Two thirds of Homebase stores revealed to be loss-making

THE new owner of ailing DIY chain Homebase faces a tough battle to get the retailer back on its feet after newly released documents revealed 70pc of its 241 stores are loss making.

Homebase, which was bought by Hilco Capital for £1 in May, will bring back popular brands and products shunned by its former Australian owner, Wesfarmers, in a bid to reverse a 10pc slide in sales.

The scale of the compa- ny’s challenges were laid bare in a document given to creditors as part of preparations for a forthcoming vote on its turnaround plans, the Financial Times reported.

Homebase will close 42 of its shops and secure sweeping rent cuts on some others if it can persuade its creditors and landlords to approve a so-called company voluntary arrangement (CVA) deal next week.

The creditor document urged lenders to back the deal, warning: “If the CVA is not approved, then it is very likely Homebase will go into administration or liquidation.”

Hilco Capital plans to inject £25m of cash as well as raising £116m of debt to help finance the turnaround.

It also plans to lure back concessionaires such as Habitat and Laura Ashley that were ejected from Homebase’s stores under Wesfarmers’ ownership.

The conglomerate’s £340m takeover in 2014 raised hopes that Homebase could be given a new lease of life.

But it soon ran into trouble after converting a number of stores to its own Bunnings Warehouse brand and a shake-up of the product range that marginalised soft furnishings in favour of power tools and building materials.

The Sunday Telegraph revealed last week that Amazon had emerged as a key bidder for the stores Homebase is looking to vacate as it hunts out new properties to make up for a shortage of warehouse space.