Homebase sales take shine off Home Retail

Home Retail Group has posted a jump in profits for last year, despite weaker sales at its Homebase chain.
The group, which also owns Argos, said this morning that it had beaten analyst expectations with a pre-tax profit before exceptional items of GBP 376m in the year to March 2006. This was a 12% jump on the previous year.
Total group sales were up 6% to GBP 5.85bn. Chief executive Terry Duddy said this meant the company had now captured 10% of the total UK home merchandise market.
Argos achieved a 2.4% rise in like-for-like sales, which Mr Duddy said was partly due to last year’s World Cup – which sparked a surge in sales of new televisions.
But Homebase’s like-for-like sales dropped by 1.4%, due to disappointing sales of DIY and home decorating products. This follows a 3.1% drop in comparable sales the previous year.
Shares in the company opened down 1.75p at GBP 4.54, but analysts were encouraged by today’s results.
“Argos is generating like-for-like sales growth, whilst Homebase appears to have arrested the decline in like-for-like sales and the group continues to expand its store numbers for each,” said Keith Bowman, equity analyst at Hargreaves Lansdown.
“Distribution remains a key strength at Argos, with internet orders up by 45% and now representing over 16% of total sales. It could perhaps be argued that Argos is slowly becoming the Amazon of the UK.”
Home Retail Group declined to give any details of current trading this morning, but cautioned that this year would be challenging given recent interest rate rises.
“In addition, comparatives for the retail market as a whole, and particularly Argos, become tougher as we start to face last year’s positive impacts of the World Cup,” the group warned.