Homebase makes early return to profit as turnaround plan pays off
Homebase today said it had returned to profit earlier than expected after its turnaround plan helped deliver strong growth.
The DIY retailer reported earnings before interest, tax, depreciation and amortisation of £3.2m for the year, up from a £114.5m loss in 2018.
Homebase has embarked on a radical turnaround strategy after it was bought by Hilco Capital for just £1 amid huge losses.
The firm said new ranges and improvements to both its in-store and online offering had helped drive like-for-like sales up 2.6 per cent, while its gross margin rate rose 2.8 per cent.
Homebase last year bought Bathstore out of administration and has now opened 49 concessions in its stores.
The homeware chain said its cost-cutting strategy had helped trim its costs base by more than £180m, and that nearly all of its 164 stores were now profitable.
Chief financial officer Andy Coleman told Morning Wire the company had “attacked the cost based across all areas of the business”.
This included halving its stock losses, reducing its number of distribution centres from six to three and making redundancies in its head office.
“Eighteen months into our turnaround, we’re extremely proud of what our team has achieved, working hard with our partners to return to profit and lay solid foundations for growth,” said chief executive Damian McGloughlin.
“We have a very clear vision for Homebase, and we’re excited about the plans we have for the future. We will continue to invest in our ranges, services, and team members as we make Homebase the go to place for the inspiration, expertise and products customers need to take their ideas and create homes they love.”
Homebase said it company voluntary arrangement (CVA) — a popular rescue deal designed to slash rents — would conclude 18 months ahead of schedule due to its strong financial performance.
The company has since signed 75 new leases, meaning less than five per cent are now covered by the CVA. McGloughlin added that ending the CVA early sent a clear signal to the market that its turnaround was complete.
The results came on the same day that Topps Tiles issued a profit warning, blaming a slowdown in home improvement spending among Brits.
But Homebase boss McGloughlin dismissed the concerns, saying: “The market has actually got stronger.” He added that sales figures for January and February had outperformed the same period last year.
The firm said it would continue to invest in the business in 2020, with plans to expand its product range to become a “single destination for home and garden projects”.
The DIY specialist said it will also open more concessions with other brands and will trial new store formats.