Lowe's jumps after announcing plans to revamp its underperforming Canadian operations
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- Lowe's rose as much as 5% in early trading on Wednesday after lifting its full-year profit guidance and announcing a plan to restructure its Canadian operations.
- The home-improvement retailer's third-quarter earnings beat Wall Street's estimates, but same-store sales and total revenue came in below expectations.
- Lowe's will close 34 under-performing Canadian locations and restructure its Canadian corporate operations to "more efficiently serve stores," the company said in its earnings report.
- Watch Lowe's trade live here.
Lowe's traded as much as 5% higher early Wednesday after the company lifted its full-year profit forecast and announced plans to restructure its Canadian business.
The home-improvement retailer announced third-quarter earnings Wednesday, posting profits that exceeded analyst estimates. Total revenue disappointed, but shares advanced as the company laid out its plan to improve lagging Canadian stores.
Here are the key numbers:
Adjusted earnings per share: $1.41, versus the $1.35 estimate
Revenue: $17.39 billion, versus the $17.70 billion estimate
Comparable sales growth: 2.2%, versus the 3.2% estimate
Full-year earnings per share forecast: $5.63 to $5.70, previously saw $5.45 to $5.65
The company announced a $53 million pre-tax charge for starting a "strategic review" of its Canadian business in the third quarter. The reorganization plan will kick off in the fourth quarter, and include the closure of 34 Canadian stores.
Lowe's also plans to reorganize its corporate structure in Canada to "more efficiently serve stores." The plan shows a willingness to compete with rivals like Home Depot, which lowered its own 2019 earnings guidance on Tuesday.
"Although we still have work to do, I am confident we are on the right path to build a better Lowe's and generate long-term profitable growth," CEO Marvin Ellison said in the Wednesday report. "We are committed to the Canadian market and are taking decisive action to improve the performance and profitability of our Canadian operations."
The retailer also stands to profit from a thriving US housing market. Homebuilder sentiment remains strong after reaching a record high in October. The Federal Reserve's recent interest rate cuts also slashed homeowners' borrowing costs, prompting a third-quarter increase in mortgage debt.
Lowe's closed at $113.40 per share Tuesday, up roughly 23% year-to-date.
The company has 25 "buy" ratings, seven "hold" ratings, and one "sell" rating from analysts, with a consensus price target of $124.86, according to Bloomberg data.
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