Home Retail sales enjoy a sunshine lift

HOME Retail Group yesterday brought some cheer to the market after its Homebase chain reported its first positive sales figures in two years.<br /><br />The DIY chain yesterday posted a 3.8 per cent increase in like-for-like sales for the 13 weeks to 30 May, beating market expectations. <br /><br />Homebase said total sales, which include those from new stores, rose by 5.8 per cent to &pound;465m as spring sunshine prompted a surge in demand for outdoor furniture, barbecues and plants. The group said seasonal items accounted for 40 per cent of its sales over the period.<br /><br />The more upbeat figures come after rival Kingfisher last week said its B&amp;Q chain doubled retail profits and grew like-for-like sales by 3.2 per cent during its first quarter. <br /><br />But while Homebase sales were positive during March and April, the group reported a softening in May due to poorer weather, leading analysts to question whether the group can maintain its growth. Singer Capital analyst Matthew McEachran said: &ldquo;Homebase remains an area of concern as conditions get more challenging. The market may respond adversely given commentary about May&rsquo;s softer performance.&rdquo;<br /><br />Home Retail&rsquo;s catalogue chain Argos also beat forecasts, reporting a 2.8 per cent drop in like-for-like sales for the period. Analysts, who thought Argos would take longer to recover from the downturn, had expected a four per cent drop.<br /><br />Argos has seen a lift in electrical goods as it profits from rival DSG&rsquo;s restructuring struggles. <br /><br />Chief executive Terry Duddy yesterday said: &ldquo;We still need a lot more proof that we are over the recession and are taking a cautious quarter-by-quarter approach. I believe the effect of unemployment has not yet bitten. But we are picking business up from MFI and Woolworth&rsquo;s demise and showing strong growth in the toy and electrical sectors.&rdquo;<br /><br />Margins at the group continue to be under pressure, with Duddy forecasting margins will drop by 2.5 percentage points due to promotional activity. In April Home Retail unveiled annual results showing an operating loss of &pound;402m due to goodwill writedowns of &pound;694m.