9th Jun 2016 06:36
LONDON (Alliance News) - Home Retail Group PLC on Thursday reported growth in sales in the first quarter of its financial year and said its takeover by J Sainsbury PLC remains on track to complete in the third quarter of 2016.
Home Retail said total sales at digital retail chain Argos grew by 2.6% year-on-year in the 13 weeks ended May 28 to GBP868 million, with like-for-like sales up by 0.1%. Net new space contributed 2.5% to total sales growth, as a result of store openings in the previous financial year.
Sales grew in both electrical and non-electrical categories during the quarter, with growth in the former principally attributable to sales of TVs, mobile phones, computers and tablets, partially offset by a decline in white goods. Non-electrical product sales were driven by furniture and sports goods, partially offset by weaker sales of seasonal products.
Gross margin at Argos, however, declined by 100 basis points, due to adverse movements in foreign exchange rates and shipping costs, as well as a negative sales mix impact resulting from the improved performance of margin-dilutive electrical products.
Home Retail also said it will increase by GBP30 million its provision for customer redress, after the group's financial services division "erroneously collected excess fees" in relation to the late payment of amounts due from certain customers.
Home Retail said it already had booked a charge in its financial 2016 accounts for this, but has since "been advised that a more extensive customer redress programme will now be required" and so will increase the provision.
"I am pleased with our performance in the first quarter. Argos delivered good total sales growth together with positive like-for-like growth, representing its strongest sales growth performance in eight quarters. This was achieved against the challenging backdrop of constrained seasonal product sales due to poor weather, on top of a deflationary pricing environment," Chief Executive John Walden said in a statement.
"Finally, we remain on track to complete the proposed transaction with Sainsbury's in the third quarter of this calendar year," he added.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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