Shares in Home Retail plunge as sales disappoint

Kasmira Jefford
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INVESTORS in Home Retail Group ditched the stock yesterday after Argos sales missed forecasts and the group warned of a “subdued” year ahead.

The retailer said like-for-like sales at Argos rose 1.9 per cent to £828m in the 13 weeks to 1 June, an improvement on the 0.2 per cent decline the same time last year, but behind analyst forecasts of three per cent growth.

Chief executive Terry Duddy said sales of outdoor toys, barbecues, garden furniture and lawn mowers had been hit by the poor weather, although consumer electronics such as tablets and televisions performed well.

Margins were squeezed by about 0.75 per cent of a point by the higher proportion of electronics in the mix, which are less profitable than some other products.

“Seasonal sales were adversely impacted by the volatile weather and as a result its performance for the quarter was slightly behind our expectations,” Duddy said.

At Homebase like-for-like sales rose by a better than expected 1.4 per cent to £422m, as demand for big-ticket items, such as kitchens, helped offset weak sales of seasonal products. But more promotional activity than a year ago squeezed the gross margin at the chain by 200 basis points.

Bethany Hocking, an analyst at Investec said its performance was further evidence that Homebase is winning share from its larger rival Kingfisher’s B&Q.

Duddy said while he expects consumer spending to remain subdued, the group was on track with delivering its turnaround plans for both retailers.