UPDATE: Home Retail Says Outlook Uncertain As Sales Fall

10th Jun 2010 07:47

(Re-writes, adds detail.) By Simon Zekaria Of DOW JONES NEWSWIRES LONDON (Dow Jones)--General merchandise retailer Home Retail Group PLC (HOME.LN) Thursday warned the economy remains uncertain and reiterated that it targets flat year-on-year profitability after posting falling first-quarter same-store sales. "Economic conditions remain both challenging and uncertain, with this quarter proving difficult in terms of consumers' willingness to spend," Chief Executive Terry Duddy said in a statement. Duddy also said: "At this early stage of the financial year, we are targeting to achieve a similar level of profitability to last year." In the last fiscal year, the group's pretax profit before exceptionals came in GBP292.9 million. In the first quarter to May 29, home improvement chain Homebase posted a 1.4% annual fall in sales for stores open at least a year. Total sales fell 1.4% to GBP459 million. The chain's gross margin fell around 150 basis points, hit by negative currency effects and shipping rates. General merchandise chain Argos reported a 8.1% fall in same-store sales and total sales fell 5.2% to GBP889 million. Argos' gross margin also fell around 150 basis points. The group said the chain faced tough year-on-year comparisons, particularly in consumer electronics, with lower demand for video games and televisions contributing about two-thirds of the overall sales decrease. A total of 32% of Argos' sales came from online operations, up from 28% in the same period last year. The company previously said it will refurbish 130 Argos stores this year and 500 in the next three years. The group said the financial impact from currency and shipping rates on margins will have a "negligible impact" in the second half. Earlier this month, Homebase rival B&Q, owned by Kingfisher PLC (KGF.LN), reported a 2.8% fall in same-store sales as cold weather impacted seasonal and outdoor product purchases. At the end of April, Home Retail warned the U.K. retail sector is set to remain difficult after it posted an 11% fall in pre-tax profit for its last fiscal year. The retailer has been hard hit by the economic downturn in the U.K. over the past two years, which has crimped consumer spending. Many economists expect the upturn to be slow and fragile as the coalition government will be forced to cut public spending and impose taxes to cut the budget deficit. On Wednesday, Homebase shares closed at 238 pence, valuing the company at GBP2.09 billion. By Simon Zekaria, Dow Jones Newswires; +44 207 842-9410; [email protected] (END) Dow Jones Newswires June 10, 2010 02:47 ET (06:47 GMT)