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The week ahead: Home Retail Group to report on half year trading

Argos and Homebase owner Home Retail Group will report a first-half sales recovery driven by better summer weather and amid Britain's improving housing market.

But the group's profits will come under more pressure when it reports results for the six months to the end of August on Wednesday.

DIY chain Homebase posted a bigger-than-expected jump in like-for-like sales of 11% in the 13 weeks to August 31, while Argos rose 2.7%.

That helped underlying sales at the Homebase chain grow 5.9% across the whole of the first half. Like-for-like sales at Argos were up 2.3% during the six months.

However, margins at both businesses fell during the half after volatile weather between March and June hurt Homebase and Argos suffered as it expanded in the fiercely-competitive electronics space.

Home Retail is trying to reinvigorate the Argos high street chain, recently announcing a trial with eBay, which will allow customers of the auction website to pick up products at around 150 Argos stores throughout the UK.

Last year, chief executive Terry Duddy set out plans to grow Argos sales from £3.9 billion to £4.5 billion a year in 2018 in a digital push involving the closure or relocation of some stores and a cut in the print circulation of the catalogue.

Mr Duddy, one of the UK's longest serving retail bosses, is standing down in July after 15 years with the group.

Analysts at N+1 Singer said Home Retail will benefit from current trends, but faces big challenges over the longer-term.

They said: "The business continues to benefit from near-term tailwinds including favourable product cycles and competitor weakness, however we continue to harbour concerns that greater structural change might be required at Argos and the Homebase refurbishment programme is overly cash-hungry."

They see the group edging revenues up 2% to £5.59 billion during the year and expect adjusted pre-tax profits to climb to £97.5 million from £91.1 million.

Source : London Evening Standard

20 October 2013
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