Homebase to close one in four stores as Britain's love of DIY fades

Homebase owner Home Retail Group, which also runs Argos, to close one in four stores as part of turnaround plan for DIY retailer that could lead to 2,000 job losses

Homebase to close one in four stores

Homebase says it is closing one in four of shops in the UK because the country’s love of DIY is fading.

Home Retail Group, the owner of Argos and Homebase, warned the DIY retailer had to face up to the “rise of a generation less skilled in DIY projects”.

The company intends to close 25pc of Homebase stores by February 2018 as part of a three-year turnaround plan. This will result in the closure of more than 80 shops and the potential loss of 2,000 jobs. As many as 30 stores will close in the next six months.

John Walden, chief executive of Home Retail, said British households were increasingly looking for third-party help with housing projects. This is a result of being short of time, as well as health and safety regulations insisting that certain work – such as electrical wiring – is only carried about by professionals.

“It's younger people, people who are time-starved, who are more likely to look for third-party help,” he said.

Mr Walden said the DIY market had been hit by the slowdown in the housing market after the collapse of Lehman Brothers, but faced deeper “structural challenges” that are holding it back even as the housing market picks-up.

Home Retail made the comments as it reported a 13pc increase in half-year pre-tax profits to £31m before exceptional items. Statutory pre-tax profits fell from £14.2m to £13.5m as Home Retail invests millions of pounds in modernising Argos.

The company is closing Homebase stores despite the DIY retailer growing like-for-like sales by 4.1pc in the 26 weeks to August 30, ahead of the 2.9pc rise for Argos. Homebase also reported operating profits of £27.8m, ahead of the £12m for Argos.

However, Homebase sales were helped by the warm weather during the summer – which increased sales of BBQs and garden furniture. City analysts expect the business to make a loss in the second half of the year. In contrast, Argos sales traditionally surge over the Christmas period and the catalogue retailer is eventually expected to record annual profits four times larger than Homebase.

There had been speculation that Home Retail could sell Homebase, but the company said it will pursue a three-year turnaround plan for the DIY retailer that will "position itself to be ready for future investments". Mr Walden said a sale "was never on the table".

The managing director of Homebase, Paul Loft, will step down after 12 years in the role ahead of the turnaround plan.

Mr Walden insisted the company’s plans for Homebase were “ambitious”, but that stores would be closed because the DIY retailer is "too large relative to the demands of the UK market and changing digital shopping patterns".

Despite insisting that Argos remained the company’s “greatest potential source of shareholder value”, Mr Walden said of Homebase: “Don’t think this is a hold-tight, don’t-spend-any-money plan.”

The plan for Homebase involves installing Argos and Habitat concessions within stores, improving its website, cutting prices in certain product areas, and retraining staff. Mr Walden said store standards in Homebase were “inconsistent” and that some of the stores were simply too big, with falling sales per sq ft.

“It is not doing anything wrong, but it can do better,” Mr Walden said.

However, analysts warned that Home Retail faced a tough task in turning Homebase around.

Lucy Cox, retail analyst at Added Value, said: “Homebase is failing as its competitors have a solid offering which better resonates with consumers. Homebase lack identity and the in-store experience is disappointing shoppers.

"As online shopping grows ever more dominant, unless Homebase offers a shopping experience that ensures footfall in its store, its store closure rate is only set to continue.”

Home Retail shares fell by 2pc in early trading on the news that the company would not raise cash by selling Homebase.