Home Depot said Thursday that it’ll open 4 latest distribution centers because it chases more sales from remodelers, contractors and other home professionals.
The brand new distribution centers are expected to open in the primary half of the yr in Detroit, Los Angeles, San Antonio and Toronto. The facilities make room for the bulky size, wider variety and bigger orders of products that pros need, equivalent to lumber, shingles and insulation, which then could be delivered directly to a job site.
Each facility averages roughly 500,000 square feet — about five times the dimensions of the common Home Depot store.
The expansion of the distribution centers is an element of a yearslong company strategy to attract pros who handle larger and more extensive projects, equivalent to a significant renovation or kitchen remodel. Home Depot has opened 14 similar distribution hubs to serve pros in major metropolitan areas, starting with the primary that it opened in Dallas in 2020.
Home Depot draws roughly half of its total sales from pros and the opposite half from do-it-yourself customers, equivalent to homeowners tackling a painting project.
Yet winning more of pros’ business has turn into critical as Home Depot tries to return to growth and navigates a better rate of interest environment that has slowed housing turnover and chilled demand for home improvement projects.
Home Depot’s sales declined by 3% in the last fiscal yr as customers took on fewer projects after the pandemic. The corporate said it expects total sales to grow about 1% this fiscal yr, including the lift from a further week. It anticipates comparable sales, which take out the impact of store openings and closures, to fall about 1%, not including the additional week.
Beating those lackluster expectations could rely upon pro customers, who are frequently steadier and greater spenders compared with DIY customers, said Chip Devine, Home Depot’s senior vice chairman of out of doors sales, who oversees the corporate’s pro business. In addition they need more specialized salespeople and services, which suggests they’re less likely to jump between retailers or switch to a competitor.
“We interact with them five times every week,” he told CNBC. “That relationship over time, you turn into a partner to their business, and that is less complicated than capturing the elusive consumer.”
Plus, he said, pros who handle more complex projects have historically used Home Depot like a convenience store where they buy just a couple of items. That offers Home Depot a whole lot of room to grow because it adds capabilities to handle pros’ entire orders, Devine said.
However, do-it-yourself customers have turn into a tougher sell. They’ve made fewer discretionary purchases and tackled smaller home projects in recent quarters. Big-ticket transactions, or those with a price tag of greater than $1,000, fell by nearly 7% in the fourth quarter compared with the year-ago period, the corporate said on its earnings call last month.
Home Depot is changing other facets of its business to support pros who handle complex and pricey projects. It’s piloting a program that provides trade credit to pros, which suggests that Home Depot underwrites a big order and doesn’t charge the professional customer until it’s delivered — a regular that is common in the industry, Devine said.
The retailer also expanded its dedicated sales force for pros. And it has added digital and personalized features for pros, equivalent to tools that help manage complicated orders and a loyalty program that provides perks.
In a CNBC interview, CEO Ted Decker described expanding the professional business as certainly one of three key priorities for the yr, together with constructing latest stores and making a more seamless experience for patrons.
He said Home Depot is trying to bring to the professional business what it once did to DIY — turn itself right into a one-stop shop.
“Before Home Depot got here along, a consumer doing a project was running to all these different stores,” he said. “You’ve a ironmongery store. You’ve a paint store. You’ve a flooring store. The professional’s doing the identical thing.”