Home Retail Group Reports Lower Profits


LONDON -- Home Retail Group -- the owner of Argos and Homebase -- this morning published its full-year results for the 52 weeks to March 2, 2013. Sales were reported as essentially flat, at 5,475 million pounds, but underlying pre-tax profit was down just over 10%, at 91 million pounds. Argos saw its underlying operating profit rise 6.5%, to 100 million pounds, but Homebase's plunged over 50%, to just 11 million pounds, despite a reported gain in market share.

Both businesses suffered from what John Coombe, Home Retail Group's chairman, described as "subdued consumer spending." Earnings per share were down 11%, at 7.7 pence, and the company's full-year dividend will be only 3.0 pence per share, down over a third on 2012's 4.7 pence.

The results also reiterate the group's intention to transform Argos from a dowdy catalogue-based operation, to a digitally led business. So far, the plan appears to be bearing fruit, with multichannel sales now accounting for over half of Argos's total sales. The group also reports that Argos has delivered like-for-like sales growth for the first time in five years.

Homebase is also subject to similar brand repositioning, with the group aiming to reinvent the DIY chain as a "multi-channel home enhancement retailer," through a combination of store refits, and augmentation of the "in-store experience" with multichannel offerings. Progress here seems slower, with Internet-based sales currently representing only 5% of total sales. The company also pointed to the adverse impact of record poor weather conditions on Homebase's seasonal product sales.

Terry Duddy, chief executive of Home Retail Group, commented:

This was an encouraging year with both businesses growing their market shares. Argos delivered like-for-like sales growth for the first time in five years and multi-channel sales broke through the 50% threshold. Our strong financial position enables Argos to deliver on its transformation plan to become a digital retail leader, and for Homebase to invest in the rollout of its new proposition.

Despite what may seem disappointing results, Home Retail Group has rewarded shareholders with a 127% increase in share price since its low point of June 2012.

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