Home Retail Group has made the decision to implement a programme of store closures in its Homebase chain.
A review of the chain’s store portfolio earlier this year found that a number of the 323 outlets currently operating in the UK are “unprofitable or are in decline”, meaning that urgent action is needed to ensure group profits remain stable. So far this year, 7 Homebase stores have been closed permanently, with a further 23 closures expected to occur before the end of March 2015.
However, these closures are simply the tip of the iceberg when it comes to the grand scale closures to be implemented by the company, as Home Retail Group intends to cut the chain’s store portfolio by 25 per cent by 2019.
Most of the remaining stores will benefit from refits which have elevated sales in pilot stores, while a small percentage will gain Habitat and Argos concessions within them – a scheme which has already begun to run in selected nationwide stores to great success.
Industry analyst Keith Bowman, of Hargreaves Lansdown stockbrokers, believes that Home Retail Group is yet another retailer facing the challenge of addressing the changing nature of the industry.
He says; “Home Retail is today further underlining the rebalancing taking place by the retail industry away from the high street and towards online sales.
“While the relatively new chief executive continues to embrace change, the depth of transformation at the company does heighten investor nerves, near to medium term.
“Profits have materialised at the low end of expectations, whilst execution of the plan now needs to be made, in which time rivals will be pushing their own e-commerce strategies.”
Home Retail Group is by no means struggling, as in the six months to the end of August pre-tax profits reached £13.5 million. However, this total marked a 5 per cent drop from the previous year, encouraging executives to press on with store closures.
Yet during the period, Homebase appeared to be the strongest asset in Home Retail Group’s portfolio, as like for like sales rose by 4.1 per cent. Argos, meanwhile, saw a like for like sales rise of only 2.9 per cent, although admittedly this measure does strip out the effects of new store openings.
Chief executive John Walden has claimed the three year plan will assist in improving the productivity of Homebase overall and “will position Homebase as a smaller but stronger business, ready for investment and growth.”
He also insisted that the number of jobs affected by the decision will be minimal as the group will continue to work with the new owners of all sites in order to re-employ existing Homebase workers.
