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Inside the Home Depot playbook

A merchandising VP lays out ‘classic’ response to crosswinds
Ken Clark

The good thing about the current macroeconomic environment weighing on the home improvement industry is that the tailwinds are more durable than the headwinds.

Feb 19, 2020 San Mateo / CA / USA - People shopping at Home Depot in San Francisco bay area; The Home Depot, Inc. is the largest home improvement retailer in the USA; Shutterstock ID 1653868690
Frictionless shopping is among the keys to navigating the market crosswinds.

That observation — made by Dana Hudson, The Home Depot’s vice president of merchandising for kitchen and bath during a presentation in Las Vegas—doesn’t mean the conditions are ripe for home improvement growth.

The “crosswinds” facing the industry will require careful navigation. The Atlanta-based giant’s fiscal 2024 outlook delivered in its latest quarterly earnings call on Feb. 20 calls for totals sales growth of 1% and comparable-store sales of negative 1% compared to fiscal 2023. (The company’s stores will get an extra week on the calendar to move merchandise.)

“I'm a huge optimist, and I believe that those tailwinds are definitely on our side,” Hudson said.

Speaking during the Crystal Vision Award Breakfast (see sidebar) benefitting the Storehouse of World Vision, Hudson ran through the familiar list of challenges facing the industry in general.

Home improvement spend as a portion of personal consumption — elevated though it is compared to pre-pandemic — is decelerating since 2021. And Home Depot expects that deceleration to continue “until it reverts to the norm.” The gung-ho home improvement years 2020 to 2022 saw “meaningful pull forward that still has to work out of the system,” she said.

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About Crystal Vision

More than twenty years ago, leaders in the kitchen and bath industry met with the global humanitarian organization World Vision with the idea of reducing waste and equipping families across the nation to live fuller lives.

That was the birth of Crystal Vision—an annual event that recognizes the contributions companies are making to society.

The 2024 event was held Feb. 28, and coincided with KBIS in Las Vegas.

And of course, there’s the headwind of high interest rates.

“Those interest rates are not doing us any favors in terms of their ability or willingness to actually take on the remodel project right now,” she said.

Working against those headwinds, and in favor of home improvement retailing, are the tailwinds formed by aging housing stock and rising home values. More than half of American homes (53 percent) are 40-or-more years old. “All of those homes need repair and probably a lot of those need a good touch up and a great remodel” she said.

Meanwhile, the American home market value increased 46% since 2019—that adds up to $15 trillion. “So our most valuable asset is just getting much more so,” she said.

In these crosswinds, Home Depot is taking some pages out of what Hudson calls a “very classic playbook.”

She described three chapters:

First chapter: product authority.

Product authority, she explained comes through offering such things as quality products, the right brands, and great innovation. In the kitchen and bath area, one example of functional innovation is in the area of water conservation.

Product authority also leans into design trends, what Hudson called “our industry superpower.” Speaking to a room with large representation of Kitchen & Bath Industry Show (KBIS) attendees, Hudson said, “All of you who were here seven years ago, we were looking at a sea of white and gray. And now it's matte black and pops of color. And the great wood tones are back. We need to lean into that.”

Dana
Dana Hudson

Second chapter: frictionless shopping.

The key to frictionless shopping is inventory availability, and retailers are in a much better position this year than one year ago during the post-COVID supply chain struggle. But the industry is not completely out of the woods. “We still have so much work to do on making sure that the product is in the right place, in the right quantities and where the customer wants to buy it,” she said.

Toward this end, the retailer is applying intelligent machine learning and new technologies to boost inventory productivity.

Beyond that, Home Depot is investing in ways to improve the project buying experiences of its customers, especially on the digital side. The idea is to make it easier for a customer to coordinate buying a group of related items.

“Basically, we want to make sure that the customer is not spinning their wheels in the early days, wondering: ‘Can I get this remodel project done? And how much is this going to cost?’”

Third chapter: cost reduction.

In Hudson’s words, there is a “relentless focus on cost” at work at Home Depot.

“We still believe that there is significant cost to iron out, especially as it relates to supply chain and how we're getting product from point A to point B,” she said. ”But in any situation, we always want the customer’s discretionary dollars to go further.

“Those are three classics, but we are trying to apply some smarter takes to them, especially as it relates to applying new technologies to old problems.”

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