Lowe's Sells Canada Retail Business to Sycamore for $400M

Lowe’s has sold its Canadian retail business to New York-based private equity firm Sycamore Partners for $400M in cash.

Based in Boucherville, Quebec, the home improvement chain’s Canadian arm operates 450 corporate and independent stores under a variety of brands, including Dick’s Lumber, Reno-Depot, Lowe’s Canada and Rona.

The portfolio of retail outlets acquired by Sycamore will include 70 Lowe’s big-box stores and about 150 corporate-owned Rona stores as well as a wholesale business supplying 210 independent Rona dealers.

With the acquisition of Lowe’s Canadian business, Sycamore has strengthened a retail portfolio that includes Ann Taylor, Loft, Lane Bryant, Belk and Talbots.

According to a report in the Globe and Mail, Lowe’s sale of its Canadian retail outlets will result in a “shakeup” of Canada’s home improvement and hardware market, with many of the independent dealers expected to cut their ties with Rona and sign up with Canadian retail chains including Castle Building Centres Group, Groupe BMR and Home Hardware Stores.

Castle, which has 330 outlets, and Groupe BMR, with 275 stores, are both planning to expand their footprints, the newspaper reported.

However, after a two-year construction binge, hardware retailers in Canada are now resetting sales forecasts and bracing for a recession, the Globe and Mail said.

A spokesperson for Lowe’s Canada told the Globe and Mail that Sycamore is strongly committed to the dealer network “as an integral part of our Canadian business model.” The new owners also support the implementation of Lowe’s Canada’s existing growth plan, the spokesperson said.

The sale of the Canadian retail business will permit Lowe’s to “simplify” its business model, CEO Marvin Ellison said, in a statement.

“While this business represents approximately 7% of our full year 2022 sales outlook, it also represents about 60 bps of dilution on our full year 2022 operating margin outlook,” Ellison said. “By executing this transaction, we will intensify our focus on enhancing our operating margin and taking market share in the US.”

Ellison expressed confidence in the long-term outlet for Lowe’s US business, noting “improved sales trends and strong profit flow-through in the third quarter.”

Stefan Kaluzny, managing director of Sycamore Partners, said in a statement that Lowe’s Canada and Rona would be established as a standalone company headquartered in Boucherville.

“We look forward to working with the company’s management team to build on its 83-year history as a leading Canadian home improvement business serving families, builders and contractors in their communities across the [Canada],” Kuluzny said.