Home Depot already gets half of its business from professionals, while the other half comes from do-it-yourself customers. With the deal, the Atlanta-based company is making another push to win customers who are taking on complex and lucrative construction jobs, especially as homeowners move away from do-it-yourself projects. That was one of the priorities Home Depot executives set for themselves this year. This is also why the company is opening a growing network of distribution centers that can stock large quantities of items that professionals need, such as lumber or shingles, and deliver them directly to the job site.
The acquisition is the largest in Home Depot’s history.
In an interview with CNBC, CEO Ted Decker described the deal as an “additional accelerator” to efforts to attract more professionals. He said the deal increases Home Depot’s total addressable market by $50 billion.
It adds to other recent deals the trader has made in the professional space. These include the roughly $8 billion acquisition of HD Supply, a national distributor of maintenance, repair and operations products in the multifamily housing and hospitality markets, in 2020. It also made two other acquisitions last year for undisclosed amounts: International Designs Group, which owns Construction Resources, a distributor of surfaces, appliances and other products they sell to home professionals; and Temco, an appliance supply and installation company.
SRS Distribution sells supplies to professionals in the landscaping, pool and roofing businesses. The McKinney, Texas-based company has approximately 11,000 employees and 760 locations in 47 states. It also has a fleet of 4,000 delivery trucks and a dedicated sales force that caters to home professionals, Decker said.
Decker said he was confident the deal would be approved by federal regulators, even as they tighten scrutiny on mergers and acquisitions.
“With the distinct customer base, different channels, different buying occasions, we feel good that this will come through,” he said.
The acquisition is expected to reduce Home Depot’s earnings per share due to depreciation, but be accretive to cash earnings per share in the first year after the deal closes.
Home Depot turned to the professional business as its growth stagnated. The retailer, a major beneficiary of pandemic trends, has dealt with declining sales as consumers take on fewer home projects and spend more on grocery bills and experiences. Over the past few quarters, customers have purchased fewer expensive items and taken on smaller, less expensive projects.
Decker said last month on an earnings call that Home Depot will focus on opening new stores, bringing in more sales professionals and trying to make shopping more seamless for customers.
Home Depot plans to open a dozen new stores this fiscal year. It recently announced that it will open four distribution centers that serve professionals.
Acquisition comes after A home improvement retailer said last month it expected slower sales trends to continue. He said he expects total sales for the full year to rise about 1 percent, including one extra week in the fiscal year. However, it expects comparable sales, which strip out the effects of store openings and closings and exclude the extra week, to fall about 1%.
Home Depot had a total of 2,335 stores in the U.S., Mexico and Canada at the end of its fiscal year in late January. It has about 465,000 employees.
As of Wednesday’s close, Home Depot shares were up about 11% this year. That’s slightly ahead of the S&P 500’s 10 percent gain. Shares of Home Depot closed at $385.89 on Wednesday, giving its market value about $382 billion.