A customer wearing a protective mask loads wood at a Home Depot store in Pleasanton, Calif., on Monday, Feb. 22, 2021.
David Paul Morris | Bloomberg | Getty Images
Home Depot’s next CEO, Ted Decker, said he wants home professionals to see the company as more than a convenience store.
The retailer wants to win bigger, planned orders from contractors, like thousands of feet of flooring — not just last-minute purchases when they’re scrambling to find a tool or finish a job. The shift is part of Home Depot’s growth strategy as it tries to maintain momentum beyond the pandemic and reach $200 billion in annual sales.
“We’re sort of the 7-Eleven for the pros – convenience, value, great products and brands – but what we’re building now is something completely different and revolutionary to get the pros planned purchase,” said Decker, the company’s chief operating officer. officer on Tuesday during the company’s earnings call.
Home Depot reported Tuesday that its sales increased 11% in the fourth fiscal quarter compared to the same period last year. The retailer gave a cautious outlook for the year ahead, with “slightly positive” sales trends and earnings per share growing at a single-digit pace.
Home Depot executives haven’t said when the retailer expects to hit that $200 billion goal, but it would represent a gain of nearly $50 billion from its annual sales in fiscal 2021. .
Pandemic-fueled home improvement projects have boosted Home Depot sales by more than $40 billion over the past two years. That’s about the same amount of total sales growth Home Depot had from 2009 to 2018.
About half of Home Depot’s total sales come from home professionals, Chief Financial Officer Richard McPhail said. He estimated on the company’s earnings call that the retailer’s total addressable market in North America was more than $900 billion.
Its competitor, Lowe’s, is also trying to hunt the most reliable and lucrative business customers. It’s always had a smaller share of pros, with nearly 75% to 80% of its business coming from DIY customers.
Over the past several years, The Home Depot has invested in supply chain centers to help it better meet the needs of professionals. It is in the midst of a five-year plan to invest $1.2 billion in its supply chain, including building large facilities, called flatbed fulfillment centers, that can store and deliver larger orders. It built the first in Dallas and is opening 40 in total in major US markets. He previously filled pro orders in-store.
Decker said the giant hubs have allowed Home Depot to carry a wider range of merchandise and have given professionals more assurance that they can get the quantities they need. For example, he said, a store in the past could only carry about 3,000 square feet of flooring, which is enough for three odd jobs.
With the distribution centers flat, he said, Home Depot is receiving orders for 7,000 square feet of flooring and for 150 door counts.
Scot Ciccarelli, retail analyst at Truist Securities, said Home Depot wanted to change the thought process for professionals.
In the past, a professional could run to the Home Depot store when a saw blade broke.
“Now what if they could actually start convincing this contractor ‘Don’t just bring your broken saw blade here. Why don’t you bring your doors and your millwork here?” he said. “If you can do a big multi-family project and you can start to gain ground with that, it becomes a big deal. “