Argos owner Home Retail sees sales improve, but margins slump

13th Jun 2013 07:07

Homebase and Argos owner Home Retail has revealed an improvement in like-for-like (LFL) sales at both chains in the first quarter, though margins at both retailers were down sharply on the year before.Chief Executive Terry Duddy said that overall the group's trading has been consistent with the board's expectations.Sales at Argos, the catalogue-shopping firm that is currently undergoing a transformation into a "digital retail leader", reached £828m in the 13 weeks to June 1st, up 1.2% on a reported basis but 1.9% higher on a LFL basis. The company said that consumer electronics maintained its positive sales performance during the quarter, helped by growth in tablets and TVs. This, combined with growth in white goods and core electricals, offset the "market-driven" declines in video gaming and audio. Argos also suffered a weaker performance in seasonal products.In line with its plan to ramp up its online exposure, Argos' internet penetration increased to 42% of total sales, up from 41% a year ago.However, the gross margin declined by 75 basis points (bp) due to the sales mix impact from the growth in consumer electronics.Sales growth at Homebase was a more subdued 0.2% to £422m, though LFL sales increased by 1.4% due to a decent performance in "big ticket products". However, the company saw reduced sales of seasonal items which represented 40% of total sales due to the poor weather conditions.The gross margin slumped by 200bp due to a return to a more normal level of promotional sales , compared with an unusually low level last year.