HHGL Limited has announced the next phase of its restructuring plan and is seeking approval from creditors on a proposed plan to reduce its cost base in the UK and the Republic of Ireland.
Restructuring company Hilco bought the DIY chain for £1 in May but has announced it will close 42 UK stores as part of the plan over the next 16 months. Up to 1,500 jobs may go as a result.
Homebase’s sales performance and profitability declined significantly under the ownership of Australian company Wesfarmersover the last two years. The company has faced an extremely challenging retail trading environment reflecting weak consumer confidence and reduced consumer spending.
These factors have had a significant adverse impact on Homebase’s trading position. A total of 17 Homebase stores have already closed this year and the business has also cut 303 jobs at its head office in Milton Keynes.
After a comprehensive review, Homebase has concluded that its current store portfolio mix is no longer viable. Rental costs associated with stores are unsustainable and many stores are loss making.
The CVA enables Homebase to make essential changes to its store portfolio, reducing its cost base and providing a stable platform on which to continue its turnaround.
Homebase chief executive Damian McGloughlin said: "Launching a CVA has been a difficult decision and one that we have not taken lightly. Homebase has been one of the most recognisable retail brands for almost 40 years but the reality is we need to continue to take decisive action to address the underperformance of the business and deal with the burden of our cost base, as well as to protect thousands of jobs.
“The CVA is therefore an essential measure for the business to take and will enable us to refocus our operations and rebuild our offer for the years ahead.”
Under the terms of the CVA proposal, all creditors receive a better outcome than any other likely alternative.
The creditors will vote on the CVA on August 31.
Stephanie Pollitt, assistant director of real estate policy at the British Property Federation, said: “These situations are never easy as property owners need to take into consideration the impact on their investors, including those protecting their investors’ pensioners’ savings, as they vote on the CVA proposal. Ultimately, it will be for individual property owners to decide how they will vote on the CVA, but the proposal has sought to find a solution that provides a sustainable future for Homebase.”