logo-loader

Home Retail Group interims demonstrate further high street woe

Published: 08:14 19 Oct 2011 EDT

no_picture_pai

Interim results at Home Retail Group (LON:HOME) showed that sales at the group’s businesses were down six per cent to £2.6 billion. The sales data provides further evidence that the UK high street is continuing to struggle, after HMV Group (LON:HMV) last month revealed that like-for-like sales for its summer trading period were down by 15.1 per cent.

As a result shares in Home Retail were down 13 per cent at 104.1 pence each this lunchtime.

Sales at Home Retail’s Homebase home furnishings business held up reasonably well during the 26 weeks to August 27 at £839.6 million – down only 1.8 per cent from the £855.3 million that Homebase made in the comparable period in 2010. But catalogue-based high street store Argos saw its turnover fall by 7.6 per cent to just under £1.7 billion.

“Spending in our markets continues to decline with many consumers facing pressures which affect the amount of household cash flow they have available for the purchase of discretionary goods,” said Home Retail’s chief executive Terry Duddy, who noted that core customers at Argos continue to be under greater pressure with demand affected across several product categories – most notably consumer electronics.

Operating and distribution costs for the group as a whole were broadly flat at £944 million, which Home Retail said reflected the effect further cost savings have had offsetting the impact of both underlying cost inflation pressures and investment in new initiatives.

However, benchmark operating profit at the group was down 72 per cent to £27 million, while benchmark profit before tax was down 70 per cent at £28 million. Meanwhile, earnings per share were down 68 per cent at 2.5 pence.

Home Retail said that multi-channel sales have continued to grow and that they now represent £770 million, or 46 per cent, of Argos’s total sales. The fastest-growing channel continues to be online Check & Reserve (its facility that enables customers to check stock and reserve products at their local store), which grew to represent 22 per cent of all sales.

This is a demonstration of the impact of the Internet on shopping habits, although even the UK’s Internet retail sector is not booming as much as that in other countries. Last week, online clothes retailer ASOS (LON:ASC) reported that, although its total sales grew 53 per cent to £106.7 million during the three months to September 30 compared with Q2 2011, it only saw a one-per cent improvement in its sales to online customers in the UK.

As far as the City was concerned today, shares in Home Retail rate a ‘sell’. Broker Singer Capital Markets said that it believes there will be pressure on full-year estimates for the group and that downgrades of between 15 and 20 per cent are likely. “We remain cautious on earnings prospects given the group’s exposure to the UK mass market customer, the continuing squeeze on spending and competition,” said the broker, which expects adjusted pre-tax profit to fall to £137 million during the current financial year from £254.1 million last year.

Singer rates Home Retail’s shares as a ‘sell’ down to 95 pence.

In a separate announcement today, Home Retail said it had signed a joint venture with Haier Group to develop a multi-channel general merchandise retail business in China. The Argos-branded joint venture will launch in the Shanghai region in 2012.


ARway.ai announces multiple new SaaS developer contracts in both the United...

ARway.ai (CSE:ARWY, OTCQB:ARWYF) Chief Executive Officer Evan Gappelberg joined Steve Darling from Proactive to announce multiple new SaaS developer sign-ups for its augmented reality experience platform, focusing on AR indoor navigation. These partnerships represent significant milestones in...

4 minutes ago