DIY retailer Homebase to close 42 stores, putting around 1,500 jobs at risk

Homebase

Up to 1,500 jobs are at risk after DIY chain Homebase announced the closure of 42 stores this afternoon.

Homebase’s sales performance and profitability declined significantly under the previous ownership over the past two years.

In addition, the company has faced an extremely challenging retail trading environment reflecting weak consumer confidence and reduced consumer spending. These factors have had a significant adverse impact on Homebase’s trading position.

After a comprehensive review, Homebase has concluded that its current store portfolio mix is no longer viable.

Rental costs associated with stores are unsustainable and many stores are loss making.

The decision is part of a plan by the retailer to pursue a Company Voluntary Arrangement (CVA).

The CVA enables Homebase to make essential changes to its store portfolio, reducing its cost base and providing a stable platform on which to continue its turnaround.

Homebase says under the terms of the CVA proposal, all creditors receive a better outcome than any other likely alternative.

It is anticipated that 42 stores will close during late 2018 and early 2019.

The proposed changes to the store portfolio will regrettably mean redundancies from those stores earmarked for closure.

The process is expected to lead to a reduction of up to 1,500 roles, although it says every effort will be made to redeploy team members within the business where possible.

All stores in the UK and the Republic of Ireland will remain open for business as usual and this process will have no impact on customer purchases, outstanding orders or any product or service guarantees.

The creditors will vote on the CVA on August 31.

Damian McGloughlin, chief executive of Homebase, said: “Launching a CVA has been a difficult decision and one that we have not taken lightly.

“Homebase has been one of the most recognisable retail brands for almost 40 years, but the reality is we need to continue to take decisive action to address the underperformance of the business and deal with the burden of our cost base, as well as to protect thousands of jobs.

“The CVA is, therefore, an essential measure for the business to take and will enable us to refocus our operations and rebuild our offer for the years ahead.”

Alvarez & Marsal is handling the Homebase CVA, a mechanism used by fellow retailers Carpetright, Mothercare and New Look which enables retailers to restructure, with the agreement of a majority of creditors.

Alvarez & Marsal is a specialist adviser on corporate insolvencies and advised Toys R Us before its collapse.

Stephanie Pollitt, assistant director of real estate policy, British Property Federation (BPF), said: “These situations are never easy as property owners need to take into consideration the impact on their investors, including those protecting their investors’ pensioners’ savings, as they vote on the CVA proposal.

“Homebase and Alvarez & Marsal have, however, demonstrated best practice, engaging with the BPF in the process and therefore ensuring property owners’ interests have been properly taken into account.

“Ultimately, it will be for individual property owners to decide how they will vote on the CVA, but the proposal has sought to find a solution that provides a sustainable future for Homebase.”

Homebase has already closed 18 unprofitable stores as it struggles to stay afloat, including the axing of 303 head office jobs in Milton Keynes.

It was bought by restructuring experts Hilco in May for £1 after Australian owner Westfarmers walked away from the business following its acquisition – widely regarded as one of the most unsuccessful in UK retail history – having paid £340m two years ago when Homebase operated from more than 250 stores, with 11,000 staff.

Stores to close are: Aberdeen Bridge of Don. Aberdeen Portlethen. Aylesbury. Bedford St Johns. Bradford. Brentford. Bristol. Canterbury. Cardiff Newport Road. Croydon Purley Way. Droitwich. Dublin Fonthill. Dublin Naas Road. Dundee. East Kilbride. Exeter. Gateshead. Grantham. Greenock. Hawick. Inverness. Ipswich. Limerick. London Merton. London New Southgate. London Wimbledon. Macclesfield. Oxford Botley Road. Peterborough. Pollokshaws. Poole Tower Park. Robroyston. Salisbury. Seven Kings. Solihull. Southampton Hedge End. Southend. Stirling. Swindon Drakes Way. Swindon Orbital. Warrington. Whitby.

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