UK's Homebase aims to stand out in shrinking market

Wed Nov 28, 2012 1:03pm EST

* To refit entire store estate over next five years

* Refit model costs 800,000 stg, gives 20 pct sales uplift

* Sees store estate reducing from 340 to 300 stores by 2017

By James Davey

LONDON, Nov 28 (Reuters) - Homebase, Britain's second-biggest home improvement retailer, plans to revamp its stores over the next five years as it battles to win share in a crowded and contracting market.

The 340-store business, owned by Home Retail Group Plc , said on Wednesday it will use a re-fitted store in Ruislip, west London, as the blueprint for future development.

That store has undergone an 800,000 pounds ($1.3 million) refit that is expected to deliver a 20 percent sales uplift over a full year.

Speaking on a media visit to the Ruislip store, Homebase Managing Director Paul Loft said a combination of store investment, a focus on multi-channel - connecting with customers through different channels including online - along with improved customer service would differentiate the chain more clearly from the competition.

The value of Britain's home improvement market has declined by between 2 and 3 percent in 2012 and it is becoming increasingly crowded, with Homebase competing against the DIY "sheds" of B&Q and Wickes as well as Ikea, John Lewis and supermarkets like Tesco Plc and Asda (part of Wal-Mart Stores inc ).

Homebase ranks behind Kingfisher Plc's B&Q chain in the UK market.

MARKET SHARE

With the UK facing a "triple-dip" recession, stores groups, particularly those focused on "big ticket" items like kitchens and bathrooms, are finding the going tough as disposable incomes are eroded by rising prices, subdued wage growth and government austerity measures.

A continuing low level of housing transactions is also bad news for firms like Homebase, which last month posted an 18 percent fall in first-half profit.

"There's no sign of it (the economy) jumping back up in the near term. We've got to get on with it and invest and gain share within the market place," said Loft.

Home Retail, which also owns the Argos household goods business, is planning capital expenditure at group level of about 175 million pounds a year over the next three years. Of this, about 100 million will be invested in Argos.

The Ruislip store showcases Homebase's latest proposition and includes Laura Ashley and Habitat concessions.

Homebase has freed up space by removing slow-selling lines, replacing them with the concessions and other brands such as Qualcast lawnmowers, Farrow & Ball paint and a range from celebrity chef Jamie Oliver.

There is also an increased focus on decorative ranges and new lines such as carpets, made to measure curtains and blinds.

By 2017, Loft anticipates the size of the Homebase estate will shrink to about 300 stores as leases expire.

Shares in Home Retail, up 43 percent over the last six months, closed up 2 percent at 112.5 pence, valuing the business at about 1.01 billion pounds.

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