Home Retail to shrink Homebase

The group said yesterday it would close about 80 of its 323 stores over the next four years through a combination of lease expirations and property exit deals with other retailers.

The company has about 16 stores in Yorkshire, including Leeds, Sheffield, Hull, Huddersfield, Bradford, Whitby, Harrogate, Doncaster, Wakefield, Northallerton, Selby, York and Bingley.

A spokesman for Home Retail said no decision had been made about which stores would close.

Homebase, like its larger UK rival B&Q, has suffered from an excess of retail space, the growth of non-traditional competitors such as supermarkets and the rise of a generation less skilled in DIY projects.

A review found Homebase was saddled with “inconsistent store operating standards” as well as “a large estate with low sales densities that result in a challenged financial model”.

Paul Loft, Homebase’s managing director, is to step down when a successor is found, the firm said.

A shake-up will aim to improve product availability, presentation and customer service. It will also see it take advantage of online technology developed by Argos.

The announcement came as the group’s half-year results showed that though sales and profits were rising at Homebase, earnings growth was lagging behind that of Argos where they soared by 57 per cent.

The 747-store Argos chain, which contributes around 70 per cent of group revenue and contributes four times more profit than Homebase, is being reinvented from a catalogue firm to a digitally-led business, targeting more sales from tablet PCs and mobile phones.

Argos, which has stores across Yorkshire and a large distribution centre in Castleford, is investing £300m in a five year plan that is targeting a 15 per cent rise in sales to £4.5bn by 2018.

“A cleaner, more profitable business should benefit the group,” said Investec analyst Alistair Davies.

Home Retail posted a 13 per cent rise in underlying first-half profit to £30.9m in the six months to August 30, below analysts’ average forecast of £34.6m.

Sales increased three per cent to £2.7bn, with sales at stores open over a year up 2.9 per cent at Argos and 4.1 per cent at Homebase.

Group chief executive John Walden said: “The Homebase agenda must ... be set in the context of the Argos transformation plan which will be the group’s greatest potential source of shareholder value and must therefore be the near-term priority of both the group’s focus and its resources,”

Argos saw sales from mobile and tablet devices rise by 45 per cent. Homebase was boosted by a strong performance from seasonal products during the spring and “big ticket” items such as fitted kitchens and bathrooms.

The announcement of closures spells an uncertain future for staff at Homebase, which in March employed nearly 18,000 people. Home Retail said affected employees would be the first to know and it would where possible redeploy them to elsewhere in the group, or ask businesses taking over its sites to find roles for them.

It said the full-year outcome will depend upon Argos’ Christmas trading. The group maintained its interim dividend of one pence per share.