Bosses at Home Retail Group (HOME) are putting their faith in Christmas this year, after the company revealed the outcome of full-year results will depend on a strong festive trading period at catalogue retailer Argos. Second-quarter trading there was poor, with total sales down 0.4 per cent, despite 52 new store openings. On a like-for-like basis, Argos reported a 2.8 per cent decline, with management blaming weak consumer demand for electrical products.
Over at DIY retailer Homebase, total sales declined by 2.8 per cent to £378m, as a result of ongoing store closures. But like-for-like sales increased 5.9 per cent in the quarter with strong sales growth across all product categories, particularly big-ticket items. The problem is these products are low margin, and coupled with the impact of clearance activity and an adverse sales mix, gross margins fell 75 basis points.
By comparison, margins at Argos improved 125 basis points due to favourable currency and shipping costs, and good timing of a small number of other positive items. However, this timing benefit is expected to reverse in the second half of the financial year.
