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Home Retail sees H1 profit down 20-25%

Argos Q2 underlying sales -5 pct vs f'cst -3 to -6 pct

* Argos Q2 gross margin down 125 bps vs f'cst -50 to -150

* Homebase Q2 lfl sales flat vs f'cst -2 to +1 pct

* Homebase Q2 gross margin down 75 bps vs f'cst -50 to -150

Home Retail Group, Britain's No. 1 household goods retailer, forecast a 20-25 percent reduction in first-half profit, with sales at its Argos stores continuing to fall as low income shoppers cut back on spending.

The firm, which also owns the Homebase DIY business, also said on Thursday it expected to make a year to end-February 2011 underlying pretax profit of 250-275 million pounds ($387-$426 million), which is in line with the bottom half of the current analyst range.

Sales at Argos stores open at least a year fell 5 percent in the 13 weeks to Aug. 28, its fiscal second quarter, with gross profit margins falling around 125 basis points.

Analysts had expected underlying sales to fall 3-6 percent and gross margins to decline by 50-150 basis points, according to a company poll of nine.

At Homebase, the UK's second-largest DIY retailer after Kingfisher's B&Q, underlying sales were flat, while gross margins fell 75 basis points.

Analysts had forecast underlying sales in a range of down 2 percent to up 1 percent and gross margins to decline 50-150 basis points.

"As always, the (full-year) outcome will depend upon trading at Argos in its peak Christmas period," said the firm.

Shares in Home Retail have lost 32 percent of their value over the last year, lagging a 3 percent rise in the general retailers index. The stock, which this week lost its place in Britain's FTSE 100 .FTSE index of leading companies, closed Wednesday at 222.5 pence, valuing the business at 1.85 billion pounds.

Source : James Davey - Reuters

09 September 2010
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