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11/23/2020

Lowe’s reacts to HD Supply deal

CEO says rival’s big investment doesn’t affect Lowe’s MRO approach

Lowe's acquired Maintenance Supply Headquarters in 2017.

On Monday of last week, The Home Depot announced a plan to purchase HD Supply for $8 billion, bolstering its position in what the Atlanta-based retail giant describes as a “highly fragmented, $55 billion MRO marketplace.”

The following day, the HD Supply deal for the powerhouse distributor of MRO – maintenance, repair and operations products and services — was the first order of business mentioned during the Home Depot’s third quarter earnings call.

HD Supply posted sales of $6.146 billion in its most recent annual report, for the year ended Feb. 2. The company’s holdings feature 40 distribution centers nationwide and a dedicated fleet of more than 700 delivery trucks serving the multifamily, hospitality and healthcare sectors, among others.

“The acquisition of HD Supply strategically positions us to drive accelerated sales growth in a highly fragmented MRO space,” said Richard McPhail, Home Depot CEO.

News of the deal encroached into the Lowe’s earnings call one day later. Referring to Home Depot’s agreement to acquire HD Supply for $56 per share – about an $8 billion deal – an analyst asked Lowe’s CEO Marvin Ellison if the “news in the MRO space” changes anything about Lowe’s investments.

“It does not,” answered Ellison. “When we look at our investment thesis and we evaluate where we can gain the greatest return, it is in our core business.”

He defined the core as the company’s omni-channel combination of brick-and-mortar stores, its dot-com platform, its supply chain and “all the other operational components that tie that together.”

“We feel like we’re in a good position and we’re going to continue to make those investments,” Ellison added. “And over time that thesis may change but in the short term and near term, we’re just laser focused on our core business.”

Lowe’s will continue to aggressively court the MRO customer through its Lowe’s Pro MSH – Maintenance Supply Headquarters. The model has the ability to scale, he says, within the current pro strategy.

Lowe's acquired Maintenance Supply Headquarters in May of 2017 for $512 million. That move complemented a 2016 acquisition of Mid-Atlantic and Northeast MRO distributor Central Wholesalers.

Lowe’s Pro MSH is self-described as a one-stop shop for maintenance and renovation supplies for the multifamily housing and hospitality industries. It offers same-day delivery in 23 national markets.