Homebase Falls into Administration 📉

Hey there! 👋

The struggling DIY chain, Homebase, has fallen into administration putting up to 2,000 jobs at risk. This follows the failure of Hilco, Homebase’s owner, to sell the retailer outright, despite selling a large number of stores to The Range. Consultancy firm Teneo has been appointed as the administrator.

Let’s dive into what is going on, how this affects different stakeholders, and how a law firm could be involved.

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What has happened to Homebase? 🏠

Homebase’s struggles have been ongoing for around three years, with the cost of living crisis causing major issues for the chain. This is because of a reduction in sales caused by reduced consumer confidence, placing Homebase in a precarious position.

Homebase has struggled to attract shoppers for some time, with its parent group, HHGL, announcing a loss of £85m last year.

According to the Chief Executive of Homebase, Damian McGloughlin, Homebase initially attempted to restructure and seek investment, which ultimately failed and led to the decision to appoint administrators.

Following their appointment, Teneo immediately sold off up to 70 stores and the intellectual property of Homebase to CDS Superstores, the owner of The Range and Wilko. This administration deal is expected to save about 1,600 jobs, yet the fate of 2,000 employees including head office staff is still up for debate with Teneo still seeking to sell off the remaining 49 stores.

Teneo has stressed that there will not be “any immediate redundancies” and customers will receive their orders “as far as possible”, as well as pledging to make arrangements for gift vouchers to be used, attempting to build employee and consumer confidence.

How are different stakeholders affected? 🫂

Employees

Approximately 2,000 staff face uncertainty. Whilst the sale of 70 stores to CDS Superstores is expected to secure 1,600 jobs, the remaining 2,000 jobs are currently in jeopardy. Additionally, the employees part of stores acquired by CDS Superstores may have concerns about how their roles or compensation may change.

Customers/Consumers

Shoppers may experience disruptions, including potential store closures and a change to product availability. While Teneo has tried to reassure customers that disruptions will be avoided, this could become difficult as administrative measures continue to take place.

Suppliers

Companies that were key suppliers of goods and services to Homebase may face financial losses due to unpaid invoices. The government has advised that suppliers who are owed money should register as a creditor. Additionally, suppliers will be concerned about how the sale of stores to new owners may affect them.

Competitors

Rival retailers may see a shift in the market. There are now opportunities to try and capture Homebase’s market share for competitors to take advantage of and establish a greater presence within the DIY sphere. With consumers simultaneously now seeking alternative options, companies have a unique opportunity to expand their influence in the market.

How could law firms be involved? ⚖️

Advising Administrators

• Legal Compliance – Ensuring that the administrators comply with UK insolvency legislation, such as the Insolvency Act 1986, by guiding them and ensuring any actions are in line with this.

• Asset Sales – Law firms may assist in the legal aspects of selling Homebase’s assets to buyers, such as the sale of 70 stores to CDS Superstores.

For Advising Creditors

• Debt Recovery – Acting on behalf of suppliers or any other creditors to recover debts that are owed to them by Homebase.

• Litigation – Should negotiations fail over repayment plans, creditors may wish to pursue legal action thus getting the litigators involved.

🗞 Other news…

UK Inflation rose in October 🪙

UK inflation surged past the Bank of England’s 2% target in October, reaching 2.3%. This was above forecasts and was 0.6% from September’s 1.7% rate. This will mean another interest cut before the year ends is now unlikely.

Amazon launches Shein & Temu rival 🛒

Shopping giant Amazon launched ‘Haul’, a new shopping outlet for US customers. The aim is to match the low prices of its e-commerce rivals, Shein and Temu, setting a maximum price on products at $20, while most products costing under $10. Given the action taken against Temu by the European Commission in October, it will be interesting to see how Haul develops!

I hope you enjoyed this article. See you next week! 👋

Written by Umair Patel