Home Bargains has set out a no-holds barred expansion target as it plans to treble in size. Operations director Joe Morris tells Nicola Harrison why the company wants more, more, more

Value retailer Home Bargains has really set out is stall. On a dedicated ‘landlord’ page on its website, the retailer has posted the following message: “Home Bargains is hungry for new stores.”

This is, in fact, something of an understatement. The Liverpool-based chain, which operates more than 190 shops, is gunning for 600 UK stores in the long term, and has set itself a target to have 350 of those by 2013, by which point it estimates it will have smashed through the £1bn turnover barrier.

The retailer, owned by family-run business T J Morris, prides itself on a simple mantra, according to operations director Joe Morris: “We just try and give people the best products, at the best price, in a nice shopping environment with good service at the tills.”

It all sounds so easy, but Morris says that’s not so. “What we do is work very, very hard. It’s not an easy model. If it was easy everybody would be doing it.”

Home Bargains buys in goods it can sell at knock down prices, and if it cannot sell them cheaply, it will not sell them at all. Shoppers do not know what the shelves will be filled with on any given week. On average though, food - which includes alcohol - makes up around 30% of sales, with health and beauty, homewares, household products, seasonal goods and toys making up the remainder. Morris stresses that Home Bargains does not over-analyse the split. “We just buy the best products we can. The more it sells, the more we put on the shelf,” he says.

The format is working - in the year to June 30, pre-tax profits soared 28% to £45.4m, while like-for-likes shot up 10% - and now the retailer’s priority is to expand, opening on average one store a week. “Some retailers are cutting back on the property side, and some have disappeared,” says Morris. “We’re in acquisition phase, and it’s a good time to take property on. There are some good deals out there. The landlords like to see us in their stores. Certainly in some of the shopping centres we’ve gone into other retailers have been very appreciative of us coming in too. We have very high footfall stores.”

Each week, two million customers pass through its stores, which are typically 10,000 sq ft to 15,000 sq ft and in secondary locations, says Morris. All stores need A1 planning consent to sell food. Morris stresses there is no “magic formula” to what type of stores are acquired. “If fantastic stores come along on the high street we’ll take them,” he explains. “The issue is how many people walk past.”

At the moment, around 75% of Home Bargains’ portfolio is on the high street or malls, with the remainder on retail parks. The portfolio stretches from Glasgow and Edinburgh to South Wales, and in England to Milton Keynes. It is looking for more stores down to the M4/M25 around the outskirts of London. Once the retailer passes the 350-store milestone, it will open a second distribution centre.

Home Bargains is close to establishing a major presence on the British high street - which Morris regards as “one of the most competitive in the world” - so are there plans to expand internationally? “I don’t see why not,” says Morris. “When we’ve saturated the UK; that would be the next logical step, around Europe or further afield.”
There is still plenty to be done domestically, including refitting all the newly acquired stores. When Home Bargains takes on a new store, it typically spends £500,000 on a shop fit. “We invest heavily,” says Morris, who points out what a “terrible state” many of the 20 Woolworths stores it acquired were in. “We took six months to open them whereas other companies opened in two weeks.”

Morris accepts Home Bargains has benefited in the recession as shoppers seek value, but he believes it will continue to thrive when good times return. “We don’t care much about the recession,” says Morris, matter-of-factly. “We’re relying on the time-rich, money-poor customer - that’s a growth market.”

But how does the Home Bargains brand stand out in the crowded value sector? While acknowledging that the retailer is “up against some very strong competition”, Morris does not see many similarities with the pound shops and alike. “We’re not a single-price operator and that gives us a lot more room for manoeuvre,” he says. “The pound shops aren’t really a direct competitor. Not many products overlap.”

Rather, he cites Wilkinson, the supermarkets, and B&M Bargains as rivals, but adds he “almost doesn’t worry about them. We just do what we do. We’re a family-run company that lived above a shop. As a kid I slept under the counter - we know retail”.

Discounters on the up

It is not just Home Bargains that is on the expansion trail. The total number of discount shops in the UK has surged by 60% during the downturn as cash-strapped shoppers strive to save money and retailers expand into more affluent areas.

There are now 1,423 discount stores in Britain and for every one that has closed two have opened, according to research for the British Property Federation by the Local Data Company. And the value retailers do not appear to be halting their growth.

The 321-store retail chain Wilkinson is planning to open 15 new stores in its current financial year, after opening 26 the year before. Poundland, which has around 215 stores, opened 41 shops in its last financial year, and aims for 250 by the end of its current financial year.

99p Stores will open 48 stores in its current financial year, taking its store count to 120. The 120-store chain Original Factory Shop will have its “biggest ever year” for store openings in 2009/10, opening 30 stores compared with the 18 it opened last year, while B&M Bargains has vowed to increase its store numbers to 400 across the UK. It has around 90 stores currently.