Home Retail Group shares jump more than 12%

Argos's digital makeover appeared to be paying off today as the catalogue chain turned a new page, announcing solid Christmas trading figures.

Owner Home Retail Group said the chain grew sales by 1.6 per cent to £1.7 billion in the 18 weeks to 5 January, after two years of shrinking trade due to the high street slowdown and competition from online-only rivals.

The retailer’s new tablet and smartphone apps, as well as click and collect services, meant internet trading accounted for 42 per cent of overall business.

Home Retail Group chief executive Terry Duddy said mobile commerce sales grew by 125 per cent as customers took advantage of the website’s new functions.

“Argos had a good peak trading period building on its first-half performance,” he said.

Shares in Home Retail Group soared by more than 12 per cent to 136.6p, even as analysts warned of deepening troubles at its other business Homebase.

Total sales at Homebase fell by 4.5 per cent to £453 million, although some of that was due to the closure of three stores as the company trimmed its portfolio to 337.

Like-for-like sales declined by 3.9 per cent in the period, driven by the continued reluctance of customers to splash out on “big ticket” items.

Homebase also saw its average margin shrink by 50 basis points as it increased the level of clearance activity.

Nevertheless, the parent company still guided City expectations higher, saying profit before tax for the current financial year was likely to be about £10m ahead of a market consensus of £73m.

Duddy said: “Whilst we anticipate consumer confidence will remain subdued in the coming year, we are focused on delivering the transformation plan to reinvent Argos as a digital retail leader and the ongoing development of the Homebase proposition.”

Seymour Pierce’s retail experts Kate Calvert and Freddie George upgraded the stock from “sell” to “hold”, but that was driven more by hopes of a takeover of the struggling group than confidence that Argos’s turnaround can be sustained.

Their latest note said: “We remain unconvinced that the new strategy will have a significant impact on the Argos business while Homebase is becoming more and more challenged.”

Source : Dominic Jeff – Scotsman.com
www.scotsman.com/business/retail/argos-sales-recovery-driven-by-mobile-click-and-collect-1-2742154