Lowe's (LOW) To Reduce Workforce For Third Time In 2017

Per media report, home improvement retailer, Lowe's Companies, Inc. (NYSE:LOW) continues with retrenchment efforts as it is set to initiate the third lay-off in 2017. The company is all set to trim nearly 125 information technology employees. This action is being conducted by the company in order to improve overall efficiency to cater to customers’ needs in a better way.

However, management is looking to relocate some of the jobs to India where the company has employee strength of roughly 1,000 in information and technology as well as analytics. Further, it will provide severance package, outplacement support and also conduct a job fair with local employers.

Earlier, the company had cut down 2,400 full-time workers in January and above 500 corporate jobs in February. These lay-off actions are taken by management to increase store productivity and competence, as Lowe’s faces intense competition from the world’s largest home improvement retailer, The Home Depot, Inc. (NYSE:HD) and other home supply retailers.

Bottom Line

We observed that Lowe’s shares have declined 9.4% in the past one month, underperforming the Zacks categorized Building Products-Retail/Wholesale industry’s fall of 4%. Recent decline in share price was primarily due to lower-than-expected first-quarter fiscal 2017 results and trimmed guidance. The company now anticipates fiscal 2017 earnings to be approximately $4.30 per share, down from the previous estimate of $4.64 but up significantly from $3.99 posted in fiscal 2016. The decline in earnings guidance is due to loss on extinguishment of debt and lower interest expense.

However, we believe that an improving job scenario, gradual recovery in the housing market and merchandising initiatives bode well for Lowe’s in the long run. Additionally, the Canadian business has been performing quite well. Moreover, the company has acquired former Target locations across Canada, in a bid to penetrate into the Canadian market further. Moreover, the buyout of RONA will help augment its position in the Canadian market.

Zacks rank & Other Stocks to Consider

Lowe’s currently carries a Zacks Rank #3 (Hold). Better-ranked stocks worth considering in the retail space include Aaron's, Inc. (NYSE:AAN) and Best Buy Co., Inc. (NYSE:BBY) . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Aaron's has reported better-than-expected earnings in the trailing four quarters, with an average beat of 10.6%.

Best Buy has an impressive long-term earnings growth rate of 11.8% and has also surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average earnings beat of 33.8%.

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