Home Depot Initiative Aims for $500M in Supply Chain Savings - Modern Distribution Management

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Home Depot Initiative Aims for $500M in Supply Chain Savings

By 2024, the company says it will complete its goal by focusing on reducing fixed costs beyond product and transportation expenses.
Credit: The Home Depot

Earlier this month, home improvement retailer The Home Depot announced plans to cut $500 million in supply chain costs by sometime in 2024, according to analysis by Supply Chain Dive.

During a June 13 investor and analyst conference, the company’s Executive Vice President and Chief Financial Officer Richard McPhail said the cost-savings initiative will reduce the company’s supply chain holding capacity by, in part, focusing on reducing fixed operating costs other than product and transportation expenses.

McPhail said The Home Depot had to broaden its supply chain presence at elevated costs over the past couple of years to respond to increased demand, according to Supply Chain Drive’s report.

According to documents the company’s 2023 Investor & Analyst Conference, The Home Depot has made significant changes to its supply chain operations the past 15 years, including it’s One Supply Chain investment in 2018, which aimed to create “the fastest, most reliable, most efficient delivery network in home improvement.”

During the June 13 investors conference, the company reaffirmed its guidance for fiscal 2023, including:

  • Sales and comparable sales to decline between 2% and 5% compared to fiscal 2022.
  • Operating margin rate to be between 14.3% and 14.0%.
  • Diluted earnings-per-share-percent-decline between 7% and 13% compared to fiscal 2022.

“We operate in a large and highly fragmented market with unique characteristics that make it one of the most attractive sectors in retail, if not the economy as a whole,” Ted Decker, Chair, President and CEO, said during the conference. “While we are the number one home improvement retailer in the world, we have a relatively small share of the market today, and there are significant opportunities in front of us.”

On May 30, MDM reported that The Home Depot and fellow retail giant Lowe’s Companies are anticipating that their professional customers — also know as Pros — to continue working through elevated project backlogs this year, although the companies speculate the size of those projects is getting smaller.

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