Home Retail profits to be at lower end

9th Sep 2010 07:04

Retailer Home Retail Group said that unless Christmas is a cracker this year profits are likely to be in the bottom half of the range of analysts' estimates. In a trading update the group said things are getting worse more slowly at Argos while Homebase beat expectations over the summer months.Sales at Argos in the 13 weeks to 28 August - the group's second quarter - totalled £924m, up from £889m in the first quarter.Like for like (LFL) sales were down 5.0% from a year earlier but this was an improvement on the 8.1% slide in LFL sales in the first quarter. Video gaming and large ticket home-related areas such as furniture saw challenging conditions. Computers, white goods and toys all continued to show good growth, while small ticket homewares sales were ahead.Gross margin during the quarter tumbled by around 125 basis points, or 1.25 percentage points, after falling by some 150 basis points in the first quarter.The decline was driven principally by the anticipated net impact of adverse currency and shipping rates, with promotional activity also being higher year on year.At Homebase, sales tumbled to £396m from £459m in the first quarter, but on a LFL basis were unchanged from a year ago, after registering a 1.4% LFL fall in the first quarter.Seasonal categories saw growth overall, led by garden planting and outdoor furniture. 'Big ticket' sales were also ahead, with growth in kitchens, bathrooms and bedrooms. Sales for the remaining categories were lower overall.Gross margins moved down by about 75 basis points after sliding some 150 basis points in the first quarter.As with Argos, margins were affected by the anticipated net impact of adverse currency and shipping rates."While Homebase has produced a good first half peak trading performance on top of last year's strong result, total group benchmark profit before tax (PBT) in the first half is expected to reduce by approximately 20-25%. For the year as a whole, we expect to deliver group benchmark PBT of £250-275m, which is in line with the bottom half of the current analyst range," the company's chief executive, Terry Duddy said.