Why Home Depot made an $18.25 billion bet on the pro business

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Lowe's Companies Inc Noticias

Home Depot Inc,Retail Industry,Business

The retailer's acquisition is boosting the business as home improvement demand remains slow.

The retailer announced it was acquiring SRS Distribution, a company that sells supplies to roofing, pool and landscaping professionals, for $18.25 billion in March and closed the deal in June.

In both of the past two quarters, Home Depot's revenue would have fallen year over year if SRS' sales were excluded. SRS came with a steep price tag, but could add rocket fuel to Home Depot's pro growth, said Joe Feldman, a senior research analyst for Telsey Advisory Group. He compared the deal to Walmart's, an e-commerce player. Some industry-watchers and Walmart's own CEO have credited the move for accelerating Walmart's online business, even though it eventually

"Their biggest challenge – and really, their only challenge – is when do we see a great retail vertical over the past few years get back to being that way?" said Chuck Grom, a senior analyst who covers retail for Gordon Haskett. For example, about 80% of the roofing business comes from repairs or re-roofing projects rather than for new homes, Decker said. He cited that as one of the factors that made SRS attractive.

SRS also sells a larger catalog of products that professionals use to satisfy customers' varied demands, such as a surf blue-colored roofing or a deeper selection of outdoor fire pits, Tinker said.

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