Home Retail Group reports mixed trading performance

Home Retail Group reports mixed trading performance

As the speculation continues to mount regarding the bids from Sainsbury’s and Wesfarmers, Home Retail Group has published its latest trading statement today, reporting a “mixed performance”. Commenting on the group’s activities for the 18 weeks from 30 August 2015 to 2 January 2016, John Walden, Chief Executive of Home Retail Group, commented: “This has been a very eventful period for the Group.  Argos traded through a challenging market while launching significant new propositions.  During the period we also commenced and progressed discussions for the sale of Homebase to Wesfarmers Ltd., and received an approach from J Sainsbury plc for the potential acquisition of the Group.

“Against this backdrop, whilst Argos trading performance was mixed, I am pleased that we made material steps forward in the Argos Transformation Plan.  Total sales at Argos increased 0.9%.  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 like-for-like sales decreased 2.2% in the period, while new digital concession locations added in the past year contributed 3.1% to growth.

“In October Argos introduced FastTrack, market-leading nationwide propositions for both same-day home delivery and store collection, made possible by our hub & spoke distribution network.  FastTrack, together with our now-proven store concession model and improvements in digital channels, drove increases in digital sales, digital participation and home delivery.  I continue to believe that the capabilities being developed in the Argos Transformation Plan will position Argos as a retail leader in an increasingly digital future.”

As previously reported, many market observers regarded the Argos home delivery network as one of the key attractions for Sainsbury’s.

Walden continued: “In Homebase, like-for-like sales grew by 5% while total sales declined by 4%.  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.  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.  The potential transaction would allow the Group to focus on Argos and its Transformation Plan, with an improved balance sheet and financial position, which I believe would represent an even greater opportunity for building long-term shareholder value.

“As a result of the most recent trading period, we expect that Group benchmark profit before tax for the financial year ending February will be around the bottom of the current range of market expectations of £92m to £118m.”

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