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Report on Business Lowe’s aims to sell Mexico stores amid restructuring effort

Lowe’s Cos. Inc. said on Tuesday it was looking to shed its retail operations in Mexico and two of its smaller U.S. businesses as the country’s second-biggest home-improvement chain strives to compete with rivals including Home Depot Inc.

Shares of the Mooresville, N.C.-based company fell nearly 3.6 per cent in morning trading after Lowe’s blamed inventory missteps for a smaller-than-expected rise in comparable store sales. Larger rival Home Depot’s shares were also down nearly 2 per cent.

Under Marvin Ellison, Lowe’s newly appointed chief executive, the company has been streamlining its business by shutting underperforming stores and cutting back on slow moving inventory.

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The company has perennially lagged Home Depot in same-store sales, despite having roughly the same number of stores.

Lowe’s said it was looking at all options for its chain of 13 stores in Mexico and that it was “exiting” its U.S. contracting services business Alacrity Renovation Services and security and smart-home app Iris Smart Home.

Earlier this month, the company announced the closing of 51 underperforming stores in the United States and Canada, which followed the shutdown of 99 Orchard Supply stores in California.

“We believe Lowe’s is moving in the right direction, but this quarter’s results show that change is not linear or quick in large retail organizations,” Wedbush Securities analyst Seth Basham said.

Sales at stores open for more than a year rose 1.5 per cent in the third quarter, well below analysts’ expectations of a 2.93-per-cent increase, according to IBES data from Refinitiv.

Mr. Ellison said the company failed to sell more because of the assortment of merchandise and an inability to restock shelves with the right kind of inventory, despite a rise in customer visits.

“We see the issue as poor execution, not a macro concern,” Mr. Ellison said on a postearnings call, referring to the company’s third-quarter sales. “Although interest rates have ticked up and housing turnover has been pressured, the home improvement backdrop remains strong.”

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The company cut its forecast for full-year sales growth to about 4 per cent from 4.5 per cent and comparable sales growth to about 2.5 per cent from 3 per cent.

Lowe’s net earnings fell to US$629-million, or 78 US cents a share, from US$872-million, or US$1.05 a share, a year earlier.

Excluding items, Lowe’s earned US$1.04 a share, beating estimates of 98 US cents. Net sales rose nearly 4 per cent to US$17.42-billion, edging past expectations of US$17.36-billion.

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