Drama In Mexico

Grind for August 26th, 2018
“Fashion is merely an opinion. And I’ve got a lot of opinions.”

– Kanye West

Whatever It Takes

The Headline

Lowe’s trims inventory and closes stores to compete with Home Depot

The Grind

In my experience, the products and services offered by Lowe’s and Home Depot are nearly identical. But thanks to its catchy advertising and outstanding customer service, Home Depot has a much better reputation than Lowe’s.

That reputation manifests in earnings, with Home Depot reporting $30.5 billion in sales last quarter (that’s up 8.4% from a year ago).

To compare, sales at Lowe’s stores rose 5.3% in the second quarter.

The Details

Lowe’s announced on Wednesday it would be closing all Orchard Supply Hardware locations (Lowe’s acquired Orchard Supply Hardware for $230 million in 2013).

According to CEO Marvin Ellison, who left JC Penney to join Lowe’s in May, the store will also “aggressively rationalize store inventory” and cut back on lower-performing products.

Lowe’s has also hired David Denton, current CFO of CVS, to be its new CFO. Denton will join Lowe’s in August after CVS completes its acquisition of health insurance company Aetna.

Lowe’s current CEO, Marshal Croom, is planning to retire in October.

Not So Fast

The Headline

Mexican President-elect wants to keep oil out of NAFTA

The Grind

Mexican President-elect Andrés Manuel López Obrador (AMLO) does not want Mexico’s oil industry to be a part of the revamped North American Free Trade Agreement (NAFTA).

Mexico, the US, and Canada had already agreed to add a new chapter on energy investment to the trade deal, but that was before AMLO won the election in July. His opinion could throw a wrench into NAFTA negotiations, which began in August 2017.

The Details

The 1994 version of NAFTA didn’t include energy because at the time Mexico had a state monopoly in oil.

In 2013, President Enrique Peña Nieto opened Mexico’s oil sector to private and foreign investment. The change attracted dozens of foreign oil companies, including major US businesses, which earned the rights to drill in Mexico.

Obrador opposes the change, and negotiators are scrambling to finalize a deal so that it can be approved before he takes office in December.

But even if outgoing President Nieto signs a new NAFTA deal, it will be up to a Senate controlled by AMLO’s allies to pass it and to the new president to implement it. That means the deal has to be something both sides can accept.

As it stands, the new energy rules would cement North America’s energy integration and give extra protection and assurance to existing investments in Mexico.

AMLO and his leftist colleagues oppose these changes, while others warn that making new demands this late in the game could undo the past year of talks just as the US and Mexico make progress on agriculture and cars and come close to reaching a full deal.

Did you know… The widow of the inventor of the Winchester rifle built a house with mazes and dead-end staircases to confuse the ghosts of the people who were killed by her husband’s rifles.