Home Retail Group has announced that it has commenced and progressed discussions for the sale of Homebase to Australian conglomerate Wesfarmers, confirming that it received an approach from J Sainsbury plc for the potential acquisition of the group.
It a trading statement for the 18 weeks from 30th August 2015 to 2nd January 2016, John Walden, chief executive of Home Retail Group, comments: “Against this backdrop, whilst Argos trading performance was mixed, I am pleased that we made material steps forward in the Argos Transformation Plan.
"Total sales at Argos increased 0.9%. They were affected by volatile trading patterns resulting from particularly strong sales during Black Friday week, a shift in consumer demand from both the weeks before and after Black Friday, growth in digital transactions, reduced store footfall particularly on the high streets, and the continuing effects of price deflation. Argos like-for-like sales decreased 2.2% in the period, while new digital concession locations added in the past year contributed 3.1% to growth.
“In October Argos introduced FastTrack, market-leading nationwide propositions for both same-day home delivery and store collection, made possible by our hub & spoke distribution network. FastTrack, together with our now-proven store concession model and improvements in digital channels, drove increases in digital sales, digital participation and home delivery. I continue to believe that the capabilities being developed in the Argos Transformation Plan will position Argos as a retail leader in an increasingly digital future.
“In Homebase, like-for-like sales grew by 5% while total sales declined by 4%. The Homebase Productivity Plan, which includes an aggressive store closure programme, overhead reductions and customer proposition improvements, has begun to position Homebase as a smaller, higher quality and more efficient business."
"Yesterday we announced that we are in advanced discussions to sell Homebase, which would provide good value for shareholders and a growth opportunity for Homebase colleagues. The potential transaction would allow the group to focus on Argos and its Transformation Plan, with an improved balance sheet and financial position, which I believe would represent an even greater opportunity for building long-term shareholder value."
John Colley, Professor of practice at Warwick Business School and an expert on large mergers, comments: "Home Retail look as though they are clearing the decks to sell Argos to Sainsbury's who are interested in the 'Click and Collect' opportunities which the stores may present. Sainsbury's really do not want a troubled DIY store which makes this disposal helpful to the bigger deal. £340m is a good price in view of the level of Homebase's profits."
The future of Habitat is uncertain.
