Home Retail profit to be at lower end of expectations

Home Retail Group’s full year profit is expected to come it at the lower end of expectations after Argos sales over the festive period dipped.

Sales at the retailer for the 18 weeks to 2 January have dropped 2.2%, but a 5% increase in sales at Homebase has limited the damage to the group.

The company has been in the sights of supermarket Sainsbury’s in recent months and also announced last night it is in talks to sell off Homebase to an Australian conglomerate.

Despite Argos making progress in its transformation plan, total sales came in at £1.837bn for the quarter, with year-to-date sales at £3.58bn.

“Argos traded through a challenging market while launching significant new propositions,” said chief executive John Walden.

“They were affected by volatile trading patterns resulting from particularly strong sales during Black Friday week, a shift in consumer demand from both the weeks before and after Black Friday, growth in digital transactions, reduced store footfall particularly on the high streets, and the continuing effects of price deflation.”

Argos’ sales dropped 2.2% compared to the same period last year, but rose 0.9% compared to the previous quarter.

Sales for the DIY and home furnishings business totalled £434m for the period, contributing to year-to-date sales over the last 44 weeks of £1.25bn.

That was a 5.0% increase on the same period in 2014, but a 4% drop compared to the last quarter as a result of Home Retail’s ongoing store closure programme.

The Homebase Productivity Plan, which includes an aggressive store closure program, overhead reductions and customer proposition improvements, has begun to position Homebase as a smaller, higher quality and more efficient business,” Walden said.

“Yesterday we announced that we are in advanced discussions to sell Homebase, which would provide good value for shareholders and a growth opportunity for Homebase colleagues.

He said the sale to Wesfarmers would allow the group to focus on Argos and its Transformation Plan.

The company expects benchmark profit before tax for the financial year ending February will be around the bottom of market expectations of between £92m and £118m.