Lowe's shutting all Orchard Supply Hardware stores

Lowe's is pulling the plug on all 99 Orchard Supply Hardware stores in the U.S.

The decision comes just seven weeks after Marvin Ellison took the helm as president and CEO of the home improvement chain, after he spent four years as CEO of J.C. Penney.

"While it was a necessary business decision to exit Orchard Supply Hardware, decisions that impact our people are never easy. We will be providing outplacement services for impacted associates, and they will be given priority status if they choose to apply for other Lowe's positions," Ellison, who had also previously worked as a high-level executive at rival Home Depot, said Wednesday in a statement.

Orchard's 4,000 employees were told of the closures on Tuesday, according to local media reports.

Acquired by Lowe's in 2013, Orchard Supply Hardware stores will start closing Thursday, with the closures expected to be completed by February 1, the end of the company's fiscal year. Primarily based on the West Coast, the chain helped Lowe's expand into markets including California, Florida and Oregon.

The decision, along with a plan to overhaul inventory at its namesake stores, prompted Lowe's to trim its yearly revenue outlook, with the retailer now projecting an increase of 4.5 percent, as opposed to its previous forecast for a sales boost of 5 percent.

Lowe's competitor Home Depot last week reported upbeat results. Both retailers, which are viewed as barometers for the housing market and consumer spending, have recently described strong demand for their products.

"We posted solid results this quarter by capitalizing on delayed spring demand," Ellison stated in the release. 

Lowe's net income climbed 7 percent to $1.52 billion in the second quarter, with net sales rising 7 percent to $20.89 billion.

In an earnings call, Ellison said he is overseeing a strategic review that will involve possible sales of real estate and other holdings that don't fit into its core retail business. "We must create a true expense reduction culture here," he said.

Investors embraced the moves, which Lowe's anticipates will increase free cash flow by about $1 billion, sending shares of the company up 8 percent in midday trading.