Fortunes of home improvement companies are correlated to the health of the economy. Thus, there remains no surprise that the companies operating in this sector are striving to add diverse revenue streams to hedge against economic cycles.
Building on the strategy, home improvement chain store Home Depot Inc. (HD) is planning to come up with a 1-million-square-foot e-commerce distribution center in McDonough, Georgia, Business Journal reported.
Moreover, the new distribution center is expected to generate about 300 jobs in the region.
Why E-commerce?
The technological advancement in marketing, including e-commerce and online business, provides a win-win situation for both the retailers and shoppers. This situation enables the companies to generate additional sales while broadening the company’s existing customer base globally. Moreover, it also enhances the visibility and reputation of the retailer as a global firm offering great fashion and value at the same time.
On the other side, shoppers get the benefit of purchasing researched products at the best prices, as they can compare the prices with various companies.
Home Depot is a leading player in the highly-fragmented home improvement industry. The company has reinvigorated itself with a shift in focus from new square footage growth to maximization of productivity through its existing store base.
In addition, the company has implemented significant changes to its store operations to make them simpler and more customer friendly. We believe these initiatives will induce more customer traffic to its stores, while boosting its top line.
Home improvement retailing business is highly competitive and the company faces stiff competition from Lowe’s Companies Inc. (LOW) and other home supply retailers on attributes such as location, price and quality of merchandise, in-stock consistency, merchandise assortments and customer service. This might weigh upon the company’s results.
Currently, Home Depot has a Zacks #2 Rank, implying a short-term Buy rating. Also, we retain our long-term Neutral recommendation on the stock.
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