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- Lowe’s on Thursday announced it sold its Canadian business to private equity firm Sycamore Partners for $400 million in cash.
- Lowe’s Canadian business, based in Boucherville, Quebec, operates 450 corporate and independent affiliate dealer stores under various banners including Rona (which Lowe’s acquired in 2016), Lowe’s Canada, Reno-Depot and Dick’s Lumber, according to a company press release.
- The deal, set to close in early 2023, is expected to have a pre-tax non-cash impairment charge of about $2 billion on Lowe’s third quarter earnings results.
The move to sell off its Canadian retail business is to help Lowe’s simplify its business model, according to CEO Marvin Ellison.
“While this business represents approximately 7% of our full year 2022 sales outlook, it also represents approximately 60 basis points of dilution on our full year 2022 operating margin outlook,” Ellison said in a statement, adding that, “By executing this transaction, we will intensify our focus on enhancing our operating margin and [return on invested capital]taking market share in the US and creating greater shareholder value.”
Lowe’s began a strategic review of its Canadian operations in the third quarter of fiscal 2019 and later that year announced actions to improve the performance and profitability of that business segment. In fiscal 2020, the company had pre-tax operating costs of $45 million related to inventory write-downs and other closing costs.
The home improvement retailer on Thursday reaffirmed its fiscal 2022 outlook, projecting total sales to be between $97 billion and $99 billion, and comparable sales to be down 1% on the low end or up 1% on the higher end. Operating margin is expected to be between 12.8% and 13%.
“We remain confident in our short and long-term outlook for the US business, underscored by improved sales trends and strong profit flow-through in the third quarter, as well as our expectations for solid business performance for the remainder of 2022,” Ellison said.
Lowe’s Canadian business joins several other retailers within Sycamore’s portfolio, including Ann Taylor, Loft, Lane Bryant, Belk and Talbots.