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Cost management continues at Homebase

Published: 29 April 2015
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.
Cost management continues at Homebase
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."


Comments

29 April 2015 01:06:00
By Tony
Thing that hombase sort act out head office are out mind thing
Wrong doing clos stone what clos more
29 April 2015 01:05:00
By whisper
U do ,
the 30 m is not in the profit number but sits under the balance sheet side of the Profit and Loss so increases cash in the business.
The 19.8m is from sales and does not include property deals etc.
29 April 2015 01:04:00
By U do the math
I might be a bit thick so my apologies for that but aren't the exceptional costs taken off the Group PBT after declaring the HB operating profit to be 19.8m? That would seem to say that the 30m windfall IS included in the declared profits so they did make a real loss of 10m. Can anyone clarify?
29 April 2015 01:03:00
By whisper
U do, if you read the HRG accounts, the 30 million is not in the this profit number, it is treated as exceptional's and sits under the group , The 19.8m is trading profit from store sales excluding property deals.
The 27m that will hit next year will again be put to exceptional and used to offset closure costs meaning that all the closure will end up cash positive.
29 April 2015 01:02:00
By Baseworker
If Homebase is still around in 12 months I will eat my hat, it doesn't add up, there are over 100 being made redundant over the next 4 mths, on very high packages at the Base and in the field teams, and much lower payouts in the stores. There is no one taking up the back up of these roles, nothing has changed the tasks still have to be done, but all the experts have gone !!! And when all these Argos pop up stores are inside Homebase how much more sales will the host stores lose, it's not a problem Argos is the only groups interested in, I'm sure the deal that Waldren and Echo Lou have signed into will safeguard there future wealth. When Homebase is sold next year.Total stitch up for the loyal staff
29 April 2015 01:01:00
By U do the Math
Why if they've closed so many loss making stores are they losing even more money? Yes I know they reported a 19.8m profit but that included a 30m windfall for Battersea. That means an actual 10m trading loss. Same cover up will happen this year when the other 27m for Battersea is chucked into the figures. Lots of busy fools including customers prepared to believe they are still a good company. Just research the appalling service reviews ( check out Trustpilot and you will never place an order with them again!)

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