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With tariffs raising costs on core building materials, Home Depot’s GMS acquisition highlights how vertical integration can insulate retailers, building on precedents from Costco to Walmart in securing supply chain control. (Photo by Xavier de Canto/Construction Photography/Avalon/Getty Images) Getty Images Why Home Depot Pivoted When retailers start buying their suppliers, it’s usually a sign that something fundamental has shifted in the market. In May, Home Depot told investors tariffs wouldn’t push up prices. By August, it revised its course, warning of “modest” increases on certain goods. Days later, it completed the $5.5 billion acquisition of GMS Inc., a distributor of drywall, ceilings, and steel framing. The timing was telling. Although Home Depot sources more than half of its purchases domestically, tariffs still threaten margins in the contractor-focused “Pro” segment, which generates nearly half of its sales. More importantly, Pro is the company’s growth engine, while the do-it-yourself base has softened as pandemic-era demand wanes. Home Depot has made clear that Pros are its strategic priority, leaning on contractors for durable growth. GMS adds control over distribution in some of the categories most vulnerable to duties, giving Home Depot more leverage on cost, logistics, and supply reliability. For Pro customers, consistency matters as much as price; for Home Depot, owning more of the chain helps provide both. And it isn’t alone: as Home Depot strengthens its contractor ecosystem, it echoes a broader trend in retail where vulnerabilities are prompting companies to rethink how much of their supply chains they need to own. Vertical Integration As Precedent Retailers have long relied on vertical integration as a means to blunt cost volatility and insulate themselves from external shocks. In grocery, both Costco and Walmart have pushed upstream into food production to stabilize essential categories. Costco’s $450 million poultry facility in Nebraska is perhaps…

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Filed under: News - @ September 9, 2025 1:28 pm