Home Depot sees huge opportunity in Mexico
The housing boom south of the border helps offset U.S. woes.
By Jeremy Schwartz
Cox News Service
Article Last Updated: 05/09/2008 11:18:11 PM MDT


MEXICO CITY — With the U.S. home improvement market hobbled by an unrelenting housing slump, Atlanta-based Home Depot is predicting a far rosier outlook in Mexico, which is in the midst of an unprecedented housing boom.

The Mexican government hopes to spur construction of 16 million new houses by 2030, a goal that would nearly double the nation's current housing stock. President Felipe Calderon has argued that a robust homebuilding effort could save the Mexican economy from the negative effects of recession north of the border.

For Home Depot Mexico, the prospects are tantalizing.

Since entering the Mexican market in 2001, Home Depot has enjoyed steady growth. The company started with four stores and now operates 69, with at least nine new stores set to open this year.

The chain, which has annual Mexico sales of more than $1 billion, is Mexico's largest home-improvement retailer.

In a sign of confidence, Home Depot announced in March the construction of a $28 million distribution center in the central Mexican state of Hidalgo that will serve at least 60 stores.

"The housing sector will continue to be strong in the future, and surely (Home Depot) will benefit from that," said Carlos González, director of stock market analysis and strategy for IXE Bank.

Last year, Home Depot revealed that its stores in Mexico, Canada and China accounted for 9 percent of its revenues and 11 percent of its operating profits.

Home Depot's strong Mexico performance stands in stark contrast to slumping sales in the U.S., where store officials this month announced the closing of 15 stores.

Home Depot won't reveal its specific sales figures in Mexico, but Ricardo SaldÃ*var, president of Home Depot Mexico, said the company has enjoyed double-digit growth in sales. SaldÃ*var said he expected Home Depot to enjoy similar rates of growth "for the foreseeable future." "I think that if we had asked ourselves back then if Home Depot would have (more than 70) stores in 2008, probably some of us wouldn't have believed it," SaldÃ*var said. "Mexico was a market that needed something like Home Depot."

As it continues growing, Home Depot hopes to fend off a challenge from North Carolina-based Lowe's, which has also been drawn by the promise of the Mexican market. Lowe's plans to open as many as five stores by 2009 in the northern city of Monterrey.

Monterrey, considered by many to be Mexico's most lucrative market, is also home to Home Depot's corporate offices and seven stores.

Home Depot also has seven stores in Mexico City, three in Guadalajara and stores as distant as Tapachula, Chiapas, along the Mexico-Guatemala border.

While most home construction in the U.S. is done with wood, Mexicans prefer concrete and reinforcing steel bars. Home Depot stores' inventory reflects the preference.

The Mexican stores also tend to be smaller than their American counterparts, an acknowledgment, SaldÃ*var said, of less individual purchasing power in Mexico.

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