Homebase to speed up store closures, UK

Homebase, part of Home Retail Group, plans to cut one quarter of all its stores by 2019, the company announced on Wednesday. Several of its 323 Homebase stores are either in decline or unprofitable. In 2012, Britain’s largest home and general merchandise retailer announced that it would be closing down some stores, but did not specify how many.

The store-shutting move is part of a 3-year turnaround program for the group, which said it is too big relative to UK consumer demand and shifting digital shopping patterns.

So far this year, seven stores have been shut down. Another twenty-three will be closed by the end of the first quarter of 2015.

The Milton Keynes-based company, which also owns Habitat and Argos, posted a pre-tax profit of £13.5 million for H1 (ending Aug 31), which was 5% less than in H1 2013.

The group posted a 2% increase in cash gross margin to £981 million, a £15 million rise in operating and distribution costs to £951 million, and an interim dividend of 1.0p (2013: 1.0p).

Too many Homebase stores are either declining or unprofitable, says Home Retail Group.

Total sales for the whole group rose by 3% to £2,669 million. Like-for-like sales at Homebase and Argos increased by 4.1% and 2.9% respectively.

In Argos, online sales accounted for 43% of total sales. Mobile commerce increased by 45% and accounted for 22% of all sales.

After carrying out a review of the DYI chain, the company said it identified inconsistent store operating standards. Its current financial model needs to be overhauled, it added.

While announcing additional closures as part of its 5-year plan, Home Retail Group did not specify how many workers would be laid off. It says that hopefully some employees may be redeployed.

Home Retail Groups CEO, John Walden, said the company performed well in the first six months of 2014. He said Argos continued to build on its sales growth from last year, and raised its benchmark operating profit.

Homebase “delivered a good peak trading period,” he added, and performed well throughout H1 2014 “despite being up against the tough comparators of a strong second quarter last year.”

The company expects to meet its full-year target, as long as Argos performs as well as expected during the Christmas trading period.

Mr. Walden said:

“In April I set out my near term priorities for the Group, which included undertaking a comprehensive review of Group strategy and its priorities going forward, in particular as they relate to Homebase. I have completed this review, which encompassed a range of market, strategic and operational factors.”

“The successful delivery of the Argos Transformation Plan over its remaining three years continues to be the Group’s strategic priority and its greatest potential source of shareholder value. Homebase is a good business with the basis for future growth. In this context, Homebase will pursue a three-year plan through to the end of FY18 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.”