13th Mar 2014 11:24
LONDON (Alliance News) - Home Retail Group PLC shares hit the highest level for nearly three years Thursday, after the home and general merchandise retailer reported strong like-for-like sales growth from both its Argos and Homebase chains in its last financial year.
Home Retail said it now expects group "benchmark" pretax profit, which strips out costs such as amortisation of acquisition intangibles, store impairment charges and exceptional items, to beat the top-end of current market expectations.
It was the biggest gainer on the FTSE 100 Thursday morning, trading 5.0% higher at 215.43 pence per share, the highest level since May 2011.
The company has struggled in recent years, with its Homebase home improvement products chain hit hard by the economic downturn that followed the financial crisis and its Argos retail warehouse stores it hard by the shift to online shopping. It has embarked on a revamp of Argos, boosting its own online presence. In January it predicted that over half of Argos sales would be made online in the near future and close to 75% over the next three to five years.
In a trading statement before its full-year results on April 30, Home Retail said that, after a strong finish to the year from its businesses, it now expects group benchmark profit before tax to be slightly ahead of the top end of the current range of market expectations of GBP107 million to GBP111 million.
For the financial year ended March 3, 2012, the group reported a benchmark pretax profit of GBP115.7 million.
Home Retail said that Argos and Homebase both delivered like-for-like sales growth throughout the financial year ended March 1, with growth accelerating in the last couple of months.
Argos reported 5.2% like-for-like sales growth in the last eight weeks of the year, accelerating from 3.3% for the year as a whole. The chain's total sales were GBP4.05 billion, up 3%, driven by strong sales for its electrical products. It said sales across the remaining product categories were broadly flat year-on-year, with the exception of jewellery which reported a slight decline.
It said for the full-year, online represented 44% of total Argos sales, of which 18% came from mobile commerce sales.
Homebase like-for-like sales rose 9.3% in the last eight weeks of the year, more than double the 4.1% growth for the year as a whole. Total sales rose 5.9% to GBP1.49 billion, driven by further growth in big ticket sales and expensive items.
Home Retail closed four Argos stores closed in the last eight weeks of the year, bringing its store portfolio to 734, while it closed 13 Homebase stores during the year, bringing its portfolio to 323 stores.
Home Retail said both business saw gross margins decline during the year, with Argos down 50 basis points for the year, and Homebase gross margin down 100 basis points.
"We have made good progress with the investment plans in both businesses during the current financial year and we have a clear agenda for growth. However, although there are signs that economic conditions may be beginning to improve, we will continue to plan for a subdued consumer environment," said Chief Executive Terry Duddy in a statement.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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