Lowe’s Buys Foundation Building Materials for $8.8 Billion

Lowe’s made an $8.8 billion bet on its professional contractor (Pro) business.

That’s the amount the home improvement retailer is paying for Foundation Building Materials (FBM), according to a Wednesday (Aug. 20) press release. The transaction is expected to close in the fourth quarter of this year.

“With this acquisition, we are advancing our multiyear transformation of the Pro offering,” Lowe’s Chairman, President and CEO Marvin R. Ellison said in the release. “It allows us to serve the large Pro planned spend within a $250 billion total addressable market and aligns perfectly with our Total Home strategy. FBM’s scalable, multi-trade distribution platform and strong leadership, combined with our recent acquisition of ADG, will significantly enhance our Pro offering.”

Based in Santa Ana, California, FBM is a distributor of building products such as drywall, insulation and ceiling systems for large residential and commercial professionals in the new construction and repair and remodeling fields, the release said. The company has more than 370 locations in the United States and Canada and serves 40,000 professional contractor customers.

The acquisition comes nearly two months after Lowe’s rival Home Depot bought specialty building products distributor GMS through its subsidiary SRS Distribution to help it expand its Pro customer base.

Both Lowe’s and Home Depot have relied on professionals to drive sales as consumers have cut back. National Retail Federation data showed that while most categories of retailers saw growth from May to July, building materials and garden supply retailers suffered year-over-year declines of at least 4%.

On an earnings call Tuesday (Aug. 19), Home Depot told investors that while DIY customers continue to buy lumber, paint and mulch, it’s contractors, remodelers and other pro customers that will determine its market positioning for the next decade.

Although Lowe’s, Menards and regional distributors are active in the pro space, none has Home Depot’s scale, balance sheet or ability to integrate physical and digital channels, management said during the call.

Pro builders spend more per project, require greater supply reliability and are less vulnerable to short-term consumer sentiment. In Q2, for example, Home Depot’s average ticket rose 1.2% to $90, even as transactions fell, thanks in part to pro customers placing bulk orders for materials.

“For context, Home Depot estimated that the addressable pro market is worth more than $450 billion annually in the United States,” PYMNTS wrote Tuesday. “Penetrating even a fraction of that spend can sustain growth in the face of ongoing macro uncertainty.”