Homebase Sold for £1

In business since 1979, Homebase has long been a staple for DIY enthusiasts all over the country. Originally set up by Sainsbury’s and GB-Inno-BM, the company was run by the Home Retail Group from 2006 until 2016, when it was sold to Australian retailer Wesfarmers. Despite attempts to make their mark on the UK’s DIY retail sector, Wesfarmers have now sold the brand to refinancing and restructuring company Hilco for the bargain sum of one British pound.The 11,000 employees of Homebase are no doubt concerned for their future as a result, in what many commentators and experts are calling one of the worst examples of a retail takeover in history.

What Went Wrong?

Wesfarmers paid £340 million for Homebase back in 2016. The Australian organisation, which initially started out as a farmer’s co-operative (and remained so until 2001, when it became a publicly traded company) is no stranger to the retail industry. The Bunnings brand, which is a subsidiary, is a major hardware retailer down under, with 295 locations. It’s also become something of an Aussie cultural icon thanks to the famous ‘sausage sizzles’ that are regularly held at the stores in aid of local community groups and events.

The problems for the takeover arguably started when Wesfarmers decided to sack the entirety of Homebase’s senior and middle management, almost as soon as the deal with HRG had gone through. Even Wesfarmers MD, Rob Scott, admitted back in March that:

“A lot of the issues we are dealing with today, to be frank, were self-induced.”

Unfortunately, things went from bad to worse over the intervening months. The decision to remove the home furnishing sections in stores, and introduce floor to ceiling shelving, meant the brand lost huge amounts of female customers.

These aspects, coupled with the fact that the competition in the DIY retail sector in the UK is already fierce, led to the Australian organisation mounting serious losses in a short space of time. Add in the fact that consumer spending on DIY is currently in a bit of a slump due to rising living costs, and the coffin for the overseas venture was well and truly nailed shut. The company is expected to lose around £230 million as a result.

The Future of the Brand

Now that Hilco have taken over, what can the 11,000 staff expect? Experts and insiders expect Hilco to use a CVA (company voluntary arrangement) to close up to 60 stores, especially the 40 worst performing. This means that layoffs are almost certainly on the way. Hope at least lies in the fact that Hilco are experts in this field. The company bought struggling music store HMV in 2013, implementing restructuring that made the brand second only to Amazon in terms of physical music sales by 2015.

They also managed to turn around the fortunes of a number of other major UK brands in the retail sector. There is a good chance, therefore, that while job losses and closures are to be expected after this buyout, Homebase will live to see another day. For now at least.