Home Depot Comments on Vendors and Higher Prices

| About: Home Depot, (HD)
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On Home Depot's Q2 conference call, executives discussed vendor negotiations and price hikes:

David Strasser - Banc of America Securities

In listening to your vendors conference calls for the second quarter, virtually all of them talked about trying to raise prices and push pricing through as a result of commodities. They talked about in a lot of different ways. How are those negotiations going and where is that level of discussion at this point?

Robert L. Nardelli

It is interesting. Before Tom answers, having been on the other side of the fence in selling to major retailers, I am going to be interested to hear Tom’s comment.

Thomas V. Taylor-Executive Vice President of Merchandising and Marketing

Thank you, Bob. I think we feel very good about our vendor negotiations, as we may have mentioned on a previous call, or certainly in my one-on-one sessions with the analysts. We added a vendor management team at the end of the last quarter. They are in place now, assisting our merchants when we do see price increases, and aggressively going out, going after, taking costs out of our business.

We feel good about it. I think that we are approaching our negotiations better-educated than we have ever been. I think the merchants are coming with great knowledge and an understanding, so when a vendor partner comes in with a price increase, we have a better understanding and can negotiate favourably.

I think we are doing a very good job.

David Strasser - Banc of America Securities

Philosophically, when you think about it, when you are going to accept them at some point, is it something that you would most likely plan on passing through, or would you accept increases that you did not think you could?

Robert L. Nardelli

I think in our discussions with our supplier partners, and they have been great, is we both work on the same objective -- that is, to get volume and hold customer volume traffic. At the end of the day, if in fact commodity prices, and we feel good about the productivity pass through that our suppliers are giving us, it would be our position to test the market. If they hold, then we will stay there. If they do not, then we go back and talk with our supplier about sharing the burden, but certainly not being uncompetitive in the marketplace.

A point too, I think one of the big advantages we have in addition to broadening our customer base through supply is the commonality of our suppliers. Joe and his team along with Tom have had some great harmonizing discussions with our suppliers. Again, if you look at our cost of goods sold, we certainly have a premier position in talking to the suppliers and again, keep in mind not only have we added 900 stores, but we have added 900 branches. So their ability not only to grow in the existing channels, but those precious new channels that Joe talked about in construction, industrial, and so forth, in giving them access to market is a huge opportunity for them through the same company base.


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