Homebase to shut one in four stores with thousands of jobs to go

Thousands of jobs at the DIY chain Homebase are under threat after the retailer announced plans to close one in four of its stores over the next three years.

John Walden, the new chief executive of its parent company Home Retail Group, refused to reveal how many workers could lose their jobs, but at least one employee – Homebase’s managing director Paul Loft – has agreed to step aside. Homebase has 17,000 staff in total, including head office employees, but the firm admitted that too many of its shops were either losing money or in decline.

The closures are the first major decision made by Mr Walden since he took charge of the business from the long-serving boss, Terry Duddy, earlier this year.

“Not all the stores we will be closing are making a loss,” Mr Walden said. “Around 10 per cent of stores are unprofitable, but you will find that in any other retailer.

“Retail in the UK is over-stretched everywhere, which is why you see retailers reducing space. There’s a movement across retail to reduce square footage and we believe we can fix it here.”

It means around 81 of its 323 stores will close by 2018, with 30 expected to shut their doors by the end of the financial year.

Mr Walden added that he expected other retailers to follow suit and start shutting space too. Shareholders appeared to agree with his assessment, as shares ended up 4.1p at 179.7p.

An expensive store refit programme will end next year as bosses assess whether the £1m price tag for each refit is worth it. “Sales growth in those stores is up 15 to 20 per cent but we’d like to see a bit more consistency across the stores,” Mr Walden added.

The DIY market has struggled since the 2008 recession as the housing market dried up and has only started recovering slowly in the last few quarters. Typically, it takes six months for housing market uplifts to filter through to stores.

Homebase warned: “Although economic indicators have more recently improved, several structural factors continue to affect home improvement retailing including an excess of retail space, the rise of a generation less skilled in DIY projects.”

It comes as Home Retail Group saw sales up 2.8 per cent to £2.67bn, however pre-tax profits for the six months to end of August fell 4.9 per cent to £13.5m. Sales at Homebase rose 4.1 per cent on a like-for-like basis, with its sister business Argos up 2.9 per cent.

Mr Walden said Argos expects Christmas best sellers to include electronics, TVs and computer consoles, with toys from Disney’s Frozen series expected to sell well.