The Home Depot The company said Thursday it will open four new distribution centers to capture more sales from renovators, contractors and other home professionals.
New distribution centers are expected to open in Detroit, Los Angeles, San Antonio and Toronto in the first half of this year. These facilities make room for the high-volume, high-variety, high-order products that professionals need, such as lumber, shingles and insulation, which can then be shipped directly to the job site.
The average size of each facility is about 500,000 square feet, about five times the size of the average Home Depot store.
The distribution center expansion is part of the company’s multi-year strategy to attract professionals to handle larger, more extensive projects, such as major renovations or kitchen remodels. Since opening its first distribution center in Dallas in 2020, Home Depot has opened 14 similar distribution centers in major metropolitan areas to serve professionals.
About half of Home Depot’s total sales come from professionals and the other half from DIY customers, such as homeowners handling painting projects.
However, winning the business of more professionals has become critical as Home Depot tries to return to growth and navigate an environment of rising interest rates, which have slowed home turnover and dampened demand for home improvement projects.
Home Depot’s sales fell 3% in the last fiscal year as customers took on fewer projects after the epidemic. The company said it expects total sales to rise about 1% this fiscal year, including an additional week of growth. The company expects comparable sales, excluding the impact of store openings and closures, to decline approximately 1% (excluding the impact of the additional week).
Chip Devine, Home Depot’s senior vice president of outside sales for the company’s professional business, said defying those bleak expectations may depend on professional customers, who are typically more stable and spend more than DIY customers. They also require more specialized sales staff and service, which means they are less likely to jump between retailers or switch to competitors.
“We interact with them five times a week,” he told CNBC. “Over time, that relationship, you become a partner in their business, which is easier than attracting an elusive consumer.”
Additionally, he said, professionals working on more complex projects have historically used Home Depot like a convenience store, purchasing only a few items. Devine said this gives Home Depot a lot of room to grow as it adds the ability to handle entire orders from professionals.
DIY customers, on the other hand, become harder to sell. In recent quarters, they have reduced discretionary purchases and tackled smaller residential projects. The company said on an earnings call last month that large transactions, defined as those with a price of more than $1,000, fell nearly 7% in the fourth quarter from the same period last year.
Home Depot is changing other aspects of its business to support professionals working on complex and expensive projects. Devine said the company is piloting a program to offer trade credit to professionals, which means Home Depot underwrites large orders and won’t charge professional customers until the goods are delivered – a common standard in the industry .
The retailer has also expanded its professional sales team. It also adds digital and personalization features for professionals, such as tools to help manage complex orders and a loyalty program that offers benefits.
In an interview with CNBC, CEO Ted Decker described Expanding the specialty business is one of three key priorities this year, along with building new stores and creating a more seamless experience for customers.
He said Home Depot is trying to do what it once did in the DIY world into the specialty industry — transforming itself into a one-stop shop.
“Before Home Depot, consumers doing a project would go to all these different stores,” he said. “You have a hardware store. You have a paint store. You have a flooring store. The pros are doing the same thing.”
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