11th Jun 2015 10:33
LONDON (Alliance News) - Home Retail Group PLC Thursday reported a drop in total sales in both its Argos and Homebase businesses in the first quarter of its financial year, but a rise in like-for-like sales in Homebase, as it continues with its 'Transformation Plan' and store-closure programme and said it looks forward to a "stronger second half".
The owner of the Argos electronics and general merchandise chain and the Homebase DIY chain said that total sales in Argos declined 2.6% to GBP846 million in the 13 weeks to May 30, as like-for-like sales fell 3.9%. It said this was due to a decrease in electrical product sales, principally driven by market declines in TVs, computers and tablets.
Total Homebase sales decreased 1.6% to GBP438 million, but like-for-like revenue was up 5.4% in the period, which Home Retail said was helped by sales growth across big ticket, seasonal and the remaining product categories, partly supported by both the trade transfer and the stock clearance sales as part of its distribution centre and store closure programme.
Home Retail is revamping both its chains to try to catch up with changing trends in the UK retail sector. Argos, which traditionally sold its wide range of products from desks at the front of large warehouse-style stores, is increasingly moving online and opening online concessions in other retailers, while Homebase is closing unprofitable stores, refitting others and also trying to boost online sales in the face of stiff competition in a declining UK DIY market.
The Argos Transformation Plan was introduced in 2012 after several years of weakening performance at the chain in order to "reinvent Argos as a digital retail leader", while the Homebase Productivity Plan was established in October last year.
In April, Home Retail posted a rise in total pretax profit and revenue for the year ending February 28, with pretax profit increasing to GBP93.8 million from GBP71.2 million the year before, and revenue rising 1% to GBP5.71 billion. Like-for-like sales grew at both chains, by 0.6% at Argos and 2.3% at Homebase.
However, at the time, Home Retail warned that its sales performance in the first half of the current year would be more challenging as Argos focuses on improving its technology and customer experiences, although it said it expected the second half to improve as its new Argos digital offers are introduced in time for peak trading. It said that Argos would face headwinds and modest declines year-on-year, while Homebase would be up against difficult comparatives.
"The performance at Argos in the quarter was broadly in line with both our expectations and previous guidance, with sales being adversely impacted by market declines in key electrical and seasonal product categories. Homebase has made a good start to the year, successfully annualising a strong like-for-like sales performance last year," Chief Executive John Walden said in a statement on Thursday.
"We continue to expect that sales will be challenging during the first half at Argos, but we look forward to a stronger second half as we progress the Transformation Plan and introduce new propositions more broadly to the market," Walden added.
Shares in Home Retail were trading up 1.1% at 161.17 pence late Thursday morning.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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