HD Supply, Home Depot’s fast-growing wholesale division, reported sales increased 159% to $3.5 billion in the third quarter. HD Supply accounted for about 15% of The Home Depot’s overall sales.
HD Supply organic growth was 7 percent, due to the slowdown in residential construction.
Overall sales for The Home Depot were boosted by the supply sector, but otherwise were softer than expected, at $23.1 billion, an 11.3% increase from the same period a year ago. Total sales in the retail segment grew 1.1% to $19.7 billion. Comparable store sales declined 5.1%.
Bob Nardelli, chairman, president & CEO said: “Our sales performance was softer than we anticipated, but I believe we are making the right decisions to strengthen our core retail business and build our HD Supply platform to ensure that we emerge even stronger when the housing cycle rebounds.”
HD Supply’s sales portfolio as of 3Q:
- Construction: 43 percent
- Infrastructure: 36 percent
- Maintenance: 16 percent
- Repair/Remodel and International: 6 percent
About 20 percent of HD Supply sales are in two businesses that serve new-home builders. Other HD Supply platforms have a smaller percentage of sales in residential construction. The division estimates that about 40 percent of HD Supply is in the residential construction market.
Year-over-year, HD Supply’s lumber and building business is down 2 percent. The company said: “That’s in a marketplace where the prices have dropped for structural lumber by about 24 percent and panels have dropped 48 percent, so there’s some pressure where the housing starts are down. We’ve got ups and downs throughout the portfolio but in every case we’re growing faster than the markets we’re participating in.”
White Cap Construction Supply, which is concentrated in high-growth housing markets, was down about 2 percent. Of that, the division was down 7-8 percent in residential but picked up in commercial. HD Supply’s multifamily business is up strong double digits.
The waterworks division had a flat quarter. “We had incredible comps relative to PVC commodity increases last year.”We also had a lot of hurricane growth in last year’s numbers so the business again took share in that marketplace,” HD Supply reported in its conference call.
In the third quarter, 12 percent of HD’s gross margin dollars came from the Supply division, as compared with 6 percent last year. About 81 basis points of the consolidated gross margin decline in the third quarter was a result of higher penetration of Supply business as well as a drop in its gross margin rate, due to a change in the mix of businesses owned. HD Supply’s gross margin rate was 26.5 percent in the third quarter, down over 350 basis points from last year.
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