Argos and Homebase struggle for H1 sales and margin in tight market

Argos and Homebase struggle for H1 sales and margin in tight market

Home Retail Group, owner of the Argos and Homebase businesses, today reported H1 sales to August 28th at Argos were down 6.5% on a LFL basis and 0.8% at Homebase, overall sales were 2.72 billion.

Margins at both businesses also suffered, with a total gross margin down 6% to 1.04 billion. Against this they did manage to reduce operating costs by 4% or 39 million, but the business overall reported a pre-tax profit for the half of 103 million.

HRG now trades from 749 Argos stores, up 10 on the period last year, and it is engaged on a 3 year refurbishment programme covering 500 stores, costing 100k per store. It has completed 61 stores to date. The Homebase operation trades from 345 stores, down 5 on last year and a further 4 stores will close in H2.

HRG is experimenting with new concepts and has 5 trial HomeStore&More format stores and has it's BedStore&More format on test at 4 of those and within 3 Homebase stores as concessions.

Terry Duddy, Chief Executive of Home Retail Group, commented:

"Homebase has completed another good performance in its peak trading period. At Argos, its core customers have been under greater pressure and there were some particularly challenging conditions in certain product categories. The Group's profit result was however supported by further excellent cost management, earnings per share were enhanced by the share buy-back programme and the interim dividend has been maintained.

"We are about to enter our busiest trading period, and whilst we are planning cautiously, we do so from a position of operational and financial strength. This position also allows us to continue to invest in both Argos and Homebase, further extending our multi-channel leadership and differentiated formats. This will maintain our competitive advantage and ensure the Group remains well-placed for the future."

The shares closed last night at 218.4p valuing the firm at 1.818 billion.

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