The Australian owner of the DIY store, Wesfarmers has agreed to get rid of its stake in the chain, selling it at an agreed price of £1 to British turnaround specialists Hilco Capital, just two years after paying £400mn for the DIY chain. Wesfarmers acquired Homebase in 2016.
Hilco which also rescued HMV from administration in 2013 is said, could close a significant number of the company’s 220 stores – threatening the jobs of its 11,000-strong workforce after it’s acquisition of the embattled Homebase DIY stores.
Under the agreement, Hilco will buy all Homebase assets, including the brand, freehold property, property leases and inventory for “a nominal amount”, Wesfarmers said in a statement to the ASX.
“The investment has been disappointing, with the problems arising from poor execution post-acquisition being compounded by a deterioration in the macro environment and retail sector in the UK,” Wesfarmers managing director Rob Scott said. The retailer also blames poor sales on bad weather.
However, my suggestion is that, the challenging retail climate in the last few years could also be attributed to the current ‘hostile environment’ for immigration. The UK government has stiffled cash flow within the system as it makes it difficult for tourists and foreign students to come to UK. These are knkwn to be the highest spenders within the retail system. Yet the government has no cash to fund benefits and pay rises. There’s simply no cash to spend in the retail sector,families are torn between putting food on the table, paying their bills and making sure their house rent is paid, and have no extras for other forms of shopping since pay rises has become oblivion, therefore shops suffer.
In the last two years, UK retail shops have seen a disappointing return on investment. A challenging climate which has seen the likes of H&M, Mothercare, ToysRUs closes some of their shops or in some cases total liquidation. Recently, Sainsburys and ASDA reached a merger deal in a bid to save the store brands. Tesco has been struggling in the past 3 years with losses and manipulations of accounting.
With Brexit in sight who knows what all these will amount to when we finally leaves the EU. Does the UK have enough consumers to sustain its retail and service market?