Update: Home Retail boss cautious despite higher sales

11th Jun 2009 13:29

Retailer Home Retail posted better than expected sales at Argos and Homebase, but the firm's shares were little changed after its chief executive cautioned against reading too much into supposed green shoots of economic recovery.Total first quarter sales at Argos grew by 0.9% in the 13 weeks ended 30 May to £937m, while like-for-like sales declined by 2.8%. Good growth continued in consumer electronics as a whole, and toy sales were strongly ahead, though the furniture and homewares markets continued to be challenging.Noting that unemployment may rise to 3m before the end of the year, chief executive Terry Duddy said: "I don't think we're strong proponents of green shoots at this early stage of the year."The first quarter was helped by increases in disposable income because of lower interest rates, and it was not offset by unemployment; that could easily change." Home Retail continues to expect that the impact of adverse currency movements on the gross margin rate will increase through the course of the year. A 75 basis point gross margin decline in the quarter was driven mainly by the sales mix, it added.Total sales at Homebase grew by 5.8% to £465m and were up 3.8% on a like-for-like basis.Seasonally-related categories account for around 40% of first quarter sales and saw low double-digit growth; the weather patterns resulted in the year-on-year demand being particularly strong in March and April but down year-on-year in May.Kitchen sales continued to be strong during the quarter. Sales for the remaining categories overall were marginally lower than the first quarter last year.The approximate 250 basis point gross margin decline was driven mainly by the sales mix and an increased promotional stance."Homebase in particular saw its performance in gardening and outdoor products benefit from the excellent weather conditions," said chief executive Terry Duddy."At this early stage of the financial year we continue to plan cautiously, with our trading focus remaining on driving cash gross margin and achieving further cost efficiencies."