Homebase, a prominent UK DIY retailer, has entered administration, marking a significant chapter in its challenging history.
- The company’s troubles began with Wesfarmers’ acquisition in 2016, leading to a strategic overhaul and eventual financial struggles.
- Despite efforts to regain market share, Homebase failed to capitalise on trends such as the DIY boom during the COVID-19 pandemic.
- The recent sale of its brand and stores to The Range highlights ongoing issues in maintaining relevance and financial stability.
- The future of Homebase now hinges on strategic decisions by its new owner, CDS Superstores, and potential interest from other retailers.
Homebase has been placed into administration, appointing Teneo, which facilitated the sale of its brand, intellectual property, and up to 70 UK stores to The Range and Wilko owner CDS Superstores. This move is the latest in a series of challenging developments for the DIY retailer.
The difficulties for Homebase arguably began with the acquisition by Wesfarmers in 2016. Wesfarmers purchased the chain for £340 million, aiming to transplant its Bunnings hardware store concept to the UK market. However, after incurring losses of around £1 billion, Wesfarmers exited the UK, selling Homebase for a nominal £1 to restructuring firm Hilco. According to Matt Walton, a senior data analyst at GlobalData, this acquisition was a ‘disastrous ownership’ that triggered significant disruptions to Homebase’s operations.
Post-acquisition, Homebase’s pivot towards Bunnings’ no-frills DIY warehouse format, prioritising power tools over its unique soft furnishings, was not well-received. Hilco’s intervention involved closing stores and refocusing on home furnishings, offering a glimmer of hope as Homebase returned to profitability under CEO Damian McGloughlin by 2019. However, the business ‘struggled to recover from Wesfarmers’ overhaul,’ Walton notes, missing out on the DIY and gardening demand spike during pandemic lockdowns.
Homebase’s market position deteriorated further, slipping from the second largest to seventh in the DIY sector by 2021, with its market share shrinking to 3.6%. Poor communication of its offerings and intensified competition, particularly from B&Q’s expanded product range, compounded the retailer’s woes, according to Walton.
Efforts to sell Homebase over recent years were unsuccessful until The Range’s acquisition. Richard Hyman, a partner at Thought Provoking Consulting, observes that Homebase lost its relevancy in a competitive market with myriad options. Without a distinct market position, it failed to attract sustainable customer traction.
The recent acquisition suggests a strategic shift, with CDS Superstores planning to rebrand Homebase outlets as The Range stores. Despite the intention to maintain Homebase’s expertise and heritage, CDS CEO Alex Simpkin acknowledged the complexity of revitalising the Homebase brand compared to Wilko. The Range’s broader product base may help integrate Homebase’s offerings, although challenges remain.
Administrators continue seeking buyers for the remaining 49 stores, with 2,000 jobs at stake. While there are no immediate redundancies planned, the future of these stores and jobs depends on finding new operators. Several retailers, such as B&M, are reportedly evaluating potential acquisitions.
The acquisition by The Range offers a potential avenue for reviving parts of Homebase, although its ultimate success will depend on strategic execution and market conditions.
