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HD Supply's 3 Key Growth Drivers in Third Quarter

Sales for Atlanta, GA-based HD Supply Holdings increased 7 percent to $2.3 billion in the third quarter ended Nov. 3 compared to the prior year. (Read more on HD Supply's third-quarter results.) According to CFO Ronald Domanico during HD Supply's quarterly conference call, the increase was due primarily to three factors.

1. Company growth initiatives. Domanico said growth initiatives accounted for $116 million, or 80 percent, of total growth in the third quarter. Of the five key initiatives HD Supply has been championing recently – selling more to existing customers, introducing new products and services, expanding channels, acquiring new customers and entering new geographies – two are getting the most attention, CEO Joe DeAngelo said during the company's second-quarter call. The share-of-wallet and new products and services initiatives, he said, have the highest payback and level of investment.

To sell more to existing customers, DeAngelo said the company is using customer segmentation, staffing, training, marketing and digital sales tools. To introduce new products and services, he said, HD Supply is using "customer needs mapping" and category management with a strong focus on proprietary brands. Earlier this year, HD Supply launched a new safety catalog and has also added new adjacent offerings from HD Supply Waterworks, such as storm drains, automated meters and high density polyethylene pipe, in recent years.

2. End-market strength. Domanico said end markets contributed $29 million to growth in the third quarter. Municipal and electrical utility markets saw a low- to single-digit decline, and nonresidential markets were flat, he said. Residential construction growth was in the mid-teens, and MRO growth was stable at 1-2 percent.

3. Water Products acquisition. Domanico said the late 2012 acquisition of this Owasso, OK-based distributor of water, sewer and gas system products contributed $21 million to third-quarter results this year. According to a press release, the purchase enhanced HD Supply Waterworks' ability to meet increasing infrastructure demand in the South Central U.S.

Get more news on HD Supply at www.mdm.com/HDSupply.

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