Homebase has entered administration as The Range looks to acquire some of its stores, marking a significant shift in the retail landscape.
- The acquisition by Wesfarmers in 2016 is considered a major factor in Homebase’s downfall, leading to significant market repositioning challenges.
- Despite early signs of recovery under Hilco, Homebase failed to capitalise on market opportunities during the pandemic.
- The Range has acquired Homebase’s brand, intellectual property, and up to 70 stores, aiming to integrate and expand its offerings.
- Challenges remain in reviving the Homebase brand, with speculations about the future of remaining stores and employees.
Homebase, once a stalwart in the DIY and home improvement sector, has entered administration, appointing Teneo to manage the proceedings. The immediate sale of its brand, intellectual property, and up to 70 UK stores to The Range and Wilko owner CDS Superstores signals a substantial industry shift. This marks a new chapter for Homebase, a company that once was pivotal in the market.
The beginning of Homebase’s troubles can be traced back to 2016, when the company was acquired by Australian conglomerate Wesfarmers for £340 million. Wesfarmers aimed to introduce its Bunnings hardware store concept in the UK but exited swiftly in just two years, selling Homebase for a nominal £1 to Hilco after investing around £1 billion. ‘The real root cause of the issues at Homebase lies on the back of its acquisition by Wesfarmers,’ says Matt Walton, a senior data analyst at GlobalData.
Wesfarmers’ strategy proved detrimental. They replaced Homebase’s unique offering of soft furnishings with a more austere DIY focus typical of the Bunnings brand. This pivot alienated Homebase’s customer base and significantly reduced its market presence, evident when Hilco took over. Although Hilco’s efforts initially showed promise, returning Homebase to profit by 2019, the company failed to sustain this momentum.
From 2020 to 2022, Homebase missed the surge in DIY and gardening due to lockdowns, unable to regain its former market position. It slipped from being the second largest DIY and gardening retailer in 2015 to seventh spot in 2021. According to Walton, ineffective communication of its offerings cost Homebase dearly as competitors like Wickes and B&Q gained ground, the latter expanding its homewares range significantly by 2022.
Despite attempts by Hilco to sell Homebase, including attracting interest from investors like Hugh Osmond and later The Range, deals fell through, and financial losses mounted. By January 2023, Homebase reported an £84 million loss, with sales down significantly. Richard Hyman from Thought Provoking Consulting emphasises that Homebase lost its connection with customers, highlighting the importance of relevance in a competitive market.
CEO Damian McGloughlin cited challenging market conditions, including reduced consumer confidence post-pandemic, persistent high inflation, global supply chain issues, and unfavourable weather, as compounded struggles for Homebase in its last financial year. Costs also surged, notably a £40 million rise in freight charges and £10 million more in energy bills.
CDS Superstores, the owner of The Range and Wilko, envisions a new future for the Homebase brand by acquiring significant portions of its assets. CDS plans to continue Homebase’s online presence and convert acquired stores to The Range outlets, promising a wider variety of products while preserving Homebase’s legacy. However, questions loom over the unsold stores and the future of approximately 2,000 employees whose jobs remain uncertain.
The complexity of reviving Homebase, as Matt Walton observes, lies in its diminished brand perception compared to Wilko. The transition required is broader than that experienced with Wilko, presenting unique challenges. Nevertheless, CDS remains optimistic, aiming to harness the brand’s potential and expand its reach in the retail landscape.
The future of Homebase remains uncertain as it navigates through administration and market challenges.
