Revenue deterioration continues at Homebase as imminent sale on the cards.
Homebase/Bunnings owners Wesfarmers today announced appalling but expected revenue figures today ahead of an impending sale of the business. Year-on-year sales for the period fell £33.7m to £211.3m, with a slight improvement at the beginning of the quarter offset by diminished footfall and a 20% drop in l-f-l sales in March, as a result of the hostile weather conditions that covered the critical Easter trading period – particularly effecting the Homebase fascia due to a higher product mix of gardening and outdoor living ranges.
Despite Bunnings Group Managing Director Michael Schneider remaining optimistic about the apparently rising retail standards at Homebase, yet another double-digit fall in sales tells a vastly different story – the 15.4% drop in l-f-l sales is the lowest over the previous year (15.1%, 11.9% and 4.3% for Q2, Q1 and Q4 2017 respectively). Over the most recent period, sales-per-store across the 250 store network fell to £0.85m – about a third of the £2.49m per-store sales experienced at B&Q over their last quarter – illustrating that Homebase has become an indefensible thorn in Wesfarmers’ side.
Plenty has already been said about Wesfarmers failings over Homebase: the slow rebranding of stores to Bunnings, a loss of identity with falling store standards at Homebase and overly rapid repositioning to an EDLP pricing structure has alienated a loyal customer base – something worth its weight in gold in the struggling DIY landscape – and failed to attract the price-orientated consumers Wesfarmers was hoping for. But staggeringly, despite the depth of the problem being recognized at the half-year results, Bunnings has continued to neglect Homebase and instead has strangely focused on futile rebranding efforts, removing the tagline “Low prices are just the beginning…” as a result of consumer driven information.
Wesfarmers now have little choice but to quickly offload a large section, if not all, of the current Homebase stores. Bidders were expected to submit an initial offering by the end of 23rd April, with Wesfarmers hoping to entice potential investors with a £100m dowry. Distressed investment private equity firms Hilco and Endless are potential heirs to the seemingly cursed store network and Homebase brand – although the tremendous $1.1bn lease liabilities currently in place will surely make interested buyers think twice.
Source: GlobalData 18 April 2018