Home Retail jumps as Argos's sales decline slows

8th Sep 2011 07:16

Home Retail Group, the company which owns Argos and Homebase, saw shares jump higher on Thursday morning, despite reporting a fall in second quarter revenues in both chains.Even though Argos - which is by far the bigger operation - registered a 7.1% decrease in sales to £859m, on a like-for-like (LFL) basis, the rate of decline slowed to 8.6% from 9.6% in the first quarter.By 09:56, Home Retail's shares were 8.05% higher at 124.8p. Homebase, meanwhile, saw a decline of 3.1% in LFL sales to £382m, having seen LFL sales grow 1.6% year-on-year in the preceding quarter. Margin - or the amount of money the company made on sales - was unchanged at Homebase but declined by 100 basis points (bp) at Argos, worse than the 75bps recorded in the first quarter, driven principally by the anticipated net impact of adverse currency and shipping rates together with an increased level of stock clearance activity. This was partly offset in part by a continued benefit from the sales mix. Terry Duddy, Chief Executive of Home Retail Group, commented: "Overall the performance in the quarter was in line with our expectations. Argos's sales continued to be impacted by the decline in the consumer electronics market, while at Homebase, after a good first quarter which saw strong seasonal sales, the second quarter was more challenging." Laptop sales provided an element of cheer at Argos, while the proportion of online sales continued to grow, rising to 34% of Argos's total sales from 32% the year before. At Homebase, "big ticket" sales continued to be affected by a challenging market, although fitted bedroom furniture continued to perform well, as did bathrooms. The group is continuing to plan cautiously, but Duddy said it was "in good operational shape" as it approaches the crucial Christmas trading period. Despite the improvement in the share price, Panmure Gordon was quick to slash its target price from 150p to 95p following the trading statement.BS