DIY retailer Lowe’s has followed in the footsteps of rival Home Depot by scaling back its expansion plans.

DIY retailer Lowe’s has followed in the footsteps of rival Home Depot by scaling back its expansion plans.

The home improvement chain now plans to open between 35 and 45 stores a year over the next five years - a marked reduction from the 120 opened in 2008 and the 66 planned for this year.

“Although the economic environment remains challenging, we continue to invest in our business and drive operating efficiencies to become a more efficient company and better serve the needs of home improvement customers,” said Lowe’s chairman and chief executive Robert Niblock.

A reduced capital expenditure budget over the coming years will help the US’s number two DIY retailer soften the blow to its bottom line, as consumers continue to shy away from big-ticket, discretionary items.

Lowe’s is bracing itself for another year of difficult conditions, with same-store sales expected to decline 7% to 9% this year, but rise by about 1% in 2010.

Niblock believes consumer spending won’t pick up until the middle of next year, when the market is expected to stabilise and unemployment figures improve.

In the meantime, the retailer expects 53 stores to generate negative cash flow this year. Although there were no operating store impairment charges for the first half of this year, Lowe’s has acknowledged that charges in the second half are possible, due to “continuing uncertainty regarding the timing and strength of the economic recovery”.

The company has said the total cost for impairments, which Lowe’s describes as a “temporary situation”, is not expected to exceed $100m (£62.2m), yet the declining value of such stores may result in closures.

As a result, Lowe’s is likely to be selective in its home market when choosing new sites, focusing on high volume, urban areas. Not only will this allow the retailer to tap into potentially quite a lucrative shopper base, but it will also help it catch up to rival Home Depot, which operates more than 250 stores in such markets, compared with Lowe’s 104.

In a similar vein to US giants Wal-Mart and Costco, Lowe’s will also drive international growth to offset weakened performance in its domestic market. This spring it announced it was to launch a joint venture with Woolworths in Australia in 2011. Lowe’s is also set to enter Mexico with the opening of two 110,000 sq ft stores in January 2010.