The Home Depot (HD) Annual Retail Round Up Conference summary

Cost management and supply chain strategy

• Maintains a dedicated Cost Finance Group to optimize product costs and advise on negotiations, with a focus on real-time cost management and supply chain diversification since 2010.

• Majority of goods now produced in the U.S., with significant diversification away from China since 2017; ongoing strategy to further diversify sourcing.

• Pricing strategy balances cost optimization with market dynamics, aiming for best value across projects rather than lowest price on every item.

• Productivity improvements in supply chain and store operations fuel reinvestment and margin protection, with $500 million in fixed cost reductions announced at the end of 2023.

• Maintains flexibility in staffing and cost structure to adapt to changing demand and economic conditions.

Consumer and market dynamics

• Homeowner financial health is strong, with high employment, income gains, and a 50% increase in home values since 2019, resulting in $15 trillion in new housing wealth.

• Despite a $50 billion cumulative deficit in home improvement spending since 2019, homeowners have significant untapped equity and are shifting from deferral to resuming projects as they accept a new normal in interest rates.

• Replacement cycles have normalized post-COVID, with strong performance in appliances and paint, including an exclusive deal with Kilz.

• Persistent demand for home improvement is supported by an aging housing stock, with 55% of U.S. homes now older than 40 years.

• Deferral of projects due to higher rates is seen as a temporary backlog, expected to be acted upon as consumer sentiment stabilizes.

Growth strategy and professional segment expansion

• Long-term strategy centers on serving professional contractors (pro), interconnected retail (digital and physical integration), and new store growth.

• Focused on building capabilities to serve complex pro orders, with 17 flatbed distribution centers and plans to expand to 20 by 2026.

• SRS acquisition expands addressable market by $50 billion, enabling entry into specialty trades like roofing, pool, and landscape, and accelerating trade credit capabilities.

• Pro business is largely non-cyclical, focused on repair, maintenance, and remodeling rather than new construction, providing resilience in downturns.

• Cross-selling and vertical expansion through SRS are showing early benefits, with ongoing evaluation of new verticals and quality asset acquisitions.