Habitat stores enter administration as part of sale

All but three UK Habitat stores are being put into administration in a deal to sell the indebted furniture chain.

Home Retail Group, owner of Argos and Homebase, will buy the Habitat brand and three central London stores for £24.5m in cash.

Habitat has appointed administrators for its other 30 outlets, which will continue trading for now.

HRG will retain 100 staff at the London stores and 50 in "brand support", which includes Habitat's furniture designers.

It is unclear what will happen to Habitat's other 750 employees, including those at the branches in administration.

Habitat, which was set up in 1964 by designer Sir Terence Conran, has been owned by the private equity firm Hilco since it bought the heavily-indebted retailer from Ikea-affiliate Ikano in 2009.

"Of course I'm sad that my love child, Habitat, appears to be dying, but I am more interested in the future of my own business and design projects - that is my focus," said Sir Terence Conran.

'Poorly located'

Habitat said that, "trading conditions have remained challenging for retailers of big ticket items such as furniture" with the company continuing to make a loss.

"A return to profitability for the business in the UK appears unlikely in the near term as many of the stores are expensive and poorly located for a furniture retailer," it said in a statement.

HRG agreed to buy the branches at Tottenham Court Road, King's Road and Finchley Road, but not Westfield London, as well as the Habitat web business.

Markets did not take the decision well, with HRG's share price dropping 3.2% by late morning on the London Stock Exchange, following a 3.4% drop on Thursday.

Europe deal

Outside the capital, HRG is planning to sell Habitat-branded goods online and via concessions at some of its existing Homebase stores.

"The style-led credentials of the Habitat brand, with its strong heritage, will be a significant addition to the group's portfolio of own brands," said HRG chief executive Terry Duddy.

Habitat said that the unsold stores would continue trading as normal for about six months while the administrator from financial advisors Zolfo Cooper conducted talks.

It also promised to fulfil all existing orders and protect customer deposits.

HRG is buying the rights to the Habitat brand in the UK and the Republic of Ireland.

Habitat said that Hilco is also in advanced talks with another party to sell the furniture company's profitable international business.

Habitat owns 27 stores in France, six in Spain and five in Germany.