Lowe’s Lows Could Portend Election Woes
A couple of Insights ago I reported on the aftermath of a rarity in Lowe’s history, a true crisis. Worse the onset of the crisis was essentially self-inflicted by the company.
The company seemingly successfully saw itself through the worst economic crises of its history which riddled pretty much all segments of this industry. Home Depot was certainly hit harder as it had to escape a prior administration’s multi-dimensional hunger for growth through a series of costly ancillary acquisitions while launching a multitude of mammoth specialty retail operations in addition to growing its typical footprint.
Home Depot bit the bullet and sold off most of the acquisitions at considerably less than they had paid. Somewhat surprisingly they promptly closed the floundering specialty stores despite the considerable investments the company had devoted to creating them. Prominent properties such as the big box EXPO Design Centers, which had been tabbed as enhancements to work with nearby Home Depots, were shuttered.
Prior to the subprime crisis and eventual recession, Lowe’s was long seen as a Wall Street darling, expanding its locations in its typically deliberate fashion across the
United States and as long planned, ultimately into Mexico and finally . As most aspects of the industry have suffered horribly over the past five years, Lowe’s seemingly took its financial hits in stride and continued a toned down expansion of its locations base and remained on its typical path, especially through openings in the less financially challenged Canada. Canada
Then in August stories broke of the sudden closing of seven Lowe’s stores across the country. One set of reports focused on two closings in
and inflamed much of the local population. Suddenly reports surfaced about five similar closings in seemingly disparate markets nationwide. This led to a pointed press release by Alaskan Senator Lisa Murkowski which served to further fan the flames questioning the state of Lowe’s health (fiscal and mental). Chicago
Should there have been an issue surrounding an innovative national retail power closing seven of its more than 1,750 locations? There was because Lowe’s is a company that has historically closed locations as a substitute for renovation. When an old store is in need of a significant upgrade and a nearby available site is seen as a significant improvement in location, Lowe’s has jumped in and moved sites as it deemed necessary.
In the case of the seven closings, the company made it clear that these stores were simply underperforming and that the company saw no coming upside. Some however were fairly new. None are to be replaced by nearby sites. One of the closed stores, in upstate New York, had only been open since February 2009, took years of planning and zoning discussions, and enjoyed a payment-in-lieu-of-taxes agreement that gave it reduced taxes for 10 years.
As bad as these facts around these closings might seem, the actual sense of crisis was fueled by the manner in which these closings were conveyed, layered upon the questions surrounding the above sense of fiasco. Local news reports in several of the affected markets indicated that employees were gathered on a Sunday evening at the store’s closing and told that it would not be opening the next morning.
Now Lowe’s has announced an additional twenty store closings. The company’s official press release states that of the twenty, ten were already closed at the time of the release. The release goes on to state that some 19,500 employees will be losing their jobs as the stores are shuttered.
At a time when national politicians have joined their local brethren to proclaim the urgency of creating jobs to prevent a double dip recession, Lowe’s recent news threatens national jobs numbers at a time when their importance is under the scrutiny of a daily magnifying glass.