Homebase calls in BCG amid doubt over retailer's future
Boston Consulting Group (BCG) has been drafted in to aid struggling retailer Homebase. With the home improvements warehouse chain looking to avoid sharing the fate of high street names Maplin and Toys R Us, a number of private equity firms are tipped for a takeover at the DIY chain.
Homebase's future has been thrown into doubt, two months after a “botched” takeover by Australian conglomerate, Wesfarmers. Founded in 1979, the company was owned by Home Retail Group from October 2006 until it was sold in February 2016, having declared revenues of £1,4679 billion as recently as 2014. Since then, however, Wesfarmers has been forced to write off £584 million from the acquisition, having axed a number of Homebase’s most popular business lines, before in 2018, it announced that half-year losses would widen from £28 million to £97 million.
Retail experts have widely blamed Wesfarmers for the demise of Homebase, suggesting that the conglomerate misjudged the UK market after completing its £340 million takeover two years ago. Wesfarmers attempted to import the home improvement brand Bunnings to the UK by converting 19 Homebase stores into the Bunnings format. However, the fast pace of the transition gave Wesfarmers little time to foreground the highly successful brand to the UK consumer, resulting in poor engagement.
Wesfarmers also fired Homebase's senior management team, alongside more than 150 middle-managers, soon after its acquisition of the retailer – and the cuts look set to continue, as the group seeks to recoup its misjudged investment. Wesfarmers has since launched a strategic review of Homebase, and as part of a Company Voluntary Arrangement (CVA) to offset bankruptcy until a buyer is found, Rob Scott, Wesfarmers Managing Director, pledged to close some 40 stores, jeopardising as many as 2,000 jobs. Homebase presently has around 250 UK stores and employs around 12,000 people
In a bid to turn the beleaguered company around in the meantime, and make Homebase more attractive for acquisition, management consultancy BCG has reportedly been brought in to advise Homebase boss Damian McGloughlin, who took the helm in January. While Homebase and BCG declined to comment, as is commonplace for consulting work of this nature, the appointment does not come as a surprise, after investment bank Lazard was already appointed to sound out buyers for the business.
According to the British press, Homebase already has a variety of suitors vying for ownership, including a number of private equity firms. These include Hilco, Endless and Lion Capital, are also considering a bid for the business. It is not yet clear whether any bid would be for all of the business, part of it, or, in B&M's case, a chunk of the chain's store estate. However, it is clear that should a private equity take over of Homebase occur, it would not necessarily bring stability to the brand – with a number of high street presences, including Toys R Us and Claire’s, having entered administration after they were saddled with unsustainable debt by private equity investments.
