Home improvement stores convert to home-decorating

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When home improvement stores burst onto the scene in the mid-‘80s, people flocked to these meccas in droves, expecting to save money and have more control over home alterations. These home improvement companies surpassed even their own expectations and now have stores in most towns across the United States.

But along with prosperity came competition. In order to keep up with this rivalry, HomeBase Inc. has decided to metamorphose from a big-box home improvement store to a home-decorating marketplace.

HomeBase has had a significant downturn in the last year, finding competition from other do-it-yourself stores, such as Home Depot, increasingly threatening, with sales and profits markedly deteriorated from 1999.

“That (competition) was a mounting concern,” said HomeBase spokeswoman Michele Feller. “To some extent, this (conversion) is a pretty unique situation.”

The chain, based in Irvine, Calif., announced earlier this month that it is halfway through its goal of converting nearly 75 percent of its stores to a House2Home concept. Sixty-two stores are listed on its Web site as future beneficiaries of the conversion process while 22 stores will be closing permanently. Five stores have already been converted.

Although Feller couldn’t release an official statement, Tarinna Sax, store manager of the HomeBase store at 1515 Auto Mall Loop, said neither of Colorado Springs’s two stores will be closing but rather will be among the conversion projects. The other store is at 2855 S. Academy Blvd.

Each HomeBase store throughout the western portion of the United States encompasses about 103,000 square feet of indoor space and nearly 18,000 square feet of outdoor patio space.

All conversion stores will go through an 11-week liquidation process. After that, the stores will undergo nine weeks of reconstruction and re-merchandising. Neither Colorado Springs store has entered the liquidation phase yet but will before the middle of May, said Feller.

The decision as to which stores will be closing is based on a variety of conditions, said Feller. It is not an issue of keeping at least one open in every market, but rather an evaluation of demographics, the needs of the community, lease restrictions, justifiable costs and competition.

HomeBase, founded in 1983 as HomeClub membership warehouse stores, is a publicly traded company (NYSE: HBI) with nearly 500 employees working at the corporate office and between 9,000 and 10,000 employees at the stores. The conversion, however, will increase staff by about 45 percent, said Feller.

HomeBase’s stock was listed at $2.87 as of Wednesday afternoon. Quarterly net sales ending Oct. 28, 2000 were listed at $334 million, down nearly $45 million from the quarterly report in 1999, showing a decline of 12.5 percent. The financial statements lists competition, decline in transactions and deflationary pricing as the reasons for this descent. The decrease in sales was offset by $14.6 million in sales in the company’s five new House2Home stores during the eight-week period they were open.

Gross profit was 19.4 percent of sales at $64.9 million for the third quarter of 2000, down $18 million from the same quarter in 1999. The report attributed that number to an overall drop in sales resulting in less buying and occupancy costs, occupancy costs of new House2Home stores not yet in operation, and a drop in gross margin due to an increase in promotional pricing.