Home improvement chain Focus (DIY) could not have said it better itself. The beleaguered retailer, whose strapline is “Famous for low prices”, has been sold this week for just £1.
Retail experts and analysts say the chain faces an uphill struggle to recover, having lost its “focus” and fallen victim to the downturn in DIY sales. However, they believe it has scope for improvement and can recover from poor marketing and management in recent years.
US hedge fund and buyout group Cerberus has teamed up with the two directors who turned around Wickes to take over Focus, Britain’s third largest home improvement retailer. Cerberus will also pay the group’s £180m debt and has repaid bondholders 40p in the pound in a deal that values the company at £225m.
Apax Partners and Duke Street Capital, the private equity firms that own the retailer, will receive £1 for their equity. Focus, which has 250 stores, is expected to complete the deal by the end of July.
Focus appointed Rothschild to sell the company earlier this year after failing to reach a debt restructuring agreement with its debtholders. The company struggled to pay the interest on its debt, blaming strong competition, rising interest rates and a slowdown in the DIY market.
But new chief executive Bill Grimsey, parachuted in this week, believes the struggling chain can be turned around. “Focus has the potential to be one of the most successful operators in the DIY sector,” Grimsey said in a statement.
“With the resources and commitment of Cerberus, we will have the opportunity to exploit its potential in a fundamentally attractive DIY market.”
Grimsey and new finance director Bill Hoskins revived Wickes in the 1990s. Seymour Pierce retail analyst Richard Ratner says: “They are first class. If Focus can be turned around they are the people to do, but it will not be an easy task.” Ratner blames Focus’s current malaise on “appalling” sales per square foot and the “limited” amount of cash it has had to spend. It also sold the “successful” part of the group, merchant specialist Wickes, in 2005.
In that year the company, then Focus Wickes, divested its 170-plus Wickes stores to Travis Perkins to concentrate on the 250-plus Focus stores and announced plans to open up to 50 new stores and refurbish existing ones.
An industry source says: “The business is a mess. Everyone is talking about the fact that it is a difficult sector which is coming under pressure, but Focus has not been managed well for a number of years.”
The source adds that Focus has been left behind by its competitors. Wickes caters mainly for tradesman, Homebase peddles the “softer” side of DIY and B&Q targets the “proper” DIY-er. Meanwhile, Tesco, through its Extra catalogue, is also looking to tap into the DIY market.
“Focus is lost,” says the source. “It hasn’t a clear targeted segment of the market. It has a mediocre offer.”
He believes investment is key. According to figures from Nielsen Media Research, Focus spent £11.8m on advertising in 2006 – a figure dwarfed by Homebase’s £25.9m and B&Q’s £37.1m.
Another executive close to the business says marketing director Paul Willis is likely to be given a stay of execution and a bigger marketing budget. Focus can recover, but has it all to do.