Home Depot Can Expand Leadership in Plumbing, Electrical & Kitchen Products

Home Depot’s (NYSE:HD) market share in home improvement product categories like plumbing, electrical and kitchen has remained relatively stable over the past few years, in the range of 21-22%, despite competition from Lowe’s (NYSE:LOW). High penetration levels in the U.S. market has helped Home Depot offset losses from the hard-hit housing markets in southern California and Florida.

We expect Home Depot to maintain its #1 position in the plumbing, electrical & kitchen market and continue its gradual market share improvement alongside a broad recovery in the housing market.

While we expect a gradual growth in Home Depot’s market share in plumbing, electrical & kitchen products to roughly 23% by the end of our forecast period, Trefis community members predict this share will cross 26%, which suggests an upside of 5% to our price estimate for HD’s stock.

We currently have a $36.65 price estimate for Home Depot stock, in line with market price.

Home Depot Leads Plumbing, Electrical & Kitchen Products Market

Home Depot generates more than one-fifth of the total plumbing,  electrical & kitchen product sales in the U.S. and Canada. The company enjoys a well-known brand name and large customer base. At 2009 end, even after discontinuing its nearly 60 Expo & HD supply stores, Home Depot had over 450 more stores than Lowe’s in the U.S. and Canada combined. With Home Depot’s high customer penetration, its competitors will find it difficult to eat into the company’s market share.

Efficient Global Product Sourcing System

Consumer demand in the home improvement space is typically driven by price and quality. Increasingly, consumers are also turning towards green and eco-friendly home products such as water saving flushes and electricity saving lights that can lower utility bills. Home Depot has an efficient global product sourcing system which gives it an edge over competitors and independent stores, facilitating its ability to distribute a wide range of innovative products.

Trefis Community Forecast

The Trefis community predicts that Home Depot’s share in plumbing, electrical & kitchen improvement products will increase from 22% in 2010 to over 26% by the end of our forecast period, compared to the baseline Trefis estimate of an increase to 23% during the same period. The member estimates imply an upside of 5% to our $36.65 price estimate for Home Depot’s stock. We note that our price estimate is roughly in line with market price.

Drag the trend line in the modifiable chart above to see how various scenarios for plumbing, electrical & kitchen segment market share could affect Home Depot’s stock value.

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Our complete analysis for Home Depot’s stock is available here.