Recent cost-cutting measures at Mooresville-based Lowe’s are part of a larger effort to boost financial results that have consistently lagged larger rival Home Depot, experts say.
But the layoffs announced this month are causing angst and uncertainty at the company’s headquarters in Mooresville, as well as in stores around the country, current and former workers tell the Observer.
Those cuts, along with others announced in the fall, have affected full-time workers across the board, from IT to store workers to warehouse supervisors.
“It’s pretty ugly in Lowe’s land right now,” said a department manager in an Atlanta store who contacted the Observer. The hourly employee was told Friday he would be keeping his job, though several of his coworkers were not as fortunate.
“They are hurting families from East Coast to West Coast, from Canada to southern Florida,” said the worker, who like others interviewed spoke on condition of anonymity for fear of reprisal.
Lowe’s has also announced a number of executive changes, including a new chief financial officer and a new marketing officer. The company attributed the CFO change to retirement, and said its former CMO left the company.
Lowe’s said its recent downsizing, which it calls fundamental to its “strategy and the future,” is designed to enhance the customer shopping experience.
The changes will “better align store staffing with customer demand, shift resources from back-of-the-store activities to customer-facing ones, and enhance our efficiency and productivity,” Lowe’s CEO Robert Niblock said in a Jan. 17 email to employees.
Added Niblock: “It is always difficult to make decisions that affect our people, but sometimes they are necessary as we build for the future and meet the evolving needs of customers.”
Lowe’s has consistently trailed Atlanta-based Home Depot, the nation’s largest home-improvement retailer. The Mooresville company is under pressure to keep up with its larger rival, which has been performing better in recent quarters, analysts say.
“If your competitor is doing better, you’ve got to fix whatever it is you’re doing wrong,” said Steven Cox, a marketing professor at Queens University of Charlotte.
“If they can’t do as well as Home Depot, you will continue to see change,” Cox said of Lowe’s.
To be sure, home improvement retail has benefited from gains in the housing market, like property appreciation, as well as a strengthening labor market. But Lowe’s continues to lag.
In the most recent quarter, Lowe’s made 88 cents a share on sales of $15.74 billion, up 9 percent from the year before. Meanwhile, Home Depot made $1.60 a share on sales of $23.2 billion.
Home Depot also outperformed Lowe’s on the key metric of same-store sales, an industry term that refers to sales at stores open at least one year. For the third quarter, Lowe’s said same-store sales rose 2.7 percent, missing the Wall Street forecast of 3.2 percent. Same-store sales at Home Depot, on the other hand, rose 5.5 percent.
Since 2009, Lowe’s has only topped Home Depot twice in same-store sales, including the first quarter of 2016, according to data from Bloomberg.
In another move to boost its share price, on Friday Lowe’s announced a $5 billion repurchase program of the company’s common stock. Shares closed up less than 1 percent Monday at $73.57.
The recent round of layoffs could help Lowe’s trim about 1 percent of the company’s total labor hours, saving about $125 million a year, according to Robin Diedrich, a senior analyst at Edward Jones. That estimate is based on the fact that Lowe’s has approximately 180,000 full-time and 90,000 part-time employees.
“Lowe’s has meaningfully underperformed Home Depot in each of the last few quarters, giving us reason for concern in the near- to medium-term,” RBC Capital Markets analyst Scot Ciccarelli said in a recent research note, adding that areas of particular concern for Lowe’s include small-ticket items and do-it-yourself purchases.
Lowe’s describes the restructuring as a necessity to meeting the needs of customers, who are turning to online shopping.
Colleen Penhall, vice president of communications at Lowe’s, said the 2,400 layoffs were “all about investing in the future of Lowe’s as we continue to respond to the dramatic shifts that are reshaping the retail landscape.” The company said it commissioned the outplacement firm Lee Hecht Harrison to help those affected find new work.
At its corporate office, Lowe’s continue to hire “for critical positions that are needed to fulfill our strategy and key priorities,” spokeswoman Karen Cobb said.
Cox, the Queens professor, said Lowe’s is aiming to become more of a go-to source for professional customers – think contractors – who tend to spend more in stores.
“You take some of your most skilled people in the back room now as managers and you move them out to the front, but you put them in the pro area, so they focus more on big-ticket items,” Cox said. “It makes perfect sense for this economy.”
Still, both current and former employees say workforce morale has suffered following the layoffs. One software engineer who lost his job in October says his friends remaining at the company “feel like they are going to be walked out next.”
The staffing changes come just before the end of Lowe’s fiscal year, which is Feb. 3. Lowe’s also has said that over the next three years, the company expects to make $3.6 billion in capital investments, including plans for 15 to 20 new stores per year, and to create about 4,000 store-level jobs.
Lowe’s is also coming up on its busiest time of year, when the home improvement season kicks off and the retailer takes on thousands of temporary hires.
The Atlanta employee will take on a new role with the company as a “service manager.” That job doesn’t include the bonus he would have been on track for as a department manager, he said, though it does include some responsibilities of an assistant store manager – a position which saw thousands of cuts earlier this month.
“We’re stressed to the max,” he said.