With store closures ahead of schedule, as Homebase's Productivity Plan progresses, parent firm Home Retail Group looks to streamline head office, with a view to investing back into the business in the future.
Homebase's Productivity Plan is making good progress, said parent firm Home Retail Group, as it released its sales for the year ended February 28 2015 today, with the home enhancement chain heading towards a stronger footing and to be considered for further investment in coming years.
The statement published today said: "The Productivity Plan, covering the three years to FY18, will result in Homebase being a stronger business with better financial ratios, a solid foundation of store operations and customer service, improved offers and proven new customer propositions. As Argos approaches the end of its Transformation Plan in FY18, Homebase should also be well positioned for investment in its long-term growth as a digital and multi-channel leader in the home improvement sector."
However, with store closures ahead of schedule, planned cost reductions are now being accelerated, with plans to reduce both head office support costs and infrastructure.
The three-year Productivity Plan, which commenced in October 2014, set out a strategy to downsize the Homebase business, reducing its store portfolio by 25%, to improve the Hombase proposition with the addition of Argos and Habitat concessions and introduction of more competitive pricing, and to create an upgraded digital offer that leverages the investments being made in sister company Argos.
During the 52-week period to the end of February, Homebase rationalised its portfolio from 323 stores to 296 - closing 30 stores and opening three - reducing net space by 3%. Total sales for the year were down marginally at -0.7% to £1,479.3m but up 2.3% LFL. While gross margin was down 100 basis points, impacted by stock clearance in closing stores, the chain reported a benchmark profit of £19.8m, up 5% on the previous year.
Homebase also expects to close around 35 additional stores in FY16. In addition to Homebase's plans to reduce its store estate, an agreement has been reached for the sale of the Battersea freehold site to a residential property developer for £57m, of which a £30m deposit was received in FY15, with the remaining £27m being due on completion during FY16. Home As a result of this sale, Homebase now anticipates that the cumulative store closure programme will be cash positive at the end of FY16.
Meanwhile, Home Retail Group stablemate Argos is well into the Transformation Plan it started in 2012, with a view to reinvent itself from a catalogue-led business to a digital retail leader.
Total sales for the 52-week period increased by 1.1% to £4,096m. Net space increased sales by 0.5% with the store estate increasing by 21 stores to 755. Like-for-like sales increased by 0.6%.
Argos converted a further 27 of its existing stores to a digital format during FY15, taking the total number of digital conversions to 33. It also opened 20 digital concessions within Homebase stores, each with a footprint of around 1,000sq ft. Seven new small-format stores were opened, including a store within Cannon Street tube station in London, which is designed to allow commuters to reserve their products during the day for same-day collection on their way home.
An investment in its offer saw a further 11,000 products added to its range, as well as a further 29 additional aspirational brands added over the course of the year, including KitchenAid and Royal Worcester kitchenware.
Home Retail Group chief executive John Walden said: "The Group performed well in FY15 and ahead of consensus profit expectations, achieving 14% growth in benchmark profit before tax and 25% growth in benchmark EPS. Both Argos and Homebase contributed positive like-for-like sales and profit growth for the second successive year. I believe the strategic plans we are pursuing across the Group will enable us to innovate and lead in a rapidly changing retail market."