Canada Markets closed

Lowe's to close 34 "underperforming" stores across six provinces, vexing Quebec

Lowe's Companies Inc. said Wednesday it will close 34 "underperforming" stores across six provinces as part of a restructuring of its Canadian business, raising hackles in Quebec over the fate of local hardware mainstay Rona.

The stores include 26 Ronas, six Lowe's and two Reno-Depots spread from Prince George, B.C., to Dartmouth, N.S.

"We think these restructuring actions that we announced today are going to really put us in a position for long-term growth," said chief executive Marvin Ellison.

The home improvement retailer did not say how many retail staff would be affected by the latest round of closures, which will see stores windup in January and February. The company says eligible employees will be offered jobs at nearby stores, according to the need for workers throughout its network.

More than one-third of the closures will be in Quebec, with Rona stores comprising 11 of the 12 shutdowns there.

Premier Francois Legault suggested the province will not be able to intervene in the hope of saving jobs.

"It's a private enterprise. What we can do is limited," Legault told reporters.

Economy Minister Pierre Fitzgibbon said the U.S. giant seemed to respect an agreement signed with Ottawa after Lowe's acquired Rona for $3.2 billion in 2016. He told reporters he could not divulge details of the deal, but aimed to call his federal counterpart after the new Trudeau cabinet was announced Wednesday afternoon.

Lowe's made a half-dozen commitments in 2016 that involved jobs and the establishment of a Canadian head office for Lowe's in Boucherville, across the St. Lawrence River from Montreal and home of Rona — a now-80-year-old Quebec hardware institution.

Bloc Quebecois Leader Yves-Francois Blanchet on Wednesday denounced the closures and called on the federal government to disclose details of the 2016 pledges.

The closures add to the shuttering of 31 Canadian Lowe's and Rona locations, including 27 stores and four other facilities, announced in November last year. At the time the company also announced the closure of 20 stores in the U.S.

The Canadian division of Lowe's has more than 600 corporate and independent affiliate stores under the Lowe's, Rona, Reno-Depot, Ace and Dick’s Lumber brands.

A "very complex business model" inhibited the retailer's ability to provide smooth service to customers up north, the CEO said.

"We're operating five banners, all with legacy systems, all with different back-end systems," Ellison said on a conference call Wednesday with analysts. "It made it very difficult to create synergies from a marketing, merchandising, sourcing perspective and even in IT systems infrastructure."

The company plans to move its Canadian information technology platform to the U.S. "to eliminate inefficiencies and unnecessary technology duplication," he said.

Lowe's, whose push northward made it the country's dominant home improvement outlet, aimed for efficiencies through scale but has had trouble standing out from chief rival Home Depot.

"The strategy does not work, because if you're always playing on cost and you're not playing on quality, availability or service, you'll lose the client," said Gilles LeVasseur, professor of business and law at the University of Ottawa.

He drew parallels to Target's trumpeted arrival in Canada in 2013, which was followed by meagre sales and the closure of all 133 stores less than two years later.

"Target came with that image of saying, 'We will offer you fantastic deals,' and people didn't see it. Lowe's comes up and says, 'We'll bring you a new relationship with our client,' and people are saying, 'Well, what's so good that we didn't have before?'"

Other obstacles are industry-wide as Canadians put off big purchases amid historically high debt-to-income ratios and whispers of a recession.

The North Carolina-based company has been undergoing a wider restructuring since Ellison stepped into the CEO role in July of last year. It remains in the midst of a catch-up period against Home Depot "after underperforming for several years," said Elizabeth Suzuki, an analyst at Bank of America Merrill Lynch.

In Canada, Lowe's has more than 28,000 employees, while its independent affiliate dealers operating under the Rona and Ace name have another 5,000 employees. The store closures will take place in British Columbia, Alberta, Saskatchewan, Ontario, Quebec and Nova Scotia.

In Quebec about 500 workers will be affected, according to estimates from the United Food and Commercial Workers' provincial chapter, which noted the company would not disclose layoffs.

About 100 employees at the Boucherville head office and a second Montreal-area office will also face layoffs, on top of about 30 employees in administrative positions across the rest of Canada, Lowe's Canada said in an email.

Ad Standards, the advertising industry's self-regulatory body, said earlier this month that the company should stop using the phrases "truly Canadian" and "proudly Canadian" on its store signs as they were misleading. The company said it "strongly disagrees" with the conclusion.

Lowe's third-quarter earnings of US$1.05 billion, or US$1.36 per share, beat the US$1.35 per share that analysts surveyed by Zacks Investment Research.

The company also boosted its full-year adjusted earnings outlook, in contrast to the larger Home Depot that missed analyst expectations and cut its full-year sales forecast Tuesday.

This report by The Canadian Press was first published on Nov. 20, 2019.

— With files from the Associated Press

Christopher Reynolds, The Canadian Press