Home Depot CEO On Interline Purchase, E-Commerce Offering

Jack Keough examines Home Depot chairman Craig Menear's recent conference call at Goldman Sachs annual Retailing Brokers Conference, in which he discussed the motivations behind the acquisition of Interline Brands.

Home Depot has made it clear that it expects to substantially grow its MRO business through its Interline Brands acquisition and will also expand its sales to professional contractors through e-commerce transactions.

Craig Menear, chairman, president and CEO of Home Depot, told attendees at the Goldman Sachs 22nd Annual Retailing Brokers Conference that the MRO space is one that the company has slightly played in but had not done very well.

“The acquisition of Interline actually allows us to service customers who are in our store today who have been asking for us to be able to do things that we couldn't do, help them manage inventory, buy an open purchase order, those type of things as well as  same day delivery,” he said.

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He said the Interline acquisition allows the company to expand its business in the multi-family sector as well as in hospitality and industrial. “It’s about a $50 billion market opportunity,” he said, according to a transcript of the call as provided by www.seekingalpha.com.

Home Depot paid $1.6 billion in cash for Interline Brands in July, making it one of the largest MRO acquisitions of the year. Interline is No. 19 on Industrial Distribution's 2015 Big 50 List.

Menear said when Interline became available, HD saw it as a way to increase purchasing capabilities.

“Home  Depot has been good at service obviously though our stores,” he said. “That’s  something that we focus on. We are not great at outside selling. And so the acquisition brings along with it 1,500 plus associates that are actually excellent at selling.

“It brings the capability to be able to manage inventory for customers, open PO purchases, the ability to have 93 distribution points for same day, next day delivery, all the things that we have customers in our stores every single day asking us for but we hadn't built out those capabilities yet.”

He also explained why the Interline purchase was different from Home Depot Supply.

“The big difference is, there were large chunks of Home Depot Supply that were focused on industrial. This is not the case here,” Menear said. “The main focus in this business is around multi family, institutional and hospitality. And so these are customers that today, again are shopping our stores. We just aren't able to capture the share of wallet with them that we would like to. And so we think that this fits very, very nicely within our current space.”

More from Jack: Home Depot Not Seeking More MRO Distributors

The HD Chairman also says the company sees opportunity to increase its business with contractors through E-commerce. He said the pro contractor is starting to use E-commerce more often and now they can see the entire inventory for a project.

“We have created that as part of our app or on our web for the pro. And clearly it's a capability that they are looking for,” he said,

He pointed out that roofers or drywallers, for example, often buy the same products on a regular basis. 

HD says its E-commerce platform gives buyers the capability to have a ready list  of products and order them through the web, via their phone on the job site or while home at night.

“And they can have that product available for pickup ready to go and/or have it delivered. Those are exactly the kind of capabilities that we are working to build out,” Menear said.

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