Business Breakdowns
Episode 81 The Home Depot: The Pro Builder’s Choice
Business Breakdowns

Episode 81: The Home Depot: The Pro Builder’s Choice

Business Breakdowns

Episode 81

The Home Depot: The Pro Builder’s Choice

Sean Stannard-Stockton is the CEO of Ensemble Capital. We cover Home Depot's customer acquisition strategy, the difference between DIY builders and Pros, and what drove their decision to stop growing its store count.

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[00:03:10] - [First question] - What the customer strategy is for Home Depot and how it differs from Lowe’s

[00:05:28] - How the sales process works for a pro versus a DIY builder 

[00:07:38] - The size of the addressable market and how much of it Home Depot controls

[00:08:47] - Home Depot’s history and its role in developing and growing their industry 

[00:11:39] - When Home Depot was founded and their original go-to-market strategy 

[00:13:38] - What drove their decision to stop expanding stores and honing their offering

[00:14:56] - Their revenue model and growth over time and the correlation between revenue and the housing market 

[00:18:10] - How much revenue growth can be traced to in-store traffic and what’s driving it

[00:20:19] - Managing inventory availability and the role it plays in financial performance

[00:21:55] - Overview of their economic model as a whole

[00:23:42] - Their earnings profile and overall leverage compared to Lowe’s 

[00:24:54] - How they position themselves for more of their business to be done online and thoughts on their CAPEX budget

[00:27:56] - Who Home Depot purchases from and how they navigated the pandemic

[00:33:23] - Other macro impacts they’ve endured since early 2020

[00:35:05] - Their labor pool and inflationary pressure on wages

[00:37:09] - Thoughts about Home Depot’s growth over the next three to five years

[00:41:40] - How much historically there has been a growth lag after bubbles and crashes 

[00:44:12] - Whether or not new home purchases and refinancing during the pandemic might impact Home Depot’s trajectory

[00:47:27] - Thoughts on Amazon potentially becoming a competitive threat

[00:49:37] - Other risks that are top of mind when thinking about Home Depot’s future

[00:53:51] - Lessons for investors and builders when studying Home Depot’s story

The Home Depot: The Pro Builder’s Choice

Introduction

Matt
This is Matt Reustle. And today, we are breaking down the home improvement giant, the Home Depot. In the U.S., the Home Depot is a key ingredient to a nice, little Saturday. But beyond the power tools and building supplies is an excellent story of business execution. Why has Home Depot been such a strong performer following a housing crash and e-commerce revolution? I'm joined by Sean Stannard-Stockton of Ensemble Capital to break that down. We cover how Home Depot transitioned their approach to business from customer-focused to capital allocation. And while Home Depot has reported strong earnings growth over the past decade and beyond that, this isn't a simple story about a growing footprint. Please enjoy this breakdown of the Home Depot. And one quick highlight ahead of our episode, we're releasing our first written business breakdown on joincolossus.com. David came from Scuttleblurb joined to break down the best-in-class trucker, Old Dominion Freight Line or ODFL. Again, you will find that on joincolossus.com and in our weekly newsletter this upcoming weekend.

HD's Customer Strategy and How It's Different

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