The Home Depot’s focus on the professional market remains unwavering, even as U.S. consumers curb their home improvement splurges.
That was the latest from the Atlanta-based retailer’s executives as they shared the company’s third-quarter 2024 earnings Tuesday (Nov. 12).
“While macroeconomic uncertainty remains, our third quarter performance exceeded our expectations,” Home Depot Chair, President and CEO Ted Decker said in a statement. “As weather normalized, we saw better engagement across seasonal goods and certain outdoor projects as well as incremental sales related to hurricane demand.”
He added on an earnings call that “big-ticket transactions were down 6.8% year over year, and we continue to see softer engagement in discretionary projects where customers use financing, such as kitchen and bathroom remodels.”
Faced with these fiscally cautious homeowners, the home improvement retailer has turned its attention to the steady B2B demand among trade professionals, which has remained more resilient in the face of economic uncertainty.
For the past half-decade, Home Depot has invested billions of dollars into enhancing its professional offerings, including new distribution centers, improved supply chain logistics, and targeted online platforms for pros. Now, in the face of dwindling consumer spending, those investments look especially prescient.
Home Depot’s quarterly sales rose 6.6% year over year to $40.2 billion, and the company raised its full-year outlook on the back of the stronger-than-expected results.
Read also: Home Depot Looks for B2B Buffer Against Softening Consumer Spend
Unlike individual consumers who might hold off on renovations or repairs, commercial clients and building professionals are under contract deadlines to finish projects, keeping the demand pipeline relatively steady.
Key to Home Depot’s pro strategy is its digital overhaul. The company has tailored its website and app to offer pros a faster, more seamless shopping experience, including features that allow for job site deliveries, bulk pricing and personalized accounts. This digital emphasis aligns with the pro segment’s need for efficiency — a necessity when every minute counts on a job site.
To ensure pros have the support they need, Home Depot executives said Tuesday that the company has also ramped up its workforce training.
“We focus on building relationships with our most important pros, including by allocating more resources during peak times,” executives told investors.
Employees at stores with a high volume of contractor traffic receive additional training on pro-specific product lines and services, allowing them to answer technical questions and recommend tailored solutions.
“We are pleased with the growth and strength of our pro ecosystem across 17 markets … delivering the best buying experience for all pro experiences,” executives said, noting that “lumber, plumbing and hardware were all above the company average for the most recent quarter.”
Home Depot’s focus on professional clients is not without risks. Building a pro-focused business demands investment in supply chain capabilities, as bulk and custom orders can strain logistics. Home Depot has addressed this by enhancing its supply chain through a network of flatbed distribution centers that cater specifically to professional jobs, allowing the company to fulfill more orders more efficiently.
Earlier this year, Home Depot spent $18.2 billion to acquire SRS, which operates as a distributor for roofing firms and construction projects. The company has 760 locations, thousands of trucks on the road and has closed more than 100 acquisitions of roofing and building suppliers.
Still, the most recent quarter marked the eighth consecutive quarter of negative comparable sales at Home Depot. The retailer expects to open around a dozen new stores this fiscal year, which ends in early February.
“This is a market, and markets ultimately return to equilibrium,” Decker said on the call, referring to the state of consumer home improvement demand. “We just don’t think we are quite there yet.”
