Homebase, a stalwart of the UK’s DIY world, has been the target of multiple takeovers since it was founded by Sainsbury’s forty years ago.
But none rocked the boat quite like the acquisition by Australian retail group Wesfarmers.
Nearly three years ago, Wesfarmers splurged £340million on Homebase, axed without ceremony every member of the Homebase board and set about erasing the established home improvement brand.
The Homebase store in Orpington (above) is the test bed for the DIY chain’s new strategy
The new custodian wanted to replace Homebase with its own Bunnings Warehouse format, which was hugely successful Down Under, but totally untested in the UK.
And customers didn’t like it. The company ripped out the kitchens, bathrooms, and home furnishings Homebase was known for, and focused instead on tools and piling shelves high with unfamiliar brands.
Just over two years later, Wesfarmers’ ill-guided foray into the UK came to an abrupt end. Amid spiralling losses and costs, the firm was forced to sell the 240-store chain for just £1. It retreated from the UK with a £547million hole in its pocket.
Caught in the cross-hairs was Leeds-born DIY retail lifer Damian McGloughlin, who was poached from B&Q at the end of 2017.
Homebase chief executive Damian McGloughlin (right) and Orpington store manager Lee (left)
Wesfarmers had hoped to put his industry acumen to good use as its Bunnings roll-out rolled on. But just a few weeks in, McGloughlin found himself heading up an urgent turnaround plan and scouting out a possible sale of the business.
Speaking exclusively to This is Money, now as the boss of a reborn Homebase, McGloughlin opens up about the confused business he was drafted into and reveals, now the dust has settled, how he plans to to breathe fresh life into the DIY chain.
‘I’ve still got my Yorkshire dulcet tones. Does it understand Yorkshire?’ jokes McGloughlin, pointing to the dictaphone as he pulls up a chair in the Homebase store’s new kitchen department.
The re-installed kitchen and bathrooms departments at the Homebase store in Orpington
Cheerful, and proudly wearing his bottle green tunic, it seems the trials and tribulations of 2018 haven’t tarnished McGloughlin’s good humour.
He explains how, in the summer of 2017, after more than three decades working for B&Q, (where he started as a Saturday boy and even met his wife) he was itching for a new challenge.
So by Christmas that year the B&Q retail director had upped sticks and joined the firm’s new rival, Bunnings, as its UK and Ireland chief operating officer.
The role, he believed, would be to help steer the roll-out of Bunnings stores across the country, with a view to succeeding the boss PJ Davis in about a year’s time.
‘I went to Australia and could see that Bunnings is a formidable business, a loved brand with a great culture. And with the backing of Wesfarmers, I believed it could really be a challenger in the UK market,’ McGloughlin says.
But he barely had his feet under the worktop when red flags started to emerge.
‘I never saw any numbers,’ he says. ‘I was on gardening leave and respectful to B&Q, so it wasn’t until I started at Bunnings that I saw the numbers. And what was in the public domain wasn’t necessarily the full story.’
The DIY boss reveals that the loss Bunnings racked up (as measured by EBITDA) in its first year as Homebase owners was ‘significantly worse’ than people thought.
Damian McGloughlin (above) joined Bunnings UK after 32 years with B&Q and is now the boss of Homebase
After taking into account a number of provisions, the company suffered losses of ‘more than £150million’ in its first year, McGloughlin says – far worse than the £54million loss widely reported in the press at the time.
‘At this point, it was clear to me that the Bunnings Warehouse stores, in my view, were not right for the UK,’ he says.
‘The stores were too geared to seasonal items, like garden furniture and BBQ’s. A good 70 per cent of the store was geared up to summer, but kept in all year round. They were not reading the UK market and the dark, cold winters we get here.
‘They weren’t sure of who the Homebase customer was,’ he adds, ‘and they lost them when they took out kitchens and bathrooms and softer areas.’
‘The Bunnings roll-out wasn’t fit for purpose,’ he says. ‘It was high cost, high inventory, high labour cost – it wasn’t sustainable, so I knew we had to think differently.’
McGloughlin was also concerned about the more than 200 stores that were still branded as Homebase and, having been neglected, were haemorrhaging cash. ‘Significantly more than people realised,’ he says.
Although he fiercely defends the individuals at Wesfarmers and Bunnings who were in charge of the venture, McGloughlin admits that ‘fundamental mistakes’ were made.
‘They are not wet behind the ears – they are experts in home improvement, but they made fundamental mistakes. The UK retail environment is harder and they didn’t read how different the market was,’ he says.
McGloughlin had been in the business for a matter of weeks when he was asked to step up to CEO in place of Davis, who took a three-month sabbatical from which he never returned.
As Wesfarmers mulled its future in the UK, he hit pause on the Bunnings roll-outs and helped formulate a plan to slow the leak at Homebase.
The Orpington Homebase store has been set up in a series of zones so it is easier to shop. Some of the red Bunnings racking remains in the store, but all its hand written signage is gone
McGloughlin’s baptism of fire only intensified when he was shortly afterwards asked to investigate a sale of the business in the background, working alongside CFO Andy Coleman and Lazards. And the rest is history.
In June last year, the process culminated in the sale of Homebase to Hilco for a nominal £1. The UK waved farewell to Bunnings, its power tools and its Sausage Sizzles, and the brief, botched acquisition went down as one of the most disastrous in retail history.
For McGloughlin, suddenly at the helm of Homebase, the job was only just getting started…
‘Immediately after taking ownership, Hilco wanted us to deliver the management plan they bought the business on. So we plunged in at relentless pace – rearranging, repricing, restructuring.’
Everything Bunnings related – a website, 24 stores, ranges, signage – had to be unpicked, he explains. Some 300 head office roles that had been created for the venture had to be culled too.
The reborn Homebase also needed to close a tail of 42 underperforming stores, which it then did through a surprisingly convivial company voluntary arrangement.
‘The CVA was absolutely the right thing to do – an opportunity to close some of the stores that had been loss making even before Bunnings took over, and Hilco and the landlords backed us immensely with that,’ McGloughlin says.
‘But the self-styled ‘straight forward’ former shop-floor worker struggled with the 1,500 or so job losses that came with it.
‘I had to look at the bigger picture – losing some jobs to save lots more,’ he says. ‘But they were our team members to the very end and we did everything we could to support them.’
By the end of last year, with fewer stores, a £95million loan, the renewed support of suppliers and what McGloughlin describes as ‘absolutely fantastic’ owners, the DIY boss could finally focus on rebuilding Homebase.
What’s next for Homebase?
McGloughlin is clear that – even though the dust of an extremely tough year is beginning to settle – the last thing he wants to do at this stage is ‘puff out his chest’.
Jumping up to give a tour of the Orpington store, he says: ‘This is not a rebrand, or a revamp, it’s a quick refloor. There’s a lot of things we haven’t done.’
But the changes, which will be tested out at five other Homebase branches before Easter, are clear to see and already garnering good results – a double-digit uplift in some categories, he says.
The company has reintroduced the bathroom and kitchen ranges Bunnings axed, plus inspirational, ‘softer’ items, like lamps, wallpaper and bedroom furniture, all showcased on a mezzanine floor.
Homebase has reintroduced home decor and used the mezzanine for bathrooms and kitchens
It has welcomed back concession partners too, signing deals with Tapi Carpets and Silent Night, with more to follow soon. He has brought in Amazon Lockers to help boost footfall, and ‘zoned’ the stores to make them much easier to shop.
‘We can go back to playing to some of Homebase’s heritage strength, and that’s in decorative and garden and customer service. We’re bringing back things like cushions and creating a friendlier, softer environment.
A general view of the Homebase store in Orpington – one of six that will be refloored by Easter
‘The suppliers are so behind us and the staff love this brand. Do they prefer it to Bunnings? Absolutely yes! And the customers have a greater affection for Homebase than I ever realised too,’ McGloughlin says.
‘But we can take some learnings from Bunnings,’ he adds. ‘We’re not going to be a Plumb Centre or a Wickes, but we’ll sit in the sweet spot.’
McGloughlin says suppliers have been supportive and are fully behind the company again
If all goes to plan, the improvements will be made across Homebase’s 188-store estate.
The company is working on getting back online too and, much later down the line, may even think about opening some new stores.
‘There will be a time and a place to open new stores. Some smaller stores could be very useful in the future,’ he says.
But first things first, McGloughlin has the ‘audacious goal’ of getting Homebase back in the black by the end of 2019.
‘We’ve achieved a year-on-year improvement that we should be really proud of, but it’s still a loss. We are still broken as a business and there’s still lots of rebuilding to do,’ he says.
Although the B&Q lifer walked into a wreckage a year ago, McGloughlin is now a proud member of the Homebase team.
‘I’m here for the long-term’, he asserts. ‘This, I have to say, is the best job I’ve ever had’.