Homebase sold for £1 after its DIY disaster

Australian owners offload chain with losses of up to £230m as it admits ‘poor execution’ led to retreat

THE Australian owner of Homebase has sold the struggling DIY chain for £1 after a bungled attempt to rebrand it turned into one of the “most disastrous” buyouts of a UK retailer.

Wesfarmers will book a loss of between £200m and £230m on the sale to HMV owner Hilco Capital, which will change all 24 of the stores converted to its Bunnings brand back to the Homebase name.

Rob Scott, Wesfarmers managing director, admitted Homebase had been hampered by his company’s “poor execution” after the takeover, compounded by a consumer slump that has hit the retail sector in recent months.

There had been hopes that Homebase could be revitalised by its new owner, which bought it for £340m from Home Retail Group in 2016.

But the revamped stores failed to win over shoppers as popular ranges were replaced by unfamiliar products favoured by Australian consumers.

Earlier this year Wesfarmers said it would carry out 40 store closures with the potential loss of 2,000 jobs.

The overhaul has resulted in 15 of the 240-strong store estate being closed so far. It is unclear whether Hilco will mount a more aggressive restructuring of the retailer, but efforts to shore up the firm are likely to trigger more store closures and put some of its 11,500 staff under threat.

Hilco has a track record of turning around under-fire companies. It snapped up HMV from administrators in 2013 and secured its future by cutting back its high street presence.

Patrick O’brien of Globaldata branded the Wesfarmers-homebase deal the “most disastrous UK retail acquisition in history”.

“While the Australian company claims that the macroeconomic environment and difficult DIY market exacerbated its problems, there can be no doubt that it was its calamitous management decision-making that has led to its embarrassing retreat,” he said.

Wesfarmers said Damian Mcloughlin, who was hired to run the business in June, will stay put after the sale.

Wesfarmers began sounding out buyers at the beginning of 2018 after it emerged that Homebase had sunk to a £97m trading loss over the second half of last year. Wesfarmers was forced to write down the value of the UK business by £550m.

It is understood that private equity house Endless, turnaround firm Alteri and bargain retailer B&M had all weighed approaches for Homebase before Hilco swooped.

Wesfarmers’ ill-fated foray underscores the tough time facing British DIY chains. Homebase reported that like-for-like sales, which strip out new shops, fell 15.4pc during the first three months of the year. Rival retailer B&Q endured equally tough trading. Likefor-like sales at the company plunged 9pc in the three months to April.

Phil Dorrell of Retail Remedy said: “Homebase was awful for ages because it did not have a clue who its customer was.”

Despite Homebase’s troubles, around 8.8m consumers will splash out £1.27bn at DIY retailers this bank holiday, according to data from Barclaycard. The lion’s share of the purchases are expected to be made by women, who spend around £300 a year on DIY.