12th Mar 2015 07:51
LONDON (Alliance News) - Home Retail Group PLC Thursday said it expects its benchmark pretax profit in the recently-ended financial year to be at the top end of current market expectations, after sales in the last eight weeks of the year fell but it said it had made progress on gross margin and costs.
The owner of the Argos general merchandise chain and the Homebase DIY chain has spent a number of years turning around the Argos business and that is paying off, but it is now being hampered by efforts to also shrink and turnaround the Homebase business.
The company said Argos sales in the eight weeks to the end of the financial year on February 28 were down 4.0% at GBP505 million, bringing the total for the year to GBP4.10 billion, up 1.1%. Like-for-like sales dropped 5.0% in the final weeks, hit by strong figures a year earlier and lower demand for some consumer electricals, meaning the like-for-like growth for the year was just 0.6%.
However, it did continue to make progress on margins. Gross margin at Argos was up about 100 basis points in the last eight weeks of the year, compared with a rise of about 25 basis points for the year as a whole.
Sales at Homebase in the final two months were down 3.8% at GBP193 million, as that chain also faced strong comparatives and it also traded from fewer stores. Sales for the year as a whole fell 3.0% to GBP1.48 billion. Like-for-like sales were down 0.9% in the final two months, meaning the annual growth was restricted to 2.3%.
"There were 30 store closures and three store openings in the year, reducing the store portfolio by 27 stores to 296, a reduction that is ahead of our previous guidance for the current financial year and which is part of the previously announced Productivity Plan," it said.
Gross margin at Homesbase was down about 225 basis points in the final two months, was down 100 basis points for the year as a whole, mainly due to the extra stock it is trying to sell off at clearance rates due to the store closures.
Still, the better-than-expected margin performance overall in the final eight weeks, means the company is expecting its benchmark pretax profit, which excludes items including store impairments, onerous lease charges and exceptional items, to be at the top end of current market expectations for the year to February 28, which it said are set between GBP120 million and GBP132 million.
Benchmark pretax profit in the previous financial year was GBP91 million, down 10% from the year before that.
By Steve McGrath; [email protected]; @stevemcgrath1
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