16th Jan 2014 09:01
LONDON (Alliance News) - Home improvement retailer Home Retail Group PLC Thursday reported strong sales growth for the 18 weeks to January 4, boosted by a strong Christmas period for both its Argos and Homebase businesses.
Home Retail said that, after strong sales in its peak trading period, it now expects to achieve full-year group benchmark profits towards the top end of the current range of market expectations of GBP90 million to GBP109 million.
The group also announced at John Walden will be taking over from Terry Duddy as Chief Executive Officer, when he steps down on March 14.
"We've been through some difficult times, but the numbers over the last year or so have been really good, and we have seen profits rising," Duddy said in a call with journalists
Home Retail said that Argos, its warehouse retail business, posted its strongest like-for-like performance in 10 years, driven primarily by a impressive internet performance.
The group said that total sales at Argos grew by 3.6% to GBP1.81 billion in the period, despite net closed space holding back sales by 0.2%, due to store closures in previous periods. It said that like-for-like sales increased by 3.8%, boosted by a strong sales performance from electrical products such as video gaming, tablets, televisions and white goods. It said that strong sales of these products was partially offset by declines in the homewares and jewellery categories, and continued declines in audio and photographic sales.
"We saw demand in products such as Furby Boom, the Teksta robotic dog and kid's tablets. All of these kind of products drove 'click-and-reserve'," said Duddy, adding: "Tablets have slowed a bit on a value basis, as prices are coming down, but on a value basis tablets are double-digit sales. Video games are also very strong."
The group said that online sales grew to represent 46% of total Argos sales, up from 42% for the same period last year, driven by growth in both its 'Check & Reserve' service and also mobile commerce sales, which grew by 75% and represented 20% of total Argos sales in the period.
"We think that Argos is heading to be over 50% of online sales shortly. Over the next three to five years, we think internet sales will be close to 75% for Argos," said Duddy.
Duddy said that surging online sales, has prompted the group to reduce the number of Argos catalogues it is printing.
"We have printed around 30 million Argos catalogues this year in total. The circulation of catalogues is falling, and we are reducing the number of catalogues a little ahead of the curve," he said.
The group said that the Argos gross profit margin declined by 50 basis points, due to the adverse sales mix from the growth in electrical products, although this was partially offset by a reduction in the level of stock clearance activity.
The group said that Homebase, its home-improvement business which was hit hard by the economic downturn, grew total sales by 2.3% to GBP464 million in the 18 weeks period ended January 4, despite net closed space damping sales by 2.4% in the period. It said that like-for-like sales increased by 4.7% in the period, driven mainly by growth in big ticket sales, although sales in the remaining categories were also slightly up year-on-year.
The Homebase gross profit margin declined by 75 basis points, which was mainly due to an adverse sales mix from the growth in big ticket products, such as as kitchens and bedrooms, the company said.
Home Retail said that it closed 10 Homebase stores in the period, reducing the store portfolio to 323, and while it closed Argos stores in previous periods, in the current period a net one new store opened, taking the portfolio to 738.
"For Argos we expect to shut around 10 stores over the next five years, and for Homebase we expect to shut around five stores a year," said Duddy.
The group's general merchandise retailer Argos has been trialling a UK collections service in partnership with online auction site eBay Inc for a six month period, of which it launched it time for the key trading period.
"We wanted to test it with 50 retailers, but we ended up testing it with less," Duddy told journalists.
Share in Home Retail Group were trading 3.3% at 207.52 pence per share in early trading Thursday.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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