Argos owner reports mixed fortunes

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The Independent Online

The Home Retail Group delivered a mixed picture on trading today after a slide in sales at Homebase was offset by better-than-expected business at Argos.

The 12 per cent fall in Homebase like-for-like sales for the 13 weeks to May 31 reflected poor weather conditions in March and April, with sales of seasonal products down by around a fifth in the quarter.

In contrast, catalogue chain Argos kept sales on a same store basis at the level seen last year, helped by demand for consumer electronics. The figure was better than the 2 per cent fall forecast by analysts, although Homebase's decline compared with market fears for a drop of between 8 per cent and 12 per cent.

Home Retail chief executive Terry Duddy described the first quarter performance by Argos as "resilient", with trading at Homebase "weaker than anticipated".

He added: "While the consumer outlook remains challenging, we approach it from a position of both financial and operational strength, and at this early stage our expectations for the full year are unchanged."

Home Retail said the the popularity of consumer electronics at Argos impacted on the chain's margins, which were down by 1.25 percentage points.

Total sales at Argos grew by 4 per cent to £929 million, with three openings and one store closure taking the total portfolio to 709 outlets at the end of the quarter, up from 683 sites a year earlier.

New space contributed 7 per cent to Homebase sales and meant overall revenues for the DIY chain were down 5 per cent at £440 million in the 13 weeks. There were four openings and one relocation in the quarter, with the portfolio of 343 stores including a further eight stores relaunched following the purchase of Focus sites.

Better sourcing and supply chain progress meant margins were up by 1.25 percentage points. In non-seasonal categories there was a better performance in furniture and further growth from the chain's kitchen installation service, although this slowed during the quarter.

The group recently reported a 15 per cent hike in underlying pre-tax profits to £433 million for the year to March 1, slightly ahead of consensus forecasts. The figure is forecast to fall to below £380 million in the current financial year.

Home Retail is also due for relegation from the FTSE 100 Index next week after retail shares were hit by fears over the consumer spending slowdown.