The Home Depot announced last week it has signed a definitive agreement to acquire Home Mart, the second largest Mexican home improvement retailer. The transaction is subject to approval by the Mexican regulatory authorities and customary closing conditions; financial terms were not disclosed. When the acquisition is completed, Home Depot will acquire 20 Home Mart locations, bringing its total store count in Mexico to 39 stores.
Home Mart will add significant new locations for Home Depot, including prominence in Mexico City and a store base in seven new markets, and enhance its position in a nearly $15 billion market.
Home Mart was established in 1993. Its stores, which average 69,000 square feet, serve customers in the home improvement industry. Home Mart stores will convert to the Home Depot brand following a transition period and training for new associates. Ricardo Saldivar will lead the combined operation as president of Home Depot Mexico.
Home Mart does not provide rental services at this point, but Home Depot's vice president of rental and pro businesses Joe Dixon told RER: "We are always evaluating growth opportunities in all markets and products."
In June 2001, Home Depot entered the Mexican market through the acquisition of Total HOME, whose stores in Monterrey and Mexico City were converted to Home Depot stores in March 2002. In 2002, the company acquired Del Norte, a four-store home improvement chain formerly based in Ciudad Juarez. Home Depot has opened a total of 11 new stores since 2002 in Mexicali, Culiacan, San Luis Potosi, Monterrey, Tijuana, Leon, Chihuahua, Guadalajara, greater Mexico City (2) and Hermosillo.
Atlanta-based Home Depot also said it is raising its new store opening guidance from 175 stores to 185 new stores this year, including the 20 stores added through the Home Mart acquisition and reflecting the company’s decision to move 10 stores previously scheduled to open in 2004 into 2005.
Also last week analysts at Legg Mason reiterated their “hold” rating on The Home Depot, while raising estimates for the company. Analysts expect the company to report robust 1Q04 results on May 18. Legg Mason expresses its concern, however, regarding the adverse impact of the rising interest rates on the company. The earnings per share estimates for 1Q04, 2004 and 2005 have been raised from 43 cents to 44 cents per share, from $2.08 to $2.10, and from $2.35 to $2.37, respectively.
Home Depot Rentals in No. 7 on the new RER 100.