Argos drives up Home Retail Group's shares by 15%

A vastly improved performance at the catalogue chain Argos in its first quarter drove a sharp spike in Home Retail Group's shares yesterday to cheer its beleaguered investors.

HRG blamed tumbling underlying sales at its Homebase DIY chain on the almost incessant rain in April, but the retailer was buoyed by a leap in margins, as it benefited from selling fewer items on promotion, more favourable exchange rates and cheaper freight costs.

The more upbeat news from HRG put a turbo-charger under the shares, which jumped by 10.9p, or 15 per cent, to 85.2p. HRG has endured a torrid time recently, dragged down by falling revenues at Argos, and it passed on its final dividend in its last financial year after a 60 per cent fall in profits to £102m.

But underlying sales at Argos slipped by just 0.2 per cent over the 13 weeks to 2 June, which was ahead of City expectations and compares with an 8.9 percent slump last year.

The improvement was driven by robust demand for laptops, tablets and Apple's iPads, as well as positive revenues for its electricals category, including whitegoods, domestic appliances and floorcare products.

The last time HRG delivered flat like-for-like sales at Argos was January 2010. David Jeary, an analyst at Investec, said: "The more positive performance from the electricals category has moved the chain within a whisker of what we have always seen as a key catalyst for the group, namely the return of Argos to positive like-for-like sales."