Home Depot has consistently out-performed expectations, partly by using internet orders to add foot traffic in stores. STEVE SCHAEFER / SPECIAL TO THE AJC
Photo: The Atlanta Journal-Constitution
Photo: The Atlanta Journal-Constitution

Home Depot CEO says company investing, well-positioned

Home Depot, the largest company based in Georgia, is poised for a growth spurt, but not because it plans to open a rash of new stores.

Instead, the company will build about 170 warehouses and distribution centers around the United States, including in Georgia, said Craig Menear, the company’s chief executive, during an extended interview with The Atlanta Journal-Constitution. Those projects are part of the company’s plans to pour more than $11 billion into internal improvements.

The Home Depot of the near future will not look radically different, but there could be innovations, Menear said.

For instance, the company is slowly adding lockers so that shoppers can pick up online orders. The lockers might be placed outside stores, so shoppers can pick up items after hours.

The internet has been poisonous for many retailers, often stealing business from stores – either by shifting sales to the likes of Amazon or making it possible for customer to buy products without having to actually go to a location.

But Home Depot has fared better.

About 7 percent of Home Depot sales are now online, but many of those orders also help the bricks-and-mortar part of the business.

“About 45 percent of the orders placed on HomeDepot.com are actually picked up in stores,” Menear said. “And of those 45 percent who come into the stores, more than 20 percent make additional purchases.”

Home Depot, with 2,285 stores and annual revenues of more than $100 billion, has been growing solidly by making operations increasingly efficient, while exploiting the nation’s housing market, Menear said. “We have had a tail wind from housing for the last few years.”

New home construction has been on the rise, although it remains far below the levels seen during the housing boom.

While some areas still lag, average home prices have been steadily rising, nationally and in metro Atlanta.

And what’s good for homeowners is good for Atlanta-based Home Depot, Menear said. “Home value appreciation drives the project business.”

When the housing bubble burst – nationally in 2007, in metro Atlanta a year later – home prices plunged, new construction ground to a halt and many builders went out of business. Home Depot managed to weather the crisis.

The expansion, now the third-oldest since World War II, should continue, Menear said. “We don’t see anything on the horizon that changes the environment on the negative side.”

The company is well-positioned to handle any likely economic bumps, he said. “And I don’t think we’ll ever see anything again like 2007.”

In general, stock analysts have praised Home Depot for consistently exceeding expectations on profits. However, the cold weather chilled company revenues during this year’s first quarter.

Mark Vickery, an analyst for Zacks Investment Research in Chicago, recently wrote that as an investment, Home Depot might be a little “stretched,” considering how well the stock has done. “Home Depot looks overvalued when compared with the broader industry and the S&P 500,” he wrote in a research report.

However, the business itself continues to look good, he wrote. “Home Depot’s investments in interconnected shopping experience is paying off.”

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