Habitat set to be swallowed by Argos as style revolution comes full circle

Home Retail Group said to be in talks to buy parts of Habitat in a possible £20m deal In the 1960s, Sir Terence Conran started a style revolution with the Habitat chain that helped the nation to shake off postwar austerity. It went on to define “the designer decade” of the 1980s, spawned countless imitators on the high street and became a victim of its own success. The chain could now face an ignominious fate, as part of the group which owns Argos, which has pioneered a different kind of design movement selling sofas for under £200 and £30 wardrobes. Home Retail Group was today said to be in talks to buy parts of Habitat in a deal that could be worth up to £20m. Home Retail declined to comment but is reported to be interested in acquiring some of Habitat’s stores and the rights to use the brand in Britain and an announcement could come as soon as tomorrow morning. Home Retail also owns Homebase and analysts suggested the Habitat brand could be used on products across its stores. “I don’t think this is a marriage made in heaven,” said one analyst. “It’s like jumping into a swimming pool with a lump of concrete tied round your neck. Habitat has never made any money and Home Retail has got enough problems of its own. “In the early days Habitat was interesting, innovative and quite successful but only people with extremely long memories can remember its best days.” Habitat has struggled financially for many years. Although the shops were a breath of fresh air when they arrived on the high street, its clever designs were soon mimicked by cheaper rivals and by the late 80s it was in financial difficulties. Even ownership by Sweden’s wealthy Kamprad family, whose patriarch Ingvar founded Ikea, could not restore its fortunes. Despite owning Habitat for nearly 20 years, they failed to come up with a successful formula and eventually paid restructuring firm Hilco a multimillion pound dowry to take the loss-making business off their hands in December 2009. Indeed while Habitat struggled Ikea marched on to become the UK’s biggest furniture retailer with sales of more than £1bn. Last year profits at Argos fell sharply as moribund consumer confidence put a dampener on sales of homeware and electricals and the group’s chief executive Terry Duddy recently warned that sales of electricals – particularly televisions and video games – had tumbled 20% during the spring. According to analysts at Verdict, the high street downturn has cost the furniture market nearly £2bn in lost sales. Neil Saunders says that back in 2008 it was worth £12.5bn but had withered to £10.7bn by last year; it has stabilised but is still predicted to shrink this year. Despite its woes, Home Retail has a substantial cash pile and is looking for new avenues of growth, having embarked on a number of new initiatives including selling books and children’s clothes. Last week it launched Argos TV, its own home shopping channel. Argos has substantial market share in areas such as furniture, toys and homeware. It already owns household brands including Schreiber, Hygena, Alba and Bush and Chad Valley which it bought following the collapse of Woolworths. In sales terms Habitat is a minnow. While Home Retail turned over more than £4bn last year, at last count Habitat was making a loss of £18.7m on sales of £74.3m in the year to March 2009. Habitat’s performance is thought to have improved on Hilco’s watch as it extricated itself from expensive stores and introduced new products and it is said to have approached private equity firms about a deal. It is unclear how many of its 29 stores Home Retail would be interested in taking on but it is thought to face competition from the French furniture group Conforama reported to be interested in buying the international parts of the chain. Conran has had no involvement with Habitat for many years. Having expanded his business empire to include restaurants and hotels, the 79-year-old’s most recent design brief is a homeware collection for Marks & Spencer which he says is a “serious design project”. “It gives us the chance to produce a truly democratic and British collection, something that I have been aiming to achieve all my working life,” said Conran of the tie-up announced in March. “This is our chance at last.” Retail industry Zoe Wood guardian.co.uk

Posted by on June 23, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.