Why Home Depot is spending $18 billion to buy a roofing company

By Nathaniel Meyersohn, CNN

New York (CNN) — In its largest acquisition ever, Home Depot is expanding its business targeting professional contractors and builders as the home fixer-upper market stalls.

Home Depot announced Thursday that it is spending $18.3 billion to buy SRS Distribution, a huge building-projects supplier that counts professional roofers, landscapers and pool contractors as its primary customers. SRS, which will operate independently, Home Depot noted, has 760 warehouses and more than 4,000 trucks to deliver its goods.

Home Depot, the nation’s fifth-largest retailer, currently gets around half of its sales from housing professionals, who spend more at stores than do-it-yourself homeowners purchasing lawn mowers and power tools. Both Home Depot and Lowe’s have been trying to win more pro customers.

Home Depot believes the acquisition will help it grow with its housing professional customer base because they do more complex renovation and remodeling projects that require purchases from specialty stores such as SRS. Home Depot in recent years has purchased other businesses targeting professionals who undertake both complex and simple housing projects.

Home Depot’s push for pro customers comes as its DIY customers have slowed their spending.

Home Depot’s sales boomed during the pandemic as millions of people spending more time at home turned to renovations and other home improvement projects. But many consumers have since shifted from purchasing physical goods to experiences, such as travel and concerts; others have just cut back spending in general. This shift has hurt Home Depot.

“After a couple of years of unprecedented demand, we continue to see softness in big-ticket discretionary categories,” Home Depot executive Billy Bastek said late last year.

Home Depot said that sales dropped over the winter and it’s a expecting a sluggish 2024.

Demand for home improvement projects has also fallen due to high mortgage rates and a tough real estate market climate. In October, mortgage rates hit a 23-year high of 7.79%.

Home Depot expects the SRS acquisition, accomplished through a mix of cash and debt, to be completed by the end of the year, but it could face regulatory hurdles.

Under Federal Trade Commission Chair Lina Khan, the agency has taken Amazon, Meta, Microsoft, Kroger and other corporate giants to court for alleged anti-competitive practices.

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