HomeBase Plans Rebound With Accessory Sales

HomeBase Inc. said Thursday that stiff competition led to a quarterly loss and a 44% drop in annual earnings, but it plans to regain momentum with a fresh concept that will put home furnishings, outdoor furniture and garden supplies in five new stores this year.

The Irvine home-improvement chain, which had hinted at such plans last quarter, would not say where the new stores would be located. The new stores will cost $7 million to $8 million, the company said.

“We continue to battle mounting competitive pressures,” Chief Executive Allan Sherman said in a statement released Thursday.

The company lost $2 million, or 5 cents a share, for its fiscal fourth quarter, ended Jan. 29. In the previous year’s final three months, it earned $414,000, or 1 cent a share. Analysts had, on average, expected HomeBase to lose 7 cents in the fourth quarter. Sales rose 6% to $327 million.

For the year, the company earned $12.6 million, or 33 cents a share, compared with $22.4 million, or 54 cents a share, for the previous year. Annual sales rose 7% to about $1.5 billion.

In a shift from HomeBase’s standard fare of hardware, lumber and home-improvement supplies, the new stores will sell products such as kitchen and bath accessories, including linens.

While the move is similar to Home Depot Inc.’s opening last year of its Expo Design Centers, HomeBase insists the two concepts are not comparable because its stores won’t focus on interior design.

Competition intensified in the local home-improvement center arena last year when Lowe’s Cos. in North Carolina rumbled into California, where HomeBase has 50 of its 88 stores.

Home Depot, based in Atlanta, upped the ante in July when it opened its new Expo Design Centers in Huntington Beach and Monrovia. It plans to open 11 more such centers this year, including one in Anaheim. By 2005, the company expects to have 200 of the centers operating.

HomeBase alluded to the ongoing industry competition in its earnings report. While same-store sales grew 1.4% for the year--driven by a 4.4% increase in the average sale--stores that encountered no new competition had a 7.1% sales increase, the report said.

The price of HomeBase’s stock, which had sunk to a 52-week low of $2.31 a share during trading Wednesday, picked up 6 cents Thursday to close at $3.