The Home Depot Incorporation is a company based in the United States. The company operates a chain of home improvement retail stores in the United States, Canada, and Mexico. In the company’s 2,300 stores, it sells appliances, lumber, garden supplies, paint, flooring, and many other home improvement products. The company was founded in 1978.
Why You Should?
- Home Depot is a great reopening play in an investor’s portfolio. During the pandemic, the company saw many supply chain issues which hurt their inventory levels within stores. Many large pro customers also stopped placing large orders. Once the pandemic is over, the company will see growth from regular channels return.
- As the pandemic comes to an end, many pro customers (like electricians and general contractors) are starting to take on large home improvement and home building projects. The CEO of the company, Craig Menear, reported that this is already happening. These customers will order products in bulk which will positively impact the company’s results in the short to mid-term.
- Earlier this year, the price of key building goods like lumber soared. This hurt Home Depot’s sales numbers as customers bought less lumber due to the high prices. However, as the price of lumber and other products goes down, customers will purchase them. This will help Home Depot move larger volumes of products through its stores.
- Home Depot has been investing heavily into its e-commerce platform, something that has helped the company report record results during the pandemic. A strong e-commerce platform has helped the company attract new DIY and pro customers as well. This will benefit the company’s long-term growth. This will also benefit investors in the company.
- Home Depot recently acquired HD Supply, a company that specializes in the transportation and distribution of products like appliances. This acquisition goes to show that Home Depot sees strong growth coming from its pro customers and wants to better serve these customers with new logistics offerings. This will also benefit investors in the company.
Why You Should Not?
- The company faces tough competition in the home improvement and retail industry. Some of these competitors include Lowe’s, Amazon, ACE Hardware, Costco, and Walmart. This competition might hurt the company and its investors.
- The company also faces tough growth comparables from a year ago after the demand for some products soared (like paint and gardening supplies). This has already hurt the company’s stock price as growth came below analyst’s expectations. The slowing of growth from DIY customers might hurt the company and its investors in the short to mid-term.
I think that Home Depot is a great long-term investment due to its position as a good reopening play, the return of its pro customers, prices starting to normalize, its acquisition of HD Supply, as well as e-commerce opportunities. However, tough competition and slowing growth in the short to mid-term might hurt the company and its investors.