Back in October, Home Retail Group (HOME) outlined a "transformative" five-year plan to reinvent Argos as a "digital retail leader" and to revamp Homebase.
At Argos, this groundwork included a re-launched website and trialling a "hub and spoke" distribution model which allows for immediate or next-day collection. Although it's too early to tell whether these sorts of changes will pay off, Argos delivered its first like-for-like sales growth in five years of 2.1 per cent. Operating profit jumped 6 per cent to £100m, helped by multi-channel sales of £2bn, or half of total Argos sales. An adverse sales mix did squeeze the gross margin by 50 basis points, but cost savings meant that operation and distribution costs fell by £10m. This helped operating margins to edge up.
Homebase performed less well. Sales fell 5 per cent to £1.43bn due to weak consumer spending, sending operating profit down 52 per cent to £11m. The strategy is to turn Homebase into a "differentiated multi-channel home-enhancement retailer" with a stylish "female-friendly" proposition. To achieve this, Homebase is refitting stores, improving service and expanding the Laura Ashley and Habitat concessions.
Bank of America Merrill Lynch expects underlying EPS of 8.8p in 2014, rising to 10.5p in 2015 (from 7.7p in 2013).
| HOME RETAIL GROUP (HOME) | ||||
|---|---|---|---|---|
| ORD PRICE: | 156p | MARKET VALUE: | £1.27bn | |
| TOUCH: | 155-156p | 12-MONTH HIGH: | 165p | LOW: 68p |
| DIVIDEND YIELD: | 1.9% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 336p* | NET CASH: | £396m | |
| Year to 2 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 5.90 | -394 | -47.7 | 14.7 |
| 2010 | 6.02 | 293 | 23.4 | 14.7 |
| 2011 | 5.85 | 265 | 21.3 | 14.7 |
| 2012** | 5.58 | 104 | 9.10 | 4.7*** |
| 2013 | 5.48 | 130 | 11.7 | 3.0 |
| % change | -2 | +25 | +29 | -36 |
Ex-div: 22 May Payment: 24 Jul *Includes intangible assets of £1.67bn, or 206p a share **52-week period ***Interim dividend only | ||||
