Ackman Takes Roughly $1 Billion Stake in Lowe's -- WSJ

By Cara Lombardo 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 24, 2018).

William Ackman's Pershing Square Capital Management LP is joining another activist investor in Lowe's Cos., hoping to profit as the retailer tries to make improvements under a new chief executive.

Pershing Square has built a stake in the home-improvement chain valued at roughly $1 billion as of Tuesday's close in what is expected to be a friendly investment, according to people familiar with the matter. Lowe's had a market value of roughly $78.3 billion at Wednesday's close.

Mr. Ackman revealed the position at a conference in New York on Wednesday, said the people, who were in attendance. He built it over the past 45 days, they said.

The people said Mr. Ackman supports Lowe's incoming Chief Executive Marvin Ellison, who during 12 years at Home Depot Inc. was credited with improving customer service and e-commerce and expanding its professional business. On Tuesday, it was announced that Mr. Ellison would leave his position as CEO at struggling retailer J.C. Penney Co. to take the top job at Lowe's, where he is expected to draw from the same playbook he used at Home Depot.

Lowe's CEO Robert Niblock said in March he would retire, a week after three new directors joined the board as part of an agreement with activist investor D.E. Shaw & Co., which owns about a 1% stake.

Home Depot's same-store sales growth has outpaced that of Lowe's over the past several years. Lowe's stock had also sharply lagged behind that of Home Depot over the past year, before closing up 10.4% Wednesday following upbeat guidance and news of Pershing Square's involvement.

A Lowe's spokesman said the company is aware of reports of Pershing Square's stake and it is committed to creating value for all shareholders.

Mr. Ackman agrees with D.E. Shaw's view that Lowe's is lagging Home Depot and could do more to capitalize on an improving real-estate market, the people said. The stake would put two activists in the top 16 holders in the company, according to the people.

Mr. Ackman has pledged to remain out of the headlines after a rough stretch of performance shrunk his fund. He has recently taken several new positions where he has said he supported management and avoided detailed complaints, including a quick trade in Nike Inc. and an investment in United Technologies Corp., though he has called for a breakup of the industrial conglomerate.

Pershing Square's publicly traded fund is up 2% this year, according to disclosures, as some of his investments have started gaining again.

Pershing Square previously held Lowe's shares in 2011, when filings showed about a 1.7% stake soon after Mr. Ackman outlined a bullish investment thesis on the retailer. He sold the shares by the end of the year after the stock price rose.

Mr. Ackman's new stake in Lowe's makes for an unusual union with Mr. Ellison, who helped stanch the bleeding at J.C. Penney in 2014 after Ron Johnson, a CEO Mr. Ackman had recruited, upended Penney's pricing strategy and offerings to disastrous results.

Around the time Pershing Square exited J.C. Penney at a steep loss, Mr. Ackman expressed contrition to his investors following a few mistakes in the retail world, which also included a loss in Target Corp.

"Clearly, retail has not been our strong suit, and this is duly noted," he wrote in 2013.

Corrections & Amplifications William Ackman revealed his stake in Lowe's at a conference in New York on Wednesday. An earlier version of this article incorrectly said the conference took place on Tuesday. (May 23, 2018)

Write to Cara Lombardo at [e-mail]

(END) Dow Jones Newswires

May 24, 2018 02:47 ET (06:47 GMT)

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