Image copyright Homebase

Home Retail Group plans to cut the number of Homebase stores by 25% by 2019, following a review of the chain.

The company says a number of its 323 Homebase stores are "unprofitable or are in decline".

Seven stores have already been closed this year and the firm plans to close another 23 before the end of March.

Home Retail Group, also the owner of Argos, reported a pre-tax profit of £13.5m for the half-year to the end of August, a 5% fall on the previous year.

At Argos like-for-like sales, which strip out new stores, rose 2.9% and at Homebase like-for-like sales rose 4.1%.

Paul Loft, the managing director of Homebase, will stand down. Home Retail Group said now was the "appropriate" time for his departure, given the completion of the review of the business.

Home Retail Group warned in 2012 that Homebase stores would be closing, but did not say how many.

The review of the chain identified "inconsistent store operating standards" and a level of sales across the chain that resulted in a "challenged financial model".

Home Retail Group could not say how many jobs would be affected by the closures, as it hopes to redeploy some of the staff involved.

It also says it will work with the new owners of the sites that it vacates in order to re-employ former Homebase workers.

Chief executive John Walden said that a three-year plan to improve the productivity of stores "will position Homebase as a smaller but stronger business, ready for investment and growth".

Investors 'nervous'

City analysts say that Home Retail Group faces a considerable challenge.

"Home Retail is today further underlining the rebalancing taking place by the retail industry away from the High Street and towards online sales," said Keith Bowman from Hargreaves Lansdown stockbrokers.

"While the relatively new chief executive continues to embrace change, the depth of transformation at the company does heighten investor nerves, near- to medium-term.

"Profits have materialised at the low end of expectations, whilst execution of the plan now needs to be made, in which time rivals will be pushing their own e-commerce strategies," he said.

As part of the plan to reorganise Homebase, 26 stores have been refitted, which the company says has resulted in "good" overall sales growth.

But Home Retail Group does not, at the moment, plan to refit all of its Homebase stores.

The company will boost the number of Argos and Habitat concessions within Homebase stores, an experiment which it says has been successful.

Home Retail Group shares are down 5.6%.