Homebase is moving onto a new page in its 39-year history after this morning’s news that its UK and Ireland business has been bought for a reported £1 from Australian group Wesfarmers by its management, in partnership with retail turnaround specialist Hilco.
Wesfarmers bought Homebase for £340m from the-then Argos owner the Home Retail Group, in 2016 and had been pursuing a strategy of rebranding the DIY specialist, a Top50 retailer in IRUK Top500 research, as Bunnings - the brand under which it trades in its Australian home market. Today it emerged that the 24 pilot Bunning stores will now revert to Homebase branding after the sale. As well as the new brand, the new owners have also taken over its network of around 250 stores, owned and leased property and inventory.
Homebase, said its new owners in a statement today, had been “disappointing for Wesfarmers, with problems arising from poor execution post-acquisition.” While its operating performance has improved in recent months, Wesfarmers had taken the decision, following a comprehensive review of the business, to leave the UK market.
Damian McGloughlin heads the new management team as chief executive of Homebase, after joining Wesfarmers and Bunnings in 2017 from B&Q. Today he said: “We are very pleased to have reached an agreement with Hilco and this marks an exciting new chapter for Homebase. With Hilco’s support we have the commitment of an experienced partner, substantial additional capital, stability for the business and the opportunity to reinvigorate a brand that has been a mainstay of UK retail for over 40 years.
“I would like to thank our team members for their commitment during what has been a testing time for the business. The momentum we have seen in the business over recent peak trading periods and their dedicated support to our customers gives us a strong platform on which to build.”
Representatives of the new team today said it was too early to consider what plans the business might have in future.
Commenting, Patrick O’Brien, UK retail research director at data and analytics company Global Data said the decision to sell Homebase for £1 had been the first sensible decision Wesfarmers had made in its ownership of Homebase.
"In the years prior to Wesfarmers’ acquisition, Homebase had been trying, correctly in our opinion, to differentiate itself by introducing more homewares lines and making the stores more appealing to female shoppers," said O’Brien. "Wesfarmers undid all this progress in weeks, turning the stores into bargain bin-littered dumps, with hand-written signs. Its plan was to focus on DIY, and ensure high range availability, service and the lowest prices, but it alienated the customers Homebase had worked so hard to attract, and they voted with their feet.
"It reversed planned store closures, such was its confidence, and started piloting Bunnings-branded stores, which to start with at least, showed a complete misunderstanding of not only the UK customer, but of the UK itself. The product mix was such that Wesfarmers must have thought that British people spent most of their time outdoors in enormous gardens cooking on large barbeques. The Wesfarmers board seemed unaware of the UK climate, customer behaviour and living environment, something they would have had a better handle on if someone there had even bothered to watch an episode of Coronation Street.
"New owners Hilco have a lot of work to do, starting with a reversal of the branding of the 24 Bunnings stores back to Homebase stores. We will watch its moves with interest – it may attempt to reposition the brand back with homewares and invest in more comfortable, shoppable stores, to woo back former Homebase shoppers, but this will be costly to implement.
"Hilco’s history with distressed retailers has led to accusations of asset stripping, but one of its most recent retail acquisitions, that of music and video retailer HMV, gives some cause for optimism. It took 141 HMV stores out of administration in 2013, and still has a portfolio of over 130 stores in the UK. This is despite the fact it operates in a continually declining market, and is regarded as driving hard bargains with landlords. Hilco will need to utilise all its negotiating powers with landlords to ensure the survival of Homebase."
Image courtesy of Homebase