With the news the past few days that it is selling its collection of Canadian store brands, Lowe’s becomes only the latest big U.S. retailing corporation to retrench from the international scene and circle the wagons around its domestic business.
It is far from alone.
The deal, announced on Nov. 3, involves the sale of about 450 stores under a variety of nameplates to Sycamore, the private equity firm that among other assets owns Belk, for about $400 million. Lowe’s CEO Marvin Ellison, who earlier in his realm also sold the company’s much smaller operation in Mexico, said “The sale of our Canadian retail business is an important step toward simplifying the Lowe’s business model.”
Simplification seems to be the watchword for this deal, but also for many others involving U.S. retailers who have pulled out of global markets around the world, including Europe, Asia and South America. But it’s not the only reason. In some cases, though not necessarily in this one regarding Lowe’s, the reason is a lot more simple: these international divisions don’t make any money.
Perhaps the biggest example of that, coincidentally, was also in Canada. Target shut down its entire discount store operation north of the border in 2015, just two years after opening it when it bought the former Zeller’s from Hudson’s Bay Co. While the idea of entering the Canadian marketplace with its similarities to the U.S. seemed to make sense, Target pretty much did everything wrong from merchandising to store location and size to…well, just being too south-of-the-border American. It was a disaster costing in the billions of dollars – U.S. dollars at that.
But most of the global retrenchments have been in Asia and Europe. Walmart, the biggest retailer on the planet, has struggled exporting its hugely successful American (including Canadian) model and has exited the U.K., Germany, Japan and South America, even though it continues to operate in China and Mexico.
Other U.S. retailers like Home Depot, Best Buy and Gap have all pulled out of China but so too have European brands like Carrefour. Overseas retailing companies have not much better luck coming into the U.S. either, with giant companies like Tesco of the U.K. and Takashima of Japan closing up here.
Which is not to say it can’t be done. Ikea is the poster child for being successful in a multitude of places around the world, = keeping its model and merchandising remarkably similar whether it’s in Shanghai or Chicago. German grocery chains Aldi and Lidl are both doing well in the American market and, as mentioned, Walmart has found success in some overseas markets.
So the Lowe’s Canadian sale is consistent with the broader retail trend. As with many businesses, it appears that too much gets lost in translation.
WarrensReport 