In its largest acquisition ever, Home Depot is expanding its business by targeting professional contractors and builders as the home fixer-upper market stalls. The company announced that it is spending $18.3 billion to buy SRS Distribution, a building-projects supplier that caters to professional roofers, landscapers, and pool contractors. SRS has 760 warehouses and more than 4,000 trucks to deliver its goods, and it will operate independently from Home Depot. Home Depot currently receives around half of its sales from housing professionals, who spend more at stores than DIY homeowners.
The acquisition of SRS Distribution is aimed at helping Home Depot grow with its housing professional customer base, as these customers undertake more complex renovation and remodeling projects that require purchases from specialty stores like SRS. Over the years, Home Depot has acquired other businesses targeting professionals who work on various housing projects. The company’s push for pro customers comes as its DIY customer base has slowed their spending, likely due to a shift towards spending on experiences like travel and concerts, or simply cutting back on general spending.
Despite experiencing a boom in sales during the pandemic, as many people turned to home improvement projects while spending more time at home, Home Depot has seen a decline in sales more recently. This could be attributed to consumers moving away from purchasing physical goods and instead focusing on experiences. Additionally, high mortgage rates and a tough real estate market climate have contributed to a decrease in demand for home improvement projects. Mortgage rates hit a 23-year high of 7.79% in October, further impacting the market for home improvement.
Home Depot expects the acquisition of SRS to be completed by the end of the year, with the deal being financed through a combination of cash and debt. However, the company could face regulatory hurdles, particularly under the leadership of Federal Trade Commission Chair Lina Khan. The agency has taken several corporate giants to court for alleged anti-competitive practices, raising concerns about potential challenges Home Depot may encounter during the acquisition process. Despite the challenges in the housing market and shifting consumer trends, Home Depot remains focused on expanding its reach to professional contractors and builders in order to drive growth in its business.
