Spring sunshine drives strong sales rebound at Home Retail's Homebase

Home Retail Group's Homebase chain basked in its first uplift in underlying sales for two years in the 13 weeks to 30 May, as the balmy spring weather drove soaring sales of seasonal products, but its catalogue giant Argos remains under the cloud of falling sales.

The 345-store DIY retailer crafted an uplift in underlying sales of 3.8 per cent for its first quarter, a massive rebound on the 10.2 per cent fall in sales over the year to 28 February.

Terry Duddy, chief executive of Home Retail, said: "It is great to have positive like-for-likes again, it is a while since we have had that. The proposition has worked, and we have had fantastic sales of lawn mowers, hedge strimmers and barbecues. We also have a great horticulture business."

Homebase said that sales of its own-brand seed kits, Grow Your Own, had rocketed by 50 per cent year on year, with potato and strawberry packs particularly buoyant. Total sales at Homebase jumped by 5.8 per cent to £465m.

Its rival B&Q, owned by Kingfisher, has also benefited from the recent balmy weather and delivered 3.2 per cent growth in UK underlying sales for the 13 weeks to 2 May.

Mr Duddy said that Homebase had also delivered "strong" sales of kitchens, and had benefited from the collapse of the furniture retailer MFI at the end of last year. However, in addition to its hefty investment in price-cutting promotions, the higher proportion of lower-margin kitchens in its sales mix contributed to a worse-than-expected drop of 250 basis points in Homebase's gross margin.

At Home Retail's Argos chain, like-for-like sales fell by 2.8 per cent in the first quarter, although this was a sharp improvement on the drop of 7.5 per cent over the 18 weeks to 3 January. Mr Duddy said Argos delivered strong sales of tents, iPods and TVs over the quarter, but added that furniture and homewares were "more challenging".

Total sales at Argos inched up by 0.9 per cent to £937m, although its gross margin fell by 75 basis points, driven by a bigger proportion of consumer electronics in the sales mix. Mr Duddy said that Home Retail continues to "plan cautiously" and focus on improving cash gross margin and costs. He said: "I don't think the recession is over, not at all. I would need to see a lot more evidence than in just one quarter."