EUR 850.00 For Business Accounts Only

Morningstar | HD Supply Expects Another Solid Year of Growth in 2019

HD Supply traces its roots to Maintenance Warehouse, a maintenance product distribution company founded in 1974. Over the subsequent two decades, Maintenance Warehouse continued to grow and Home Depot eventually acquired it in 1997. In 2007, Home Depot sold HD Supply to private equity investors (Bain, Carlyle Group, and CD&R) for $10.3 billion. After operating under private equity ownership for over five years and amassing a significant amount of debt, HD Supply completed its initial public offering in 2013. Since the IPO, HD Supply’s management team has kept a steadfast focus on repairing the balance sheet, and the company has significantly reduced its debt load. On Aug. 1, 2017, HD Supply completed the sale of its $2.6 billion Waterworks segment for a net $2.4 billion. The company used a portion of the proceeds to pay down approximately $2 billion of debt, which allowed it to reach its targeted gross debt/EBITDA ratio of below 3 times. Over the past two fiscal years, HD Supply has spent almost $1.2 billion to repurchase 34 million shares, or over 16% of its share count. We expect HD Supply will continue to opportunistically buy back its stock.HD Supply has become one of the largest industrial distributors in North America. It is the market leader in facilities and home improvement maintenance, repair, and operations as well as specialty construction. The company has successfully capitalized on its scale and expanding network of customers and suppliers to consistently grow faster than its end markets. We see a continued growth story for HD Supply over at least the next five years as the company continues to execute its growth strategies to expand its presence in its strengthening end markets. The company’s growth playbook consists of introducing new products and services, increasing customer wallet share, expanding its sales channels and geographic footprint, and increasing its already robust network of customers and suppliers. HD Supply’s free cash flow generation has been improving, and with a rightsized balance sheet, we think the company's true free cash flow potential will shine through.