Home Depot's wholesale division performing well

Filed under: Retail |

Home Depot is quietly growing its wholesale unit. The company will still be available for the homeowner and the everyday handyman, but it’s also going heavy duty.

Under the direction of General Electric veteran Bob Nardelli, HD Supply is more like Industrial Depot.

The wholesale division — selling and distributing everything from fire hydrants for neighborhood development to bolts for bridge construction — is Nardelli’s way of taking Home Depot straight to the source of the action in the construction supply chain.

The Atlanta-based company launched a wholesale strategy in 1997 when it began supplying apartment complexes with maintenance items. Since then, Home Depot has invested more than $7 billion to acquire 30-plus wholesale distributors.

The wholesale division also has been trying its hand at manufacturing, with a door assembly plant in Morrow.

All of this has doubled the size of Home Depot’s supply business and, according to Nardelli, will help it reach about $12 billion in wholesale revenue this year. That’s enough to rank HD Supply as a Fortune 200 company on its own, without the rest of Home Depot.

Home Depot executives say the total professional supply market represents $410 billion in sales potential — twice the size of the do-it-yourself market.

Nardelli says Home Depot will account for at least $23 billion of the wholesale market by 2010.

With home builders representing 25 percent of Home Depot’s wholesale customer base, the company is able to track trends and changing styles in the market.

Home Depot revamped its stores in Miami, for example, when the wholesale business started seeing demand shift away from small tiles to large tiles.

While HD Supply’s plans and goals sound great on paper, some experts have questioned whether the company built on big-box retail will make the grade as a middleman.

Retailers showing impressive growth

For the first time, Stores Magazine has published a Hot 100 Retailers list. The list highlights the retail companies that reported the greatest year-over-year revenue percentage growth.

“Revenue is frequently a reliable gauge of customer support, while profit is an indicator of how well the store is run,” said publisher and National Retail Federation Vice President Rick Gallagher. “Investors will tell you that smaller companies often have greater potential for growth, and that is certainly reflected throughout the Hot 100. We think the list represents a fresh approach to identifying the retail companies to watch.”

All public companies with more than $100 million in sales were eligible. Three of the top five retailers expanded through acquisitions.

Video game and entertainment software giant GameStop, which tops the list with a sales increase of 67.8 percent, grew largely from its 2005 acquisition of EB Games.

The Children’s Place, third on the list, purchased the Disney Store in 2004 and has seen a 44.2 percent increase in year-over-year revenue.

One of the most familiar retailers in the nation, No. 4 Federated Department Stores, snagged its high position through the purchase of May Department Stores.

Other retailers found that growth could be achieved by fine-tuning their marketing strategy.

Abercrombie & Fitch successfully revamped its marketing campaigns last year to boost its customer base, sales and unit growth, landing in the No. 5 spot with a 37.8 percent sales gain. Bebe Stores saw increases after shifting its focus from teens to an older, more style-conscious age group. As a result, sales soared and Bebe secured the sixth spot with 36.9 percent year-over-year revenue gains.

Companies also have experienced growth by expanding the number of channels in which they do business.

By developing from a catalog merchant into a retailer with an Internet and brick-and-mortar presence, No. 7 Coldwater Creek grew 33.5 percent in 2005 and plans to add 65 units this year.

A handful of the Hot 100 Retailers do not have stores at all.

Despite reporting nearly $29 million in losses last year, Overstock.com secured the No. 2 spot on the list with a 62.5 percent sales gain. Additionally, No. 20 Amazon.com and No. 40 QVC made the list as non-store retailers with year-over-year growth of 22.7 percent and 14.3 percent, respectively.

Retailers rounding out the top 10 include Dress Barn (8), Urban Outfitters (9), and Chico’s FAS (10).

Stores Magazine is the monthly publication of the National Retail Federation.

Department stores beat estimates

Same-store sales data for July shows consumers are spending their money mostly at the big name retailers. Retail giants such as Wal-Mart Stores and Federated Department Stores are beating estimates.

Same-store sales rose 2.4 percent in July for Wal-Mart. Analysts expected 2.2 percent.

Federated Department Stores saw a 3.3 percent rise in July sales at stores open for at least a year, while analysts expected 3.2 percent. And J.C. Penney said same-store sales for the month rose 4.9 percent, beating analyst estimates by almost 2 percentage points.

Joan Johnson covers retail for the Colorado Springs Business Journal.