12th Jun 2014 13:32
LONDON (Alliance News) - Argos and Homebase owner Home Retail Group PLC Thursday said sales growth accelerated in both its businesses in the first quarter of the year, driven by strong sales of electricals and TV's, seasonal outdoor products such as BBQs, as well as big-ticket items such as kitchens.
The group has been pumping money into both its businesses. It has been busy trying to reinvent its general merchandise business, and largest division, Argos into a digital retailer, while revamping its home improvement Homebase stores.
"At this early stage of the financial year, we expect to deliver full year group benchmark profit in line with current market expectations," said Chief Executive John Walden in a statement.
Home Retail said it is now forecasting a benchmark pretax profit for the full year of between GBP122 million and GBP135 million, compared with a market consensus that the company put at GBP129 million. Benchmark pretax profit strips out costs such as amortisation of intangibles, store impairment charges and exceptional items.
The home and general merchandise retailer said Argos sales in the 13 weeks ended May 31 grew 4.8% to GBP868 million, with like-for-like sales up 4.9%, representing the eighth straight quarter of like-for-like sales growth for the business. It said growth was driven by online, which it said represented 42% of total Argos sales. Mobile commerce represented 21% of sales for the business. Its Argos gross margin was down 25 basis points in the quarter, compared with a 75 basis points decline in the first quarter of last year.
Big-selling items at Argos during the quarter were seasonal products such as outdoor furniture, toys and electrical products, which it said offset a decline in categories such as jewellery and homewares.
It said sales at Argos in the quarter were driven by electrical products such as video game systems and televisions ahead of the World Cup.
"Video game systems and TV's sold well ahead of the World Cup, which offset a decline in tablets, as a result of the continued shift of sales from Apple iPads to cheaper tablets. There was also reduced sales of the Kindle Fire," Walden told journalists in a call Thursday morning.
Although the Argos store portfolio remained unchanged at 734, net closed space reduced sales by 0.1% in the quarter, the company said.
At Homebase, sales were up 5.5% at GBP445 million, with like-for-like sales up 7.9%. Gross margin in the business was down 50 basis points. Home Retail said it saw strong growth of products such as garden furniture, BBQs and garden power tools in the period, as well as big-ticket items such as kitchen sales. It said it also got a welcome boost from better weather conditions.
However, the group warned that strong comparative figures for the Homebase business in the second quarter of last year will leave like-for-like sales in negative territory in the current quarter.
"In the second quarter of last year we saw record growth of 11%, with means we are unlikely to report positive like-for-like growth in the second quarter of this year," said Walden.
At the company's full-year results in April, it gave a slightly cautious outlook for the year ahead, citing some improvement in economic conditions in the UK, but saying it expects consumer spending to remain subdued for some time.
Home Retail shares were down 2.4% at 195.70 pence Thursday afternoon, having touched 203.00p in the morning. The stock has traded between 126.00p and 225.20p in the past 52 weeks.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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