Home Depot Shifts to ROMO, Down on Advertising Value and Costco Competition

Home Depot (HD) is shifting its advertising focus from Return on Ad Spend (ROAS) to Return on Marketing Objective (ROMO) to better measure the long-term customer journey. This change has caused skepticism among shareholders, with shares down fractionally in trading. Home Depot also faces a new threat from Costco (COST), which is expanding its home improvement offerings and could compete with Home Depot for customers. Analysts have a Strong Buy consensus rating on HD stock with an average price target of $425.

Home Depot, Inc. (NYSE:HD) is shifting its advertising strategy from Return on Ad Spend (ROAS) to Return on Marketing Objective (ROMO) to better capture the long-term impact of its retail media campaigns. This change, announced by Melanie Babcock-Brown, VP of media and monetization for Orange Apron Media, The Home Depot’s retail media network, aims to address the limitations of ROAS in measuring the full value of long customer journeys [1].

The shift to ROMO is particularly relevant for Home Depot, given its long customer journeys. While some home improvement decisions are made quickly, others can take months or even years to materialize. High ROAS, which focuses on short-term outcomes, fails to capture the full value of these long consideration periods and provides limited insight into brand equity, new customer acquisition, or long-term loyalty [1].

Home Depot’s new framework, ROMO, is designed to measure the overall impact of its retail media campaigns across the entire customer journey. This approach is essential for building a long-term relationship with customers and driving sustainable growth [1].

However, this shift has sparked skepticism among shareholders. Home Depot's shares have experienced a fractionally downward movement in trading, reflecting the uncertainty surrounding the new measurement framework. Additionally, Home Depot faces a new threat from Costco (COST), which is expanding its home improvement offerings. This expansion could potentially draw customers away from Home Depot [2].

Despite these challenges, analysts maintain a Strong Buy consensus rating on HD stock, with an average price target of $425. This optimism is based on Home Depot's strong financial performance, including a 4.9% year-over-year revenue increase to $45.28 billion in Q2 2025. The company also announced a quarterly dividend of $2.30 per share, with an annualized dividend of $9.20 and a yield of 2.2% [2].

In conclusion, Home Depot's move to ROMO is a strategic shift aimed at capturing the long-term value of its retail media campaigns. While shareholders express some skepticism, the company's strong financial performance and analyst optimism provide a solid foundation for future growth.

References:
[1] https://www.adexchanger.com/adexchanger-talks/roas-nah-the-home-depots-all-about-romo/
[2] https://www.marketbeat.com/instant-alerts/filing-the-home-depot-inc-hd-shares-acquired-by-oak-harvest-investment-services-2025-08-24/