The BBC has reported that Home Retail Group plans to close 25% of its Homebase stores by 2019 – seven stores have been closed this year, and the group plans to close another 23 before the end of March. Homebase boss Paul Loft is also stepping down concurrently, reports Retail Week.
"Homebase is a good business with the basis for future growth," says the Home Retail Group's chief executive John Walden, in the group's financial summary for the 26 weeks to 30th August 2014, published today.
"In this context, Homebase will pursue a three-year plan through to the end of FY18 to improve the productivity of its store estate, strengthen its propositions and accelerate its digital capabilities by leveraging Argos’ investments. This will position Homebase as a smaller but stronger business, ready for investment and growth.”
This period saw a good first half for the group, with further like-for-like sales growth at both Argos and Homebase – sales increased by 3% to £2669m, with like-for-like sales up 2.9% at Argos, and up 4.1% at Homebase.
“Argos continued to build on its sales growth from the previous financial year, increased its benchmark operating profit whilst also making good progress with its Transformation Plan," comments John. "Homebase delivered a good peak trading period, performing well throughout the half despite being up against the tough comparators of a strong second quarter last year. At this mid-way point in our financial year, we continue to expect to deliver full-year benchmark profit before tax in line with current market expectations, however, as always the full-year outcome will depend upon the important Argos Christmas trading period.
“In April I set out my near-term priorities for the group, which included undertaking a comprehensive review of group strategy and its priorities going forward, in particular as they relate to Homebase. I have completed this review, which encompassed a range of market, strategic and operational factors.
“The successful delivery of the Argos Transformation Plan over its remaining three years continues to be the group’s strategic priority and its greatest potential source of shareholder value."
The national roll-out of Argos' ‘hub & spoke’ network was completed, enabling same-day collection of around 20,000 products, and the roll-out of online payment and fast track collection in-store commenced. Internet penetration accounted for 43% of total sales, including mobile commerce which grew by 45% and accounted for 22% of total sales.
Following the completion of the review of the Homebase business, a further 11 trial stores were refitted, which included Habitat concessions and improvements to the DIY and home propositions.
The website was upgraded, and multi-channel sales grew by 12%.
Joshua Raymond, chief market strategist of Cityindex.co.uk, comments: “Home Retail saw first half profits rise 13% on the back of strong sales growth at Argos and Homebase, but the result was in fact worse than the market expected.
"Profits came in at £30.9m for the six months to 30th August compared to forecasts of £34.6m. However, any lingering fears over the full year performance were calmed somewhat by the retailer confirming that it expects to report profits of £127m, in line with consensus estimates. That being said, the firms ability to meet these targets will rest on the shoulders of its Christmas trading period and sales at Argos. With consumer spending still hampered by weak earnings growth in the UK and new headwinds emerging from a weaker euro zone economy, Argos could be well placed to sweep up shoppers looking for discounts this Christmas.”
