With an eye on the pro customer, and the MRO market continuing to grow, Home Depot talked about its decision to acquire HD Supply for $8 billion.
“As you know, the MRO customer is an important pro customer for The Home Depot,” Craig Menear, Chairman and CEO of Home Depot told reporters during the company’s 3Q earnings conference call. “We are committed to better serving the MRO customer and growing in this space. The success we’ve had with our existing MRO business makes us confident in our ability to accelerate sales growth in a highly fragmented $55 billion MRO marketplace.”
The timing of the acquisition comes as Home Depot is seeing its strongest growth with pro customers all year. “During the third quarter, we saw double-digit growth in both our pro and DIY customers, and while DIY sales grew faster than pro sales, our pro business posted the strongest growth we’ve seen all year,” Ted Decker, Chief Operating Officer, explained. “As we look at our different pro cohorts, growth with our smaller pro customers has been consistent with strong double-digit growth every month of the year. Millennials are highly engaged with The Home Depot. Our pros are highly engaged, our B2B website is seeing record volumes and engagement with our pro customer. I’ll stop there, but it is a robust interconnected digital environment right now at The Home Depot.”
Reporters pressed Home Depot executives about the merger, and while the chain could not go into specific details before the deal’s expected close in late January, executives are expressing confidence that it will lead to success. “We’re really excited about what the combination of these two MRO businesses will bring to our customer,” Menear added. “We think we’ve got the opportunity to create significant shareholder value creation through that combination. We’re not going to talk about the degree of accretion, but we’re confident that we’ll see earnings per share accretion in 2021.”
Decker added that the numbers right now add up to a successful combination of the Home Depot and HD Supply. “If you think about 130 million occupied households in the United States, about 80 million of that is kind of owned households, single family,” Decker explained. “There’s 50 million that is rental, and of the 50, about 30 million give or take is in the multi-family operations type business. That is a huge opportunity for The Home Depot to continue to grow not only on the MRO side but as we build relationships with customers on the MRO side, we build relationships to be able to participate in capital refreshes of those facilities as well, which is something that we’re pretty focused on. We’re super excited about the opportunity that comes with this MRO space.”
“Look, I’d say a couple things. First of all, over a period of time, the HD Supply business came down to essentially the MRO maintenance facility business that it is today, that we just put the offer in on, and so it strategically lines up with what we’re trying to get accomplished in the MRO business much more so than it did a few years ago. From a timing standpoint, that’s the logic there,” Menear added. “We look forward as we close this deal, hopefully during our fiscal year end here, then we’ll determine the go-forward approach and how we allocate and prioritize, but we’ve got to get this deal closed first.”Tagged with acquisition, HD Supply, home depot