Home Depot’s Revenue Forecast Dims Amid Slowdown in Home Renovations

Home Depot (NYSE: NYSE:), a leading retail player, is expected to face a slowdown in revenue for the current fiscal year due to a recent decline in home renovation activities. The company’s stock has seen a 2% drop this year, contrasting with the ‘s 14% gain. Despite this, Home Depot’s strategic focus on professional customers and continuous efforts to improve operational efficiency have allowed it to maintain its position as a key player in the industry.

The company, known for its extensive network of approximately 2,000 stores across the U.S. and a trailing 12-month revenue of $155 billion, has been catering to both DIY and professional customers with the necessary tools, parts, and supplies for their projects. Home Depot’s unique selling proposition lies in its focus on professional customers such as contractors, plumbers, and electricians. These professionals account for half of total sales despite constituting only about 10% of Home Depot’s customer base.

In response to changing consumer behavior during the pandemic, Home Depot has been enhancing its omnichannel capabilities. According to the latest fiscal quarter report (Q2 2023 ended July 30), almost half of all online orders were picked up in-store. This trend was accelerated by customers seeking greater accessibility and convenience during the pandemic period.

In an effort to improve delivery times and enhance product assortment, Home Depot announced an investment of $1.2 billion in its supply chain back in 2017. Over the past decade, while the company’s store count has only risen by 3%, its overall revenue surged by 91%. This growth can be attributed to its ability to drive greater sales per store and its investment in supply chain improvements for operational efficiency.

Compared to Lowe’s Companies (NYSE: NYSE:), a smaller competitor that garners only 25% of its revenue from professionals, Home Depot’s financial metrics are superior. In the latest fiscal quarter, Home Depot reported better sales per square foot ($685) than Lowe’s ($513). This is largely due to the company’s relationship with professional customers who spend more and visit stores more frequently.

While Lowe’s, under the leadership of Marvin Ellison, a former executive at Home Depot, is striving to grow its professional customer base, it still has significant ground to cover. Despite the current stock performance, Home Depot’s strategic focus on professional customers and continuous efforts to improve operational efficiency continue to position it as a key player in the retail industry.

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