• Andrea Lillo

HomeBase shifts to home fashions

IRVINE, CA -HomeBase Inc., the parent company of the home improvement chain HomeBase, is undergoing major renovations of its own.

The company, which also includes the newly born retailer House2Home, announced last week that it is exiting the home improvement business, with plans to convert the majority of its HomeBase locations into House2Homes.

"We fought a good fight," Herb Zarkin, chairman, president and ceo, said about HomeBase, which had $1.5 billion in sales and $12.62 million in earnings for 1999. "We tried our best to make HomeBase a strong vital competitor in the home improvement sector...but we believe the prospects for House2Home present a far greater opportunity for long-term growth.

"While we regrettably have to move away from the HomeBase business and its brand name, we embrace the notion of change and look forward to the rewards we believe will come with this new period of transformation."

The aggressive rollout plan includes converting 62 of its HomeBase stores into House2Homes and closing the remaining 22 HomeBase stores in a staggered eight-phase schedule over the next 12 months. The company expects to have 67 House2Home stores open by next Thanksgiving. Phases 1 and 2 began last week, which include closing 31 stores in the greater Los Angeles area and undergoing liquidation. Eighteen of those stores will then open as House2Home in April or May. The company expects liquidation to last 11 weeks and construction and re-merchandising nine weeks. A new phase will commence every three weeks.

House2Home, a big box retailer for the moderately priced home decorating market, concentrates its merchandise in four areas: outdoor living; indoor living, which includes window and rugs; home decor, which includes bedding, bath and table linens; and seasonal and party goods. Zarkin has been very pleased with the results so far.

"Combined sales at the five House2Home test stores for the 12-week period since their early September opening through the fiscal month ending Nov. 25 totaled approximately $21.4 million, or an average of $4.3 million per store," said Zarkin. "This has exceeded our expectations by a percentage rate in the mid-teens. Once the House2Home chain becomes well established over the next two to three years, we will explore opportunities for new store openings in order to grow our market share and achieve greater operational efficiencies."

Zarkin said that the company could return to profitability by fourth quarter next year, and stated that the average per store annual sales could be $17 million the first year, $19 million the second and $21 million the third. He also expected the operating income per store would be approximately $2.5 million, or 11 percent to 12 percent of sales by the third year.

"It's the board's firm belief that a broad rollover of House2Home is an extremely attractive and compelling force of action with significant upside potential over a relatively short period of time," said Zarkin.

Founded in 1983 as HomeClub membership warehouse, HomeBase has locations in Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah and Washington.

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