Lowe's reports disappointing sales; to exit Mexico

Lowe's Cos. reported disappointing numbers for a key sales measure in the third quarter and said it would exit its Mexico operations in its bid to compete better with home improvement leader Home Depot.

The home improvement chain said Tuesday it would also exit its contracting service, Alacrity Renovation Services, and its Iris Smart Home businesses in the U.S.

The moves come as Lowe's is trying to focus on running a basic home improvement chain under CEO Marvin Ellison, who took the reins this past summer. Ellison, a former Home Depot executive, had been the CEO at J.C. Penney for less than four years.

In August, the Mooresville, North Carolina-based company announced it was closing the 99 Orchard Supply Hardware stores it owns in California, Florida and Oregon.

After thinning executive positions at the company, Ellison began paring away what he sees as nonessential in the aisles of Lowe's. That means rethinking some of the goods it sells, getting rid of lower-selling items, and focusing on the top 2,000 products it carries. Lowe's also wants to bolster its business with professionals, something that has been Home Depot's forte.

Lowe's had lost its way and become more interested in things like international expansion and innovation. Customer traffic has long been strong, but shoppers have been left disappointed because they haven't found what they needed.

Ellison told analysts during a conference call on Tuesday that despite interest rates ticking up and housing turnover under pressure, the home improvement backdrop "remains strong," fueled by robust real residential investment and home price appreciation. The average age of a home in the U.S. is 40 years, which creates a big opportunity for maintenance and repair, he noted.

During an interview with The Associated Press, Ellison said that he sees the Chapter 11 bankruptcy by Sears Holdings Corp. as creating opportunities to pick up extra dollars. For example, the company has been expanding its appliances and home improvement areas.

On a per-share basis, Lowe's earned 78 cents. Adjusted for non-recurring costs and asset impairment costs, earnings came to $1.04 per share. The results topped Wall Street expectations. The average estimate of 15 analysts surveyed by Zacks Investment Research was for earnings of 97 cents per share.

The home improvement retailer posted revenue of $17.42 billion in the period, which also beat Street forecasts. Eleven analysts surveyed by Zacks expected $17.33 billion.

Sales for the U.S. home improvement business increased 2.0 percent for the third quarter.

Revenue at stores opened at least a year rose 1.5 percent, below the 2.8 percent estimate, according to FactSet

Lowe's expects full-year earnings in the range of $5.08 to $5.13 per share.

Shares of Lowe's fell nearly 6 percent to close at $86.18 amid a broader market decline.

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Elements of this story were generated by Automated Insights using data from Zacks Investment Research. Access a Zacks stock report on LOW at https://www.zacks.com/ap/LOW