USA update

At a conference call to announce the acquisition, Ted Decker, Home Depot's chair, president and chief executive officer, said the deal will both complement the company's current business and add "new pathways" for sales.

We can expose their catalogue to our customers and we can improve the convenience to their customer. We are building our capacity to get more share of wallet for the complex project.

The company believes that the purchase of SRS adds USD50 billion to Home Depot's "addressable market" - ie. the amount of yearly spending it can go after. That potential business is now nearly USD1 trillion, the company said.

The acquisition continues Home Depot's foray into the vast and fragmented US market for the contractors (tradies) who do projects for homeowners and builders. Mr Decker said the combination of the companies' networks and Home Depot's diverse product line "provides the residential pro customer with more fulfillment and service options than ever before..."

The strategy is a complex calculation that depends on the housing market. Demand for materials and services has splintered, and Home Depot is trying to exploit the market's new directions.

US home prices have decelerated recently, but over the past several years, values are up dramatically. As a result, US homes are now worth more than USD45 trillion, Mr Decker said.

Yet current homeowners have often been reluctant to sell, since their existing mortgage rates are so much lower than what they would have to pay if they buy another home. That "locked-in" effect means many owners are spending money on maintenance, improvements and renovation.

Meanwhile, experts say there is a massive shortage of homes, thanks to the aftermath of the Great Recession, in which construction was minimal. So homebuilders are trying to catch up, and while building is nowhere near pre-recession levels, it is up. And that means demand for materials and services, but a different sort, and different scale, than with either DIYers or the contractors who do repairs.

Home Depot has more than 2,300 retail stores across all 50 US states. Meanwhile, SRS has roughly 760 locations in 47 US states and a fleet of over 4,000 trucks.

SRS has more than 2,500 sales team members, a fleet of more than 4,000 trucks and 760 locations in the US.

SRS is owned by private investors, and its purchase is more than twice the price of Home Depot's purchase of HD Supply four years ago. (Read more at the link.)

Home Depot buys HD Supply Holdings (again) - HNN Flash, November 2020

New DCs

The company has pushed hard into e-commerce and has opened four distribution centres with dedicated sites handling bulky construction materials - timber, insulation and roofing shingles, for instance - that contractors need.

Chip Devine, senior vice president of outside sales, told the Wall Street Journal that Home Depot is grouping together similar products in its warehouses so it can handle them in bulk, which cuts costs and speeds up fulfillment. Sales to the professional market account for about 48% of Home Depot's sales.

The company is looking to handle bulky items more efficiently so it can offer lower prices to its professional customers, Mr Devine said.

Home Depot estimates the market for bulky, big-ticket orders going to professionals is about USD200 billion. To win more business from those customers, Home Depot is adding features such as the ability to reserve products, have products delivered to job sites and to pay when items are delivered rather than paying after each order like retail customers.

Its four new warehouses, planned for Detroit, San Antonio, Los Angeles and Toronto, will add to an existing network of 14 so-called flatbed distribution centres that the retailer uses to stow bulky merchandise. Home Depot also fulfills retail shoppers' orders for those items from those warehouses.

For these flatbed distribution centres, Home Depot seeks bigger yards, compared with its standard distribution sites, that back up to railroad lines so the company can get building materials directly from suppliers.

The retailer used to fulfill orders for items such as trusses, drywall and shingles out of its stores, which clogged up aisles and tied up store associates who could otherwise be attending to retail shoppers. With the flatbed sites the company has been adding, Home Depot is putting "the focus on these core products that we never really could move very easily," Mr Devine said.

IDG acquisition

The home improvement retailer sees construction and remodelling professionals as a strong growth market in an uncertain economy. Professionals spend an estimated USD475 billion a year, Home Depot said.

In late 2023, Home Depot purchased International Design Group, a supplier of slab, tile, appliances and specialty products for kitchens and baths in a deal meant to help it will increase its business with contractors. The deal was made with IDG's owner, Mill Point Capital, a New York-based private equity firm.

IDG, created by Mill Point last year together with other acquisitions, has about 1,000 employees. It owns Construction Resources, a distributor of products for flooring, walls, countertops, decking and fireplaces with 39 showrooms. In a statement, Home Depot said:

The acquisition combines Construction Resources' expertise in complex, cross-category professional projects with the Home Depot's scale, product authority and distribution expertise.

Sources: The Atlanta Journal-Constitution, Quartz and Wall Street Journal