Following rounds of mass layoffs at Lowe’s, the company’s CEO says he regrets the impact on those affected, but is pleased with the streamlining effort and workers’ reception of it. He also did not rule out future job cuts to reduce costs.
Robert Niblock’s remarks came after the company reported fourth-quarter financial results Wednesday that topped Wall Street expectations – a much-needed sign of momentum for the local home improvement retailer that has consistently trailed behind its larger competitor, Home Depot.
Lowe’s executives have said the layoffs – over 500 last week at the corporate level in Mooresville and Wilkesboro, and 2,400 last month at the store level – eliminate layers of control, making the company more nimble and better able to respond to changing consumer habits.
“Even though it’s difficult to see the impact on coworkers, I think people understand that this will keep us a strong, viable company moving forward,” Niblock told the Observer. “As the world continues to evolve, we’ll continue to challenge ourselves. It’s something we do every year.”
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Rising home values and relatively low mortgage rates have provided a lift to Lowe’s and Home Depot, the Atlanta-based company that has outperformed Lowe’s thanks to its business for professional customers.
Niblock said he’s optimistic about Lowe’s progress with its pro business, where sales rose faster than usual. Overall, quarterly sales rose 19.2 percent, Lowe’s reported, and the average customer ticket rose 3.6 percent to $69.58. The number of customer transactions increased 15.1 percent for the quarter.
But of concern for Lowe’s, like other retailers, Niblock said, is President Donald Trump’s proposed border tax, which could raise prices for consumers.
“The retail industry is aligned in ensuring that Congress and this administration is aware of the potential impact this could have on us,” Niblock said. He did, however, note that there is “a lot of excitement” about other pro-growth proposals, like streamlining regulations and cutting the corporate income tax.
For the three months ending Feb. 3, Lowe’s reported earnings of $663 million, up from $11 million during the same period a year ago when the company took a non-cash charge as it exited a joint venture in Australia. Excluding certain items, including severance-related costs from recent layoffs, earnings per share rose to 86 cents, up from 59 cents in the fourth quarter of 2015 and above the 79 cents estimated by analysts surveyed by Zacks Investment Research.
Net sales rose to $15.78 billion from $13.24 billion the same quarter in 2015. Zacks analysts had expected sales of $15.28 billion. Sales at stores open at least one year – a key industry metric – rose 5.1 percent.
Lowe’s improved earnings report sent its shares up nearly 9.8 percent to $81.61 in midday trading.
Robin Diedrich, an Edward Jones analyst, noted in a research note that Lowe’s is making its stores and website “easier to shop” by improving product availability and offering more localized sections.
“We believe that the home improvement cycle still has room to grow and that Lowe's business model is somewhat Amazon-resistant,” Diedrich wrote.
Last week, Home Depot, the country’s biggest home-improvement retailer, reported a fourth-quarter profit that surged nearly 19 percent from the same period last year. Both earnings and sales topped Wall Street expectations, thanks to more customer visits and higher average sales.