe’s sometime in 2013 and boasts of over 99 stores in Florida, California, and Oregon. As noted by the company, it is shutting down the stores in a bid to place more focus on its core business, i.e. home improvement.
The chain’s employees were informed about the development on Tuesday when it was also announced that all the stores will still remain open for business for the usual business hours. Starting on Thursday, all the stores will reportedly commence closing sales. The commencement of the sales is to ensure that all the stores are closed when its fiscal year comes to an end. The company also noted that Lowe’s will shut down another distribution outlet situate in Tracy, California.
Explaining the development, the president of Lowe’s and its CEO, Marvin Ellison, stated that exiting Orchard Supply Hardware was a business decision which was considered necessary. Ellison, however, added that taking decisions which affect employees do not come easy. As such, he noted that the company will be making provisions for alternative placement services for the associates affected. He also stated that those associates will have priority if they decide to seek out other job opportunities with the company.
The company stated that due to the strategic reassessment of Orchard Supply Hardware, it took out a $230 million worth of non-cash before-tax charges in the last quarter. According to Ellison, the Hardware chain based in North Carolina is switching its focus to retail fundamentals and expects to tighten the inventory of its stores. This is reportedly because Lowe’s foresee a retail environment which is more demanding.
Reports have it that Lowe’s reduced its yearly sales forecast down from an initial 5% to 4.5%. Previously, the sales at those stores which have been in operation for a minimum of a year dropped from a previous 3.5% forecast to 3%. According to analysts, Lowe’s reported $20.9 billion in sales for the second quarter has surged up about 7% from a similar period one year ago. The recorded sales made it outperform the expectations initially placed at $20.8 billion. The net income, however, dropped by 7% to $1.86 for a share or $1.53 billion. This was below the projected expectation of $2.01 for each share or $1.65 billion. In the morning trading session on Wednesday, Lowe’s shares surged by 8% and were at $108.43.
The news concerning the closing of the stores has caused several old customers of the stores to take to social media to express their sadness. A customer tweeted that the proposed closing was deeply saddening and others expressed how much they will miss the stores.
Lowe’s also noted that the executive vice president of CVS Health who doubles as the CFO, David Denton will be the company’s CFO. Denton is expected to join the company as soon as CVS completes the Aetna’s acquisition before the end of the year. Ellison also expressed his confidence that Denton would play a crucial role in the acceleration of the profitability, growth and capital return of the company. Lowe’s has reportedly hired Hilco Management to handle the Orchard Stores closing sales.
The store located in Turkey Lake Road in Central Florida was the first store in the region and it opened in February of last year. In addition, a new store was under construction to replace the Sears department formerly located in that particular spot at Orlando Fashion Square. Pam Davis of Orlando noted her heartbreak due to the news of Orchard Supply closing, particularly because she had experienced not-so-pleasant situations at some other stores. Davis who is 70 years noted that she has been to the Turkey Lake Road outlet of Orchard Supply several times since the store began operation in 2017. She added that she didn’t know it belonged to Lowe’s and expressed how wonderful their services were.