A retail journey’s end Lowe’s exits Canada.

A retail journey’s end

LOWE'S EXITS CANADA TO FOCUS ON THE CORE. By Andy Carlo

Since the arrival of Marvin Ellison as president and CEO of Lowe’s in 2018, the home improvement retail giant has continued to sharpen its focus on its core, domestic retail strategy.

Shortly after Ellison was named as Lowe’s top executive, the company announced in November 2018 that it would shed its retail operations in Mexico. Lowe’s first entered in Mexico 2010 but closed all 13 of its stores by 2019.

Now the company is making a much more dramatic international exit with the sale of its Canadian division.

On Nov. 3, in a surprising announcement, Lowe’s revealed that it was selling Lowe’s Canada to Sycamore Partners, a private equity firm specializing in retail, consumer and distribution-related investments, for $400 million in cash, and performance-based deferred consideration.

The Boucherville, Quebec-based business includes about 450 corporate and independent affiliate dealer stores in a number of complementary formats under different banners: RONA, Lowe’s Canada, Réno-Dépôt, and Dick’s Lumber.

In announcing the deal, Ellison — named chairman of Lowe’s in 2001 — said, “The sale of our Canadian retail business is an important step toward simplifying the Lowe’s business model.”

Although Lowe’s Canada accounts for 7% of the home improvement retailer’s full year 2022 sales outlook, it also represents approximately 60 basis points of dilution on its full year 2022 operating margin outlook, Ellison noted.

Lowe’s is also paying a much higher ticket price to exit Canada than it did to make its major entry into the nation. And the entrance and departure of Lowe’s are both arguably the biggest Canadian home improvement retail stories of the past decade.

In 2016, Lowe’s paid $2.4 billion to complete its acquisition of RONA. At the time, RONA was a thriving, independent Canadian home improvement retailer

that essentially set the stage for Lowe’s Canada’s business model. Prior, RONA had entertained thoughts of entering the “The sale of our Canadian United States. The purchase of RONA brought pro forma revenues of approximately 6 billion retail business Canadian dollars (US$4.44 billion). Adis an important ditionally, the RONA acquisition brought Lowe’s a network of 496 corporate step toward and dealer-owned stores in a number simplifying the of complementary formats, as well as nine distribution centers. Lowe’s business But Lowe’s continues to sharpen model.” its focus on U.S. sales and its core big box business. —Marvin Ellison, “By executing this president and CEO, Lowe’s transaction, we will intensify our focus on enhancing our operating margin and ROIC, taking market share in the U.S. and creating greater shareholder

The sale of Lowe’s Canada is expected to close in early 2023.

NOT ALL FASTENERS ARE CREATED EQUAL

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