Home Depot has an interesting goal for the near future: Reach $200 billion in total sales.
It also has an interesting strategy to reach that goal: Half of that $200 billion needs to come from Pro customers.
That means Home Depot is reaching for $100 billion in Pro sales in a single fiscal year. And it doesn’t want to stop there.
“For Pro, we believe this addressable end market is over $450 billion,” Richard McPhail, Home Depot Chief Financial Officer, told reporters during the company’s earnings report conference call.
“The expanded MRO space, we think $100 billion with the acquisition of HD Supply, and then wrap that all with our hallmark of productivity: overhead maintenance, freight flow, on-shelf availability, the supply chain that the team is building to increase our on-shelf availability,” Ted Decker, Home Depot’s Chief Operating Officer said. “So that’s sort of a broad-brush framework of how we think about that next $50 billion of growth.” Decker will take over as Home Depot’s CEO on March 1.
Home Depot’s fourth quarter earnings report showed a $3.35 billion profit on sales that reached $35.72 billion, which are both significant increases from 2020. Pro sales increased at a higher rate than “Do-It-Yourself” sales. While there were fewer sales transactions in the fourth quarter, Pro customers created higher ticket sales, which created the increase in revenue.
Last year, the Pro customer downloaded our mobile app,” Decker added. “Their mobile orders increased. They joined our Pro loyalty program and authenticated with us via our B2B website. We began offering personalized pricing on certain products. And they took their first deliveries from several of our new fulfillment centers, including one of our new flatbed distribution centers As a result, we’ve seen spend with this customer more than triple to over $300,000 annually.”
Home Depot’s data shows their Pro customers across the country have a significant backlog of work, some already reaching into 2023. “We always use the term that Pros use us as a 7-Eleven. Certainly, we have more share of wallet with smaller Pros. But the opportunity with larger Pros, to build their confidence that The Home Depot is going to be there for them with a sales representative, appropriate pricing, reliable delivery, breadth and depth of inventory, that is the real disruption,” Decker told reporters.
Lowe’s reported net earnings of $1.2 billion for their fourth quarter, nearly doubling their report from 2020.
While Home Depot says 50% of its revenue is from Pro customers, Lowe’s puts their number at 23%.
“We redesigned our loyalty program based on feedback from our Pro customers who express a desire for a business partnership rather than a series of standalone transactions,” Marvin Ellison, Lowe’s Chairman and CEO told reporters on his earnings conference call. “We’ve spent quite a bit of time over the last three plus years, making not only investments in adding products to our stores, but also our service levels, and we’re very pleased with the launch of our new Pro Loyalty Program. We are seeing a 300% increase in Pro sales for Pros engaged in our Loyalty and Credit Program. And so, Pro is going to be a significant part of our growth this year and we still feel very encouraged by the progress.”
Lowe’s added that it also has data from its Pro customers about a strong backlog, and that will mean a significant effort to maintain the loyalty program. “They continue to let us know that their book of business is more robust than they’ve ever seen it. Some projects may carry over into 2023 and help that business very strongly,” Ellison reported.Tagged with Biggest News, earnings, home depot, Lowe's