Argos owner wary about outlook
The owner of Argos and Homebase today said it was cautious about the short-term outlook for consumer spending as it prepared for the vital Christmas trading period.
Home Retail Group said total sales were up 8% to £2.82bn (€4.2bn) in the six months to September 30, despite “challenging conditions in some of our markets”.
Operating profits were up 2% to £106.9m (€158.2m) – less than expected in the City – as a strong performance at Argos was offset by disappointing figures at Homebase.
Argos reported a 4.6% rise in like-for-like sales and lifted profits for the first half from £59.2m (€87.6m) to £72.4m (€107.1m).
However, Homebase saw like-for-like sales fall 2.7% and profits shrink from £52.4m (€77.5m) to £40.8m (€60.4m).
It was the first set of results Home Retail has posted since its demerger from GUS in October and the company now faces stiff competition from the likes of Tesco, whose Tesco Direct catalogue is expected to eat into Argos sales and profits in particular.
Retail analyst Nick Bubb, of Evolution Securities, said he had expected operating profits to be up by 6% against last year – far higher than the 2% achieved.
He said: “We still see only pedestrian profits growth over the next three years, and we believe the stock is over-valued at 426p. Both Argos and Homebase face increasing competition.”
