Michelle ThompsonIn its most significant acquisition to date, Home Depot is strategically expanding its focus on professional contractors and builders amid a slowdown in the home fixer-upper market.
Home Depot announced on Thursday its plan to invest $18.3 billion in acquiring SRS Distribution, a major supplier for building projects catering primarily to professional roofers, landscapers, and pool contractors. With 760 warehouses and over 4,000 delivery trucks, SRS will continue operating independently, according to Home Depot.
As the nation’s fifth-largest retailer, Home Depot currently generates approximately half of its sales from housing professionals, who tend to make larger purchases compared to DIY homeowners buying tools and equipment. Both Home Depot and Lowe’s have been intensifying efforts to attract more professional customers. Home Depot sees this acquisition as a strategic move to expand its presence among housing professionals who undertake complex renovation and remodeling projects, often requiring specialized supplies available at stores like SRS. In recent years, Home Depot has acquired other businesses targeting professionals involved in both simple and intricate housing projects.
This focus on professional customers comes amidst a slowdown in spending from DIY customers. While Home Depot experienced a surge in sales during the pandemic as people spent more time at home and engaged in home improvement projects, consumer preferences have since shifted towards experiences like travel and concerts, or they’ve reduced overall spending. This shift has impacted Home Depot’s sales.
According to Home Depot executive Billy Bastek, there has been a decline in demand for high-ticket discretionary items following a period of unprecedented demand.
Additionally, Home Depot has observed a decrease in demand for home improvement projects due to higher mortgage rates and challenging real estate market conditions. Mortgage rates reached a 23-year high of 7.79% in October.
Home Depot anticipates completing the SRS acquisition, funded through a combination of cash and debt, by the end of the year, though regulatory hurdles may arise. Under the leadership of Federal Trade Commission Chair Lina Khan, the agency has pursued legal action against several corporate giants, including Amazon, Meta, Microsoft, and Kroger, for alleged anti-competitive behavior.
