Summary
- The Home Improvement sector has been a major beneficiary of the COVID-19 pandemic.
- The Home Depot is the sector market leader and is growing share in a highly fragmented market.
- The Home Depot's financial and operating metrics are significantly better than its nearest competitor (Lowes).
Although currently fairly priced The Home Depot is a high quality company which should be added to portfolios if there is any market weakness.
Company Description
The Home Depot Inc (NYSE: HD) is the world’s largest home improvement retailer based on net sales (expected to be around $US 130 B in 2020). The company operates 2,300 warehouse-style stores offering more than 30,000 products in store and 1 million products online in the US, Canada and Mexico.
The company offers a wide range of building materials, home improvement products, lawn and garden products, décor products and provides a number of services including home improvement installation services and tool and equipment rental.
The Home Depot opened its first stores in Atlanta in 1979 and went public in 1981
The company has one reportable operating segment but does break-down sales by product category (without providing category profitability):
Source: Author’s compilation using data from The Home Depot’s 10-K.
Business Overview
According to one of the founders of The Home Depot, Bernie Marcus, the original strategy concept was to provide the most complete assortment of lumber, building materials and home improvement products, competitively priced in a service-oriented retail situation.
It is fair to say that current management has remained true to the original strategy and the company has continued to innovate and continuously improve its offerings and service performance.
