Key Takeaways
- Home Depot is acquiring SRS Distribution, which sells and distributes construction materials like roofing supplies to a network of contractors.
- The deal, valued at $18.25 billion, could help Home Depot boost sales to professional contractors.
- Home Depot has looked to grow its share of the market as inflation and high interest rates have weighed on demand from do-it-yourself renovators in the last year.
Home Depot (HD) is acquiring SRS Distribution, a company that distributes roofing materials and other construction products to a network of contractors, in a $18.25 billion deal as Home Depot looks to expand its share of the professional contractor market.
The home improvement retailer said it plans to fund its purchase of SRS Distribution through a combination of cash on hand and debt, and expects the deal to be closed by the end of its 2024 fiscal year. Home Depot estimated its total addressable market will be about $1 trillion once the deal closes, representing a boost of about $50 billion.
“SRS’s branch network, coupled with The Home Depot’s 2,000+ U.S. stores and distribution centers, comprehensive product offering, and extensive pro brands, provides the residential pro customer with more fulfillment and service options than ever before,” Home Depot Chief Executive Officer Ted Decker said in a release. “I look forward to welcoming the entire SRS team to The Home Depot and capturing the exciting opportunity ahead.”
Last month, Home Depot reported earnings that surpassed expectations, but Home Depot projected comparable sales would decline 1% in 2024 as inflation and high interest rates discourage do-it-yourself customers away from more costly renovations. Big-ticket sales, classified as transactions over $1,000, were down 6.9% in the fourth quarter of 2023 from the year prior.
In Home Depot’s earnings call, Decker said the company’s focuses in 2024 would be opening new stores and raising its share of the pro contractor market by increasing the range of products Home Depot offers and ways to fulfill orders. Senior Executive Vice President Ann-Marie Campbell also said that increasing sales to contractors that could be delivered directly to jobsites through the company’s distribution network would make stores less crowded, making them easier to navigate for other consumers.
Home Depot shares were little changed in pre-market trading as of 7:40 a.m. ET Thursday. They’ve gained nearly 12% so far this year, and over 37% in the last 12 months.