Lowe’s Companies Inc. announced the closure of all 99 Orchard Supply Hardware stores by the end of its fiscal year, according to a Securities and Exchange Commission filing on Wednesday.
The Mooresville-based company plans to close Orchard’s stores in an attempt to hone in on its core home improvement business. The closures will shut Orchard’s stores in California, Oregon, and Florida, as well as the distribution facility that services the stores.
Lowe’s expects to recognize costs of $390 million to $475 million associated with the planned store closings. The company forecasts net cash outflows to range from $290 million to $375 million.
Hilco Merchant Services is partnering with Lowe’s to roll out nationwide sales that will facilitate the store shutdowns.
Lowe’s acquired the retail hardware and backyard company in 2013 for $205 million after Orchard filed for Chapter 11 bankruptcy protection. The acquisition brought Lowe’s 72 Orchard stores and the control over the majority of its assets.
Orchard was founded in 1931 in San Jose, California, during the Great Depression.
The initial acquisition occurred during a lucrative American real estate market, with year-over-year changes in residential construction spending hovering around 20 percent. The market peaked in February 2013 at 22.7 percent, the highest level since May 2004, according to data from the U.S. Bureau of the Census.
The acquisition provided Lowe’s an opportunity to compete with the behemoth of Home Depot in a booming California real estate market at the time.
Three years after purchasing Orchard, Lowe’s recorded an impairment loss of $46 million in the third quarter of 2016, which is equal to the entire amount of goodwill originally allocated to Orchard. It recorded an additional $30 million loss from long-lived asset impairments.
The completion of the store closings is set for the end of Lowe’s fiscal year in early February 2019.
Lowe’s share price rose 5.8 percent to $105.52 on Wednesday following the announcement.
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