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Home Depot recently announced that it is acquiring SRS Distribution in a $18.25 billion deal, marking the largest acquisition in the company’s history. This move is part of Home Depot’s strategy to increase sales by targeting professionals such as contractors, roofers, and other home experts. The deal is expected to close by the end of the fiscal year, and Home Depot will finance it through a combination of cash and debt. The retailer already sources half of its business from professionals, and this acquisition will help it further expand its reach in this market.

The acquisition of SRS Distribution is just the latest in a series of moves that Home Depot has made to target professional customers. In 2020, the company acquired HD Supply for approximately $8 billion, a national distributor of maintenance, repair, and operations products. Additionally, Home Depot acquired International Designs Group last year, a distributor of design-oriented surfaces and appliances that cater to contractors and other home professionals. CEO Ted Decker described the latest deal as a “complementary accelerator” to the company’s efforts to attract more professionals, and expects it to increase Home Depot’s total addressable market by $50 billion.

SRS Distribution specializes in selling supplies to professionals in the landscaping, pool, and roofing businesses. The Texas-based company has about 760 branches across 47 states, with a fleet of 4,000 delivery trucks and a dedicated salesforce serving professionals. Home Depot is confident that the deal will be approved by regulators, despite increased scrutiny of mergers and acquisitions. While the acquisition is expected to be dilutive to Home Depot’s earnings per share due to amortization, it is projected to be accretive in terms of cash earnings per share in the first year after closing.

As Home Depot’s growth has started to stagnate, the retailer has increased its focus on the professional market. In recent quarters, consumer sales have slowed as customers take on fewer home projects and allocate more spending towards groceries and experiences. Home Depot’s strategy includes opening new stores, attracting more professional sales, and enhancing the shopping experience for customers. The company plans to open a dozen new stores during the fiscal year and recently announced the opening of four distribution centers targeting professionals.

Despite the challenges of moderating sales trends, Home Depot remains optimistic about its future prospects. The company expects total sales for the full year to grow by approximately 1%, with comparable sales expected to drop by about 1%. Home Depot currently operates 2,335 stores across the U.S, Mexico, and Canada, with a total of about 465,000 employees. Investors have responded positively to the news of the SRS Distribution acquisition, with Home Depot’s stock price up about 11% so far this year. The retailer’s market value currently stands at around $382 billion, reflecting strong investor confidence in the company’s strategic moves.

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