It began with takings of only £85 a week. Today, however, the value retailer Home Bargains turns over almost £1.5bn annually.
“Top brands, bottom prices” – that is the customer promise that has taken Home Bargains from a single store in Liverpool to one of the country’s biggest privately owned retailers.
While other value retailers such as B&M and Poundland have hogged headlines, partly because of their publicly listed status (Poundland has since been acquired), Home Bargains – the trading name of TJ Morris – is one of retail’s secret success stories.
The business is a giant of the industry that has made its owners among the richest people in Britain, and while it makes little noise about its prowess, it continues to grow apace.
Based in Liverpool and run by founder Tom Morris and his brother Joe, Home Bargains generated sales last year of £1.47bn and pre-tax profits of £147.1m.
Sales per sq ft stood at £320, a little above B&M’s £315, according to Retail Week Prospect.
The retailer’s core customers are typical of value retail more widely, mainly from the C12DE socio-economic groups. However, it is also drawing in more moneyed shoppers.
An Aladdin’s cave
The retailer’s success is dependent upon focused, sharp buying and keen cost control.
Home Bargains’ range comprises about 5,000 products, including food, which it has described as “wide but shallow”.
It likes “uncomplicated” products, says Retail Week Prospect head of research Philip Wiggenraad. That means it tends to avoid lines that require specialised display or storage.
About 30% of the assortment is made up of end-of-lines, distressed product and similar. That gives it an Aladdin’s cave appeal, because stock will change frequently and can include anything from toys to cider, by way of perfumes and arts and crafts
The limited number of products gives the retailer buying clout. About 30% of the assortment is made up of end-of-lines, distressed product and similar.
That gives it an Aladdin’s cave appeal, because stock will change frequently and can include anything from toys to cider, by way of perfumes and arts and crafts.
The retailer adopts an open-to-buy approach that allows it to scoop up deals and it has a buying office in China through which it sources directly from manufacturers.
The advantage of buying at keen prices is then hammered home by ensuring business costs are kept as low as possible.
A tough negotiator
The retailer is well-known as no pushover when it comes to negotiations on new properties and it has developed much of its own IT infrastructure rather than buying it in from suppliers.
The attention to retail detail means that Home Bargains has notched up a pre-tax profit margin of around 10% in recent years.
“[A pre-tax profit margin of around 10%] can be considered a high level for a discounter, particularly when taking into account that it is continuing to invest in new stores and a new distribution centre”
Philip Wiggenraad, Retail Week Prospect
“This can be considered a high level for a discounter, particularly when taking into account that it is continuing to invest in new stores and a new distribution centre,” observes Wiggenraad.
It is an important point. Although Home Bargains keeps the lid on costs, it does invest for growth.
The new distribution centre, in Wiltshire, will support Home Bargains’ expansion out of its northern heartland into the south of England.
At present there are about 400 Home Bargains branches. The ambition is to take that number to 800, according to its website.
Shops typically measure between 10,000 sq ft and 15,000 sq ft, but in the past few years it has sought premises as big as 30,000 sq ft.
Online pioneer in the value sector
While stores are the star of the Home Bargains show, it is one of the few value variety store groups to trade online.
Last year, according to Retail Week Prospect estimates, its etail arm delivered £35m in revenues. That is a relatively small sum and it is understood the site is primarily seen as useful for brand-building, though Home Bargains does offer click-and-collect.
Founder Tom Morris and family came in at number 52 in Retail Week’s 2016 rich list. Not bad for somebody who founded his business in 1976, aged only 21.
Morris used a bank overdraft to finance his business, and takings then averaged about £85 a week. Today the family wealth is estimated at £3.05bn, up from £2.25bn in 2015.
Home Bargains turned 40 this year, but it shows no sign of a mid-life crisis. As it pushes on with expansion into the South it may be taking on a whole new lease of life.
Home Bargains at a glance
Sales (2014/15): £1.47bn
Pre-tax profit (2014/15): £147.1m
Number of stores: 400
Number of employees: 17,000
Sales per employee: £106,500