Lowe’s Cos. Inc. is shutting 27 stores in Canada, mostly under the Rona banner, as well as offices and plants as the U.S. home-improvement retailer grapples with an overcrowded market and a cooling housing sector.
The closings, including nine stores in Quebec, touched off a renewed debate in that province over U.S. retail domination. The 2016 Lowe’s takeover of home-grown Rona drew condemnation from opposition parties after the province had threatened to block the acquisition bid several years earlier to prevent a U.S. company from controlling a Quebec-based chain. Lowe’s dropped the proposal in 2012.
“There is a great deal of sensitivity about Rona being sold off to American interests,” said Michael McLarney, publisher of trade publication Hardlines and an expert in the home-improvement segment. “I’m sure this will only pour fuel on the fire of that sentiment.”
In an increasingly tight home-improvement retail landscape, Lowe’s faces tougher competition from incumbents and emerging e-commerce players such as Amazon.com Inc. as well as reduced home sales.
“The decision to close stores is never one that we make lightly,” Sylvain Prud’homme, chief executive officer of Lowe’s Canada, said in a statement. “Following a detailed business review, we believe that this is the right path for the organization’s future.”
While the home-improvement industry has enjoyed sales lifts over past years, that growth is moderating as the housing market loses steam, Mr. McLarney said. Many young consumers cannot afford to buy homes, while baby boomers are downsizing, resulting in fewer purchases for home improvements, industry observers say.
Home-improvement retail sales climbed 5 per cent last year to $48.2-billion, but are expected to pick up by only about 4 per cent in each of 2018 and 2019, according to Hardlines.
Still, Marvin Ellison, Lowe’s new CEO, told analysts in August the company feels “very, very good about the Canadian business performance, and again, that overall acquisition of Rona. And we think that it’s exactly where we want it to be, if not exceeding expectations.”
Rona last year generated its best sales at existing stores of the past 13 years, Lowe’s Canada spokeswoman Valerie Gonzalo said.
Alex Arifuzzaman, founder of retail real estate adviser InterStratics Consultants, said consumers increasingly can buy many of the items home-improvement stores carry more conveniently online. At the same time, more people are moving into condominiums that don’t need as many renovations or repairs. “The profit model in the future is going to be different," he said.
Lowe’s said on Monday that of the 27 under-performing stores in Canada it will close by the end of January, nine are in each of Quebec and Ontario, while six are in Newfoundland and Labrador, two are in Alberta and one is in British Columbia.
Rona closings resonate loudest in Quebec, where the sale of the local hardware champion in February, 2016, triggered a political firestorm that led to the resignation of a cabinet minister in the former Liberal government.
Opposition parties at the time said the government should not have allowed one of Quebec’s flagship companies to be sold to a U.S. rival, particularly as Rona was a major employer and buyer of locally made goods. They said a decision by the government’s investment arm, Investissement Québec, to unload its 11 million shares in Rona helped open the door to a takeover. Pension fund manager Caisse de dépôt et placement du Québec also supported the transaction.
“The closing of Rona outlets confirms the fears we raised at the time of the Lowe’s purchase and plunges the employees and Quebec suppliers into uncertainty,” opposition party Quebec Solidaire said on Monday.
The Parti Québécois blamed the Caisse for not promoting Quebec’s economic development, part of a dual mandate that also includes earning the best possible returns for depositors. It called on Premier François Legault’s government to protect Quebec’s other champions.
Officials with Quebec’s economy department said they would comment in detail after talks with Lowe’s. The company is expected to brief the government on its plans this week.
The company did not say how many employees will be affected.
The company said it will also shutter two regional administrative centres in Mississauga, Ont., and St. John’s, and two plants, one in St. John’s and one in Kamloops, B.C., as part of a broader plan to focus on the most profitable parts of its business. Lowe’s is also closing 20 stores in the United States.
Lowe’s said the 27 stores represent about 3 per cent of its total Canadian retail space, which includes 430 Rona stores and 68 Lowe’s among its 2,390 locations in North America.