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Homebase to shut one in four stores Homebase to shut one in four stores
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Home Retail Group is to close one in four Homebase stores as it looks to create a “smaller but stronger” business amid falling demand. Home Retail Group is to close one in four Homebase stores, putting thousands of jobs under threat.
The move is part of a three-year turnaround plan for the DIY retailer after Home Retail admitted it is "too large relative to the demands of the UK market and changing digital shopping patterns". John Walden, the chief executive of parent company Home Retail Group, refused to reveal how many workers could lose their job, but at least one employee — Homebase managing director Paul Loft — has agreed to step aside.
“It is also costly to operate and as with most traditional retailers, Homebase has a tail of stores that are either unprofitable or are in decline,” Home Retail said. Homebase has 17,000 staff in total including head office employees but the firm admitted too many of its shops were either losing money or in decline.
The retailer plans to close 80 shops, representing a quarter of its estate, by 2018. Homebase managing director Paul Loft is to step down when a successor is found. The closures are the first major decision made by Walden since he took charge of the business from long-time boss Terry Duddy earlier this year.
The move came as Home Retail reported that sales increased by 3 per cent to £2,669m across the group with like-for-like sales up 2.9 per cent at Argos, and up 4.1 per cent at Homebase. He said: “Not all the stores we will be closing are making a loss. Around 10 per cent are unprofitable, but you will find that in any other retailer.
Operating and distribution costs increased by £15m to £951m Benchmark profit before tax increased by 13 per cent to £30.9m. Reported profit before tax decreased by 5 per cent to £13.5m. “Retail in the UK is over-stretched everywhere, which is why you see retailers reducing space. There’s a movement across retail to reduce square footage and we believe we can fix it here.”
Home Retail chief executive John Walden said: "The group has performed well in the first half of the year, delivering further like-for-like sales growth at both Argos and Homebase and a 13 per cent increase in Group benchmark profit before tax. "Argos continued to build on its sales growth from the previous financial year, increased its benchmark operating profit whilst also making good progress with its Transformation Plan. It means around 81 of its 323 shops will close by 2018, with 30 expected to shut their doors by the end of the financial year.
"Homebase delivered a good peak trading period, performing well throughout the half despite being up against the tough comparators of a strong second quarter last year.”He added: "Homebase will pursue a three-year plan through to the end of 2018 to improve the productivity of its store estate, strengthen its propositions and accelerate its digital capabilities by leveraging Argos' investments. This will position Homebase as a smaller but stronger business, ready for investment and growth."  Walden added that he expected other retailers to follow suit and start shutting space too. Shareholders appeared to agree and shares dropped only 0.2 per cent to 175.3p.
An expensive store refit programme will end next year as bosses assess whether the £1 million price tag for each refit is worth it.
Argos and Habitat concessions have worked well, but other services such as kitchen and bathroom fittings have apparently flopped.
The DIY market has struggled since the 2008 recession as the housing market dried up and has only started recovering slowly in the past few quarters. Typically, it takes six months for lifts in the housing market to filter through to retailers.
Homebase warned: “Several structural factors continue to affect home improvement retailing including an excess of retail space.”
It comes as Home Retail Group saw sales up 2.8 per cent to £2.67 billion. However, pre-tax profits for the six months to end-August fell 4.9 per cent to £13.5 million. Sales at Homebase rose 4.1 per cent on a like-for-like basis, with sister business Argos up 2.9 per cent.