On Thursday Lowe's (NYSE: LOW) announced that it will lay off workers and look to "boost staffing efficiency" in its stores. This comes amid much pressure in the retail space to try and regain market share from their faster moving, online rivals. The company announced that it would lay off 2850 employees which is rather small considering it employs a total of 285,000.
This is not the first move to boost efficiency as, in November the company started cutting hours for employees to improve their overall efficiency. Personally, when I visit my local Lowe's there is never anyone there to help anyways so by "efficiency" I think we all know its a cost cutting measure.
It's not just in the stores either. In October last year the company started in their IT department by laying off 95 employees in an effort to "streamline" the department.
With over 2350 stores it is clear that the company is looking for ways to save money. The question is, is this just smart growth where the company is forward looking and honestly looking to trim the fat? Or could this be a sign of a crack in the armor?
As far as the share price, it has under performed its rival Home Depot (NYSE: HD). Going back a year Lowe's had only shown a 4% growth in stock price, while Home Depot was able to add 13% to shareholders. Since December shares have lost over 6%, while shares of Home Depot are up over 3%. There is a clear leader in the space...for now. Again, the question is whether Lowe's is seriously looking to compete or if they are slowly getting into a trouble trend that they cannot change.
Last week we saw a sharp bounce in consumers credit habits, showing that consumers were willing, and have been charging more items to credit. One of those categories was in home renovation products which directly falls into what Lowe's and Home Depot offer.
Going back and looking at Lowe's earnings for last quarter we can see that earnings did slump at a time where other data shows strong consumer spending? This could be the first sign of troubles but lets not get too worked up yet. With earnings coming out on February 15th it will be real important for Lowe's to show improvement.