Argos and Homebase sales growth for Home Retail

Home Retail Group, which owns both Argos and Homebase, revealed that sales across Argos grew 5.2%, while Homebase sales strengthened 9.3% in the eight weeks to 1 March. Year-on-year comparisons are challenging, however, as 2012 was a strong year in some sectors.

Argos sales rose to £526 million in the eight weeks to 1 March and increased 3% to £4 billion over the year, driven by electricals such as video gaming, TVs, white good and small domestic appliances. A decline in tablet sales was anticipated as shoppers switched to lower-priced devices rather than iPads. Other product categories reported flat sales, while jewellery recorded a small decline. Encouraging as this is, it does leave Argos increasingly dependent on the competitive electrical goods market.

Online sales edged up to 44% of total sales, up 2% on last year, but mobile commerce sales soared 89% to account for 18% of total Argos sales. Argos's new digital format shops, opened in December, were said to be trading in line with the rest of the portfolio, but there was a hint from finance director Richard Ashton that customers are taking a while to warm to the new format.

Four physical stores were closed in the period to take the Argos store total to 734.

Homebase sales grew 6.9% to £203 million driven by growth in big-ticket items, but gross margins declined 75 basis points, impacted by promotions within the big ticket category.

Overall margins were largely unchanged year-on-year as "the anticipated impact of adverse currency and shipping costs were offset by a number of small positive items", the company said.

It was the last update from Terry Duddy, one of FTSE 250 group of companies' most well-liked chief executives, who steps down at the end of the week and will be succeeded by Argos boss John Walden.

Duddy, who has led the group for 15 years, said: "The positive sales performance in the last few weeks of our financial year concludes a good year for both Argos and Homebase, with both businesses having delivered like-for-like sales growth throughout the year.

"We now expect group benchmark profit before tax to be slightly ahead of the top end of the current range of market expectations of £107 million to £111 million. The cash outflow for the year will also be slightly better than previous guidance, resulting in a closing net cash position of around £330 million."

Duddy, who announced his departure last year in the face of five years of sales declines, takes the rap for sitting in the hot seat during a particularly tough period of economic uncertainty. But Argos has been fighting back at the inroads made by online retailers such as Amazon, and an improved housing market has since helped lift the DIY market.

The shares rose 6% to 217.50p, but look high enough after their 50%+ rise last year.