Holiday Central

Home Depot wants to grab a bigger chunk of Black Friday shoppers' spending

Source: Home Depot

Black Friday shoppers typically don't bust down the doors of their nearest home improvement store after they finish their turkey. But that hasn't stopped Home Depot from gunning for a larger share of spending from this frenzied legion of shoppers, who hit the streets each year ready to buy.

In an effort to capitalize on consumers' desire to decorate their homes, Home Depot — the largest seller of live Christmas trees — has grown its seasonal assortment five times over since launching the category a decade ago. These peripheral purchases have helped boost the importance of the retailer's fourth quarter, which now accounts for a larger piece of its annual revenue.

Home improvement retailers drum up the majority of their sales in the spring quarter.

"The mindset had been that home improvement was a less important category up until the last few years," UBS analyst Michael Lasser told CNBC. "[Home Depot] has increased their relevancy over the last few years in the holiday season, as they've realized that they can capture a greater share of the spend."

Home Depot does not specifically break out what percentage of its fourth-quarter sales are tied to seasonal merchandise or holiday gifting. But like many traditional retailers, its peak days occur during Black Friday week and the days that follow, said Mike Mahler, the company's vice president of merchandising.

That period is a natural inflection point for the Home Depot, as many consumers view Black Friday as the official start to the holiday shopping season, Mahler said. Last year, roughly 45 percent of the chain's 8 million poinsettia sales occurred that day. Once shoppers set foot inside a Home Depot, the retailer's growing product assortment has helped it snag incremental sales, by getting shoppers to add tree skirts, stockings and other extra items to their baskets.

All in, the company has roughly 1,000 seasonal items in its stores, and an additional 4,000 available on the web.

A home decorated with Star Shower lights.
Source: Home Depot

"We knew that there was an opportunity, we just didn't know how high was high for the accessories business," Mahler told CNBC, adding consumers are willing to spend a little extra for the right product. "They want something different than what they did last year and they want something different than what the neighbor has down the block," he said.

Indeed, shoppers have told the National Retail Federation that they planned to spend more on decorations nearly every year since 2009. This season, they plan to allocate an average $54.75 on trees, lights and the like — up slightly from $53.88 in 2015.

Home Depot is up against a tough comparison in the fourth quarter, after last year's unseasonably warm temperatures helped it record an 8.9 percent lift at its established U.S. stores.

Investors last week balked at the company's third-quarter earnings report, when management said it expected same-store sales to rise roughly 3 percent during the holiday quarter. Analysts, who have been wary of a slowdown in the housing recovery, had been looking for a 4 percent increase for the period.

Home Depot's shares have since recovered, but are still down nearly 2 percent year to date. Yet Lasser remains optimistic about the company's fourth-quarter opportunities, as sales should see a lift from "sound execution" and a favorable macroeconomic environment, he said.

"The home improvement cycle still has room to expand further, and Home Depot will benefit from that," Lasser said.

Tune into CNBC's "Mad Money" at 6 p.m. EST on Tuesday for an interview with Home Depot CFO Carol Tome.