Homebase has faced tough competition in a crowded market that has intensified since budget Chinese marketplaces have entered the fray, retail experts said today.
The DIY chain faces an uncertain future after years of pressure from rivals with similar product ranges such as B&Q, Wickes, B&M, The Range and Home Bargains.
Homebase has also fought for business with online marketplaces such as Temu offering heavily discounted consumer goods mostly shipped directly from China.
Now, Homebase has been sold in a rescue deal securing up to 1,600 jobs and 70 stores but leaving the future of its remaining 2,000 workers and 49 shops unclear.
The retailer – which opened its first branch in 1980 – appointed administrators at consultancy Teneo yesterday before The Range operator CDS, owned by retail magnate Chris Dawson, bought the majority of its stores out of administration.
The Homebase DIY store in Upton on the Wirral in Merseyside is pictured this afternoon
A collapse of Homebase could sound the death knell for another British high street chain after beloved brands including BHS, Wilko and Debenhams ran into trouble.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said Homebase had suffered from consumers spending less on home renovations amid high borrowing costs, even though interest rates have begun to come down.
She added that some consumers appear to have been ring-fencing spending for holidays and experiences rather than major makeovers.
Ms Streeter said: ‘In the DIY space it’s faced tough competition from the likes of Kingfisher owned B&Q and Wickes which have also faced challenges in the market, but recently revealed guidance showing improvements.
‘If the price is right though, shoppers are willing to splash the cash and value orientated chains like B&M European Value Retail and Home Bargains have been faring better.
Online marketplaces such as Temu offer discounted consumer goods shipped from China
‘The Range appears to have found a recipe for success with its pile ’em high, sell ’em cheaper approach to homewares, and appears to be mulling expanding its footprint by taking a chunk of Homebase stores.
‘The future for others remains uncertain, although there may be other takers in the ‘value’ end of the home market, who could swoop in with a cut-price offer.’
The exact impact Temu has had is unclear, but is likely to have had a drag on sales when considering the sales of Chinese-founded online retailer Shein last month eclipsed Boohoo’s for the first time.
Ms Streeter said: ‘B&Q and Wickes have significant trade business which has helped insulate them from weaker demand for DIY makeovers.
‘Kingfisher aims to reach more than £1billion of sales at TradePoint in the UK and Ireland over the medium term, and Wickes TradePro business also saw a 14 per cent rise in revenues over the first half of the year.
CDS, owned by retail magnate Chris Dawson, has bought the 40-year-old Homebase brand
‘Homebase has been in the squeezed middle, trying to cater to a less unenthusiastic crowd of DIYers, while competition hots up in the homeware market.
‘While it’s difficult to quantify how much impact marketplaces like Temu have had on their sales, there is no denying its now a very crowded market.’
She pointed out that shoppers can buy cushions, throws, decorations and lights at very cheap prices from sites overseas and shipped in at little cost, adding: ‘Amid such acute competition, it’s little wonder Homebase has found the going so tough.’
Another retail expert, Jonathan De Mello, founder and chief executive of JDM Retail, told MailOnline that Homebase had ‘struggled to maintain relevance in a highly competitive market for decades now’.
He continued: ‘Failure to invest in their offer and in their stores has finally led to their ultimate demise.
‘Whilst B&Q, Wickes and of course The Range have provided stiff competition to Homebase over the years, the advent of new low cost competitors such as Temu has certainly not helped.
‘The rising cost of living is only partially to blame – as these competitors also faced the same issues with rising inflation across their supply chains.
‘Their leaner business models helped them to weather the storm and in some cases even grow despite these headwinds, but a combination of a poor offer, lack of investment and frankly mismanagement all combined to push Homebase into this unenviable position of being bought out by one of their main competitors.’
Homebase was bought in 2018 for a token £1 by investment firm Hilco Capital, which has since brought in a swathe of cost-cutting measures.
But the retail chain has struggled as customers cut back on spending amid the cost-of-living crisis, and reported an £84.2million loss last year.
Damian McGloughlin, MD of Homebase which could be heading for a partial collapse
In August, Sainsbury’s struck a deal to buy 10 Homebase stores and convert them into supermarkets.
The jobs still at risk include workers at Homebase’s head office in Milton Keynes, as well as the remaining stores.
The rescue deal comes after a hunt for a buyer from Homebase’s previous owners Hilco, which is thought to have lasted for the last two months.
Mr Dawson, whose CDS acts as parent company to The Range, also bought parts of high street retailer Wilko after it collapsed last year.
It is unclear which stores will remain branded as Homebase after the deal, while administrators did not immediately disclose the locations of the 49 outlets which were not included in the deal.
The administrators said all employee wages and benefits will be paid for their period of employment, while customer orders will still be fulfilled as far as possible.
DIY chain Homebase is reportedly lining up insolvency practitioners at the Teneo consultancy
Businessman Mr Dawson, whose CDS Superstores acts as parent company to The Range, bought parts of high street retailer Wilko after it collapsed last year.
He told the Telegraph: ‘We are delighted to be able to save so many stores and jobs, and look forward to adding the Homebase brand and subsidiaries to the expanding Range group of companies.’
The Range sells homeware and DIY products from its more than 200 store estate in the UK.
Damian McGloughlin, chief executive of Homebase, said the last three years had been ‘incredibly challenging’ for DIY stores, blaming ‘a decline in consumer confidence and spending’ after the pandemic.
‘Against this backdrop, we have taken many and wide-ranging actions to improve trading performance including restructuring the business and seeking fresh investment.
‘These efforts have not been successful and today we have made the difficult decision to appoint administrators.’