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MarketScreener Homepage  >  Equities  >  Nyse  >  The Home Depot, Inc.    HD

THE HOME DEPOT, INC.

(HD)
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Home Depot : Won a Lot of Customers During the Pandemic. The Trick Is Keeping Them. -- Journal Report

10/24/2020 | 04:14am EST

By Angus Loten

Home Depot Inc. reacted to the rapid spread of Covid-19 in the U.S. by canceling annual sales events and pulling many marked-down goods off the shelves to keep crowds away from stores. But rather than a drop in traffic, amid lockdowns and social distancing, customers began flocking to its physical and online stores, spending stay-at-home savings and government stimulus checks on home-improvement projects.

In August, the Atlanta-based company posted its strongest quarterly sales growth in nearly 20 years, with May-to-July revenue up 23% to $38.1 billion, compared with the same period in 2019.

The digital technology needed to meet that rush in demand fell to Matt Carey, Home Depot's chief information officer. Mr. Carey and his team quickly spun out mobile apps for curbside-pickup services and real-time inventory-tracking software, among other tools. "It was like Black Friday every day," he says about the unexpected run.

Mr. Carey spoke to The Wall Street Journal about the efforts Home Depot made to get its technology in place and how it's handling the surge in business. Here are edited excerpts of the discussion.

The first steps

WSJ: Hardware stores were declared an essential service. But how did you keep stores open?

MR. CAREY: We went to crowd-limiting very early. Within 24 hours, we had an app deployed, running in the cloud, that allowed our associates to control the crowds coming in and out of the stores. You have a person who has a hand-held device in front of the store. As one customer goes in, you add them, and as one comes out, you subtract. Nothing high tech, but it did the job.

WSJ: What have you learned, and what would you do differently?

MR. CAREY: The past several months provided us a wealth of customer feedback, in a compressed time frame, related to the digital capabilities we offer. Take our curbside rollout, for example. We started with a very scrappy, manual process where a customer would arrive at the store after ordering online, inform an associate of their order number, and then the associate would get the order and bring it out. Associates were actually making handmade signs that said, "Curbside pickup, park here." We were able to introduce enhanced features very quickly. The experience today is now fully embedded into our app -- customers can even opt in to location-based alerts that let the store know they've arrived to pick up their order.

The digital experience

WSJ: What was happening at the online store?

MR. CAREY: There was a significant spike in our online business. Because we earlier had invested in moving that platform to the cloud, it went off just great with no issues and we continue to handle that volume without a problem.

The great thing about the cloud is that you don't have to order hardware, bring it into your data center, get it set up on the data-center floor and wire it up. Obviously, there is lead time there. It's pretty clear that we would not have been able, had we hosted it ourselves, to withstand the volumes that we experienced, and are still experiencing, on the online platform.

WSJ: What's one example of how the online software might help customers get what they need for the project they're planning?

MR. CAREY: When a customer is searching for a term such as "fence" or "fencing," we will return a range of results based on the various fencing needs they may have. As an example, within a couple clicks, we can determine that the intent of the project is to install a wooden fence for a yard, and we will help the customer with suggestions for additional tools and materials to complete the project. Suggestions may include concrete for the footings, hinges for a gate, and even a how-to guide for installing a backyard fence.

WSJ: How did you handle the pandemic's impact on logistics?

MR. CAREY: The supply chain in general across the U.S., just finding drivers and trailers, was a challenge. Making sure we could get products to the stores, a lot of that was human resources, a need to staff up. But we also had a brand-new distribution center that was going to come on line. Within two weeks, the use of that building was pivoted to become an online fulfillment center, to help offload the volume from the other online fulfillment centers. The flexibility of our software allowed us to do that.

Essentially, what we did was turn a market-delivery center into a direct-to-home pick-pack-and-ship center. It was a bulk distribution center and required a whole different software stack. You're not planning routes at fulfillment centers. You're forwarding packages to UPS and other home-delivery carriers. As a result, customers weren't experiencing the long lead times that they were from competitors.

WSJ: How were you able to help do-it-yourself home-improvement shoppers?

MR. CAREY: We have a home-measure service, whether it be carpet or other products. We want to be able to engage a customer how they want to be engaged with. If they want to order a sample online, we want to get those to you. We can help you know how many bolts you might need. We have a tool to calculate how much it will cost to buy new countertops. All the things that help you assess a project. Anything to remove the friction that prevents a customer from doing a job, even connecting them with a professional. We have these online services.

We're also using AI and natural-language processing to help connect the customer to a product they're looking for. In some cases they don't know what to ask.

WSJ: How are the stores seeing their customer change? Are more novices still jumping in?

MR. CAREY: We are seeing customers take on expanded projects throughout their homes that, in turn, create additional activity across the store. We are seeing their confidence grow after they complete their first DIY project -- it may be a garden, it may be painting. With that confidence, we see them take on the next project that may grow in complexity, like installing ceiling fans or light fixtures.

WSJ: How has this crisis had a lasting impact on the way people shop for home products?

MR. CAREY: In many ways, Covid has fundamentally changed how consumers shop. For many customers, homedepot.com or the mobile app is the new front door to the store. Our digital sales increased by roughly 100% in Q2, with 60% of those sales being picked up at our stores.

Maintaining sales

WSJ: How is Home Depot planning to keep that pandemic home-improvement surge going? How are you going to keep people coming into your stores and not Lowe's? And once people are able to leave their homes, do you expect a drop in home-improvement interest? If so, how can you win them back?

MR. CAREY: We continue to invest in capabilities that make it easier for customers to choose however, whenever and wherever they want to shop with us.

WSJ: How has the pandemic affected older and retired workers, and are any additional steps being taken for their safety?

MR. CAREY: We've taken several measures to keep associates safe, including additional paid time off, new wellness programs and health checks at our facilities. For at-risk associates, those 65 and older or those deemed higher risk due to pre-existing health conditions, we are offering even more paid time off -- up to 240 hours [by the end of the year] for full-time associates and 120 for part-time. This additional paid time off can be taken for any reason and will be paid out at year-end if not used.

Across all stores, we have installed heavy-duty protective shields that were designed specifically for the Home Depot. Through the end of our second quarter, we have invested more than $1.3 billion in Covid-related benefits for associates. We also recently announced that we would extend Black Friday deals for two months during the holiday shopping season, to avoid driving high traffic volumes to the stores over just a few days.

Mr. Loten s a reporter for CIO Journal in New York. He can be reached at angus.loten@wsj.com.

(END) Dow Jones Newswires

10-24-20 0614ET

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Financials (USD)
Sales 2021 130 B - -
Net income 2021 12 728 M - -
Net Debt 2021 26 480 M - -
P/E ratio 2021 23,4x
Yield 2021 2,18%
Capitalization 298 B 298 B -
EV / Sales 2021 2,50x
EV / Sales 2022 2,51x
Nbr of Employees 415 700
Free-Float 60,1%
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Technical analysis trends THE HOME DEPOT, INC.
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Mean consensus OUTPERFORM
Number of Analysts 33
Average target price 305,80 $
Last Close Price 276,60 $
Spread / Highest target 26,5%
Spread / Average Target 10,6%
Spread / Lowest Target -24,1%
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Managers
NameTitle
Craig A. Menear Chairman & Chief Executive Officer
Edward P. Decker President & Chief Operating Officer
Richard V. McPhail Chief Financial Officer & Executive Vice President
Matthew A. Carey Chief Information Officer & Executive VP
Paul Antony Senior Vice President-Technology
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