The Home Depot's announcement that it's considering shedding its wholesale division could offer 84 Lumber Co. expansion opportunities into fast growing areas of the country, an 84 Lumber spokesman said Monday.
"If pieces of The Home Depot made strategic and geographic sense, opportunities in the Southeast or the West, we certainly would take a look at them," said 84 Lumber's Jeff Nobers.
Less than one year ago, 84 Lumber President Maggie Hardy Magerko announced that by the end of 2009, the company founded by her father, Joe, would grow to $10 billion in sales, from $3.9 billion in 2005. Sales barely budged in 2006, but the company hasn't altered its aggressive growth plans.
Yesterday, Home Depot's new CEO, Frank Blake, further distanced himself from the company's former head, Frank Nardelli, by stating the world's largest home improvement retailer was looking at all options for HD Supply, a Nardelli pet project. Among the possibilities are selling what has become a 1,000-location North American business, doing in excess of $12 billion in annual sales.
The potential right turn by Blake throws cold water on Nardelli's plan to make The Home Depot a growing player in sales to contractors, home builders and other business customers.
From 2001 through 2005, the Atlanta-based giant made 35 so-called pro sales-related acquisitions -- 21 in 2005 alone. Last year, The Home Depot completed its largest-ever pro sales move, the $3.2 billion purchase of Orlando-based Hughes Supply Inc., a distributor of construction, repair and maintenance products.
Analysts were mixed on whether The Home Depot's potential sell-off made sense, and that 84 Lumber might be a potential buyer of pieces of the huge pro sales pie.
"It's interesting (The Home Depot's announcement), and I'm not sure from the announcement that it's looking at everything non-retail," said Nick Beare, managing director, building products and home building, for investment banking firm Stephens Inc., Dallas.
"They've not owned the operation for enough time to get a handle on what they actually own," according to Beare. "If they did sell off the entire wholesale business, I think they would be under a lot of criticism."
Analyst James McCanless, who follows The Home Depot for FTN Midwest Research, Nashville, said a number of smaller independent competitors might want to feed on pieces of HD Supply.
"With HD Supply's position in Florida through its acquisition of Cox Lumber, and in Atlanta through the Williams Brothers buy, I could see independents interested in buying those pieces," McCanless said.
Beare said the fact that The Home Depot was even considering placed HD Supply on the block might help validate 84 Lumber's long-held strategy of growing from within, known as organic growth.
"84 Lumber hasn't been terribly acquisitive during its entire time in business, and seeing Depot now looking to divest its wholesale operation might be proof for them that their strategy works," Beare said. "For 84, a divestiture may show the power of its organic strategy. For them, it's one less consolidator to contend with."
