Home Depot Jumps in with Both Feet - Modern Distribution Management

Log In

Home Depot Jumps in with Both Feet


Here’s the 300-word dissection of Home Depot’s pending acquisition of Hughes Supply. It adds a layer of complexity across a bunch of product channels at a time when there’s already plenty of pressure on margins. But this next step by HD is not a surprise to most. The issue was more when and where.

From an operational standpoint, HD has its work ahead to ratchet Hughes’ operating margins up from about 5 percent currently. The Home Depot’s current operating margins are at about 12 percent. But HD knows this wholesale distribution sector; its expectations are likely pretty grounded.

For those in industrial channels, there is a slight d’j’ vu feeling back to some high profile M& A activity in 1998 and 1999, just before industrial markets crashed. With the help of 20-20 hindsight, more than a few companies paid way too much and choked on debt. Will Hughes offer a hedge to HD if the housing market drops, as predicted by many? More to the point, the portfolio that HD now holds in its supply division, more than $10 billion by our count, certainly offers the diversification the company is seeking. This is a start.

Interestingly, more than a few observations have focused on the positives HD’s big splash into industrial channels brings – namely a larger infusion of equity buyers into the channel. There has been an increasing level of tire-kicking in 2005. Valuations are much healthier than the last several years.

The next wave of speculation will center on the MRO industrial channel. Hughes Supply’s MRO business accounted for 10 percent of its $4.4 billion in revenues in 2005. This is still a very fragmented industry. A lot of strong independent distributors have found ways to compete effectively with the HD model. That won’t change.

Share this article

About the Author
Recommended Reading
Leave a Reply

Leave a Comment

Sign Up for the MDM Update Newsletter

The MDM update newsletter is your best source for news and trends in the wholesale distribution industry.

Get the MDM Update Newsletter

Wholesale distribution news and trends delivered right to your inbox.

Sign-up for our free newsletter and get:

  • Up-to-date news in a quick-to-read format
  • Free access to webcasts, podcasts and live events
  • Exclusive whitepapers, research and reports
  • And more!


articles left

Want more Premium content from MDM?

Subscribe today and get:

  • New issues twice each month
  • Unlimited access to mdm.com, including 10+ years of archived data
  • Current trends analysis, market data and economic updates
  • Discounts on select store products and events

Subscribe to continue reading

MDM Premium Subscribers get:

  • Unlimited access to MDM.com
  • 1 year digital subscription, with new issues twice a month
  • Trends analysis, market data and quarterly economic updates
  • Deals on select store products and events



You have one free article remaining

Subscribe to MDM Premium to get unlimited access. Your subscription includes:

  • Two new issues a month
  • Access to 10+ years of archived data on mdm.com
  • Quarterly economic updates, trends analysis and market data
  • Store and event discounts

To continue reading, you must be an MDM Premium subscriber.

Join other distribution executives who use MDM Premium to optimize their business. Our insights and analysis help you enter the right new markets, turbocharge your sales and marketing efforts, identify business partners that help you scale, and stay ahead of your competitors.

Register for full access

By providing your email, you agree to receive announcements from us and our partners for our newsletter, events, surveys, and partner resources per MDM Terms & Conditions. You can withdraw consent at any time.

Learn More about Custom Reports

Request a Market Prospector Demo

  • This field is for validation purposes and should be left unchanged.