Homebase gets its house back in order and stems losses under new owners after disastrous Bunnings takeover threatened the DIY chain’s future
- Homebase has reduced its losses by £140m under fresh ownership
- The chain closed branches and cut jobs at its HQ to reduce costs by £100m
- New management is trying to restore the DIY chain to health
- A disastrous takeover by Bunnings in 2016 left the chain in deep water
What a difference ten months makes. Homebase, which was haemorrhaging money a year ago, looks as though it is on the road to recovery under new ownership.
Private equity firm Hilco snapped up the troubled DIY retailer for £1 last year after a misguided and short-lived takeover by Australian DIY giant Bunnings left it with bruising losses and on the brink of collapse.
Since then, fresh management has overseen an urgent restructuring aimed at restoring the once-loved chain to profitability.
Fresh start: Under new ownership, Homebase has stemmed its losses and radically reduced its cost base
Today, in the first formal update, Homebase said it has delivered a ‘much stronger performance’, with losses narrowing from £172million to £33million in the second half of 2018.
It stemmed the decay partly by implementing ‘difficult but necessary’ cost cutting measures.
Job cuts at head office, 47 stores closures and slashed rents on 70 other stores has helped take £100million of costs out of the company.
The retailer has also secured a £95million loan to help boost its financial position and get it back on track.
Homebase generated sales of £498million during the half-year, down 3.5 per cent as it closed around a quarter of its stores.
Homebase boss Damian McGloughlin wants to restore the DIY chain to health
As part of an ongoing turnaround plan, chief executive Damian McGloughlin is endeavouring to ‘bring back the ranges Homebase was famous for’, such as kitchens, soft furnishings and more decorative items, which were culled during Bunnings’ custodianship.
Homebase has also reintroduced in-store concessions, forming new partnerships with Tapi, Silentnight and Ponden Home.
McGloughlin said: ‘After the change in ownership last year, we put a clear plan in place to restructure the business, with a focus on cost management, better shop keeping and bringing back the things our team and customers love most about Homebase.
‘The benefits of the changes we have made are starting to come through.’
He added that, while the company is only 10-months into a three-year turnaround, he is ‘very optimistic about the future’.
In an interview with This is Money earlier this year, McGloughlin said he had the audacious goal of putting Homebase back in the black by the end of 2019.
The DIY boss reaffirmed that commitment today, claiming that if the three-month peak season all goes to plan, the retailer will ‘at least’ break even this year.
‘Homebase has shown a glimmer of hope that it might actually be able to recover from the disaster of the Wesfarmers acquisition,’ said GlobalData analyst Amy Higginbotham.
‘But the road to recovery is long,’ she added.
‘Homebase will have to work hard to rebuild its loyal customer base and recover its reputation as a specialist for home improvement which targets a female as well as male demographic, after Wesfarmers turned stores into hard DIY big boxes.’