This less than inspiring performance from Home Retail - which operates catalogue retailer, Argos, and DIY group, Homebase - confirmed the tough trading set out in the group's first-half update last month. Indeed, benchmark pre-tax profits, adjusted for such items as exceptionals, amortisation and intangibles, fell 23 per cent year-on-year to £95m. Although management did cut £39m overall from operating and distribution costs.
Weak consumer conditions have hit Argos especially hard, with like-for-like sales there slumping 6.5 per cent. Management pointed to weak demand for big ticket items, such as furniture, while product cycle declines in parts of the technology offering have meant bad news for sales in such areas as video gaming and televisions. Overall, Argos' gross margin fell 150 basis points year-on-year. Trading, however, has been a shade better at Homebase and like-for-like sales at the DIY chain fell by a more modest 0.8 per cent, while the gross margin dropped 100 basis points. Management says Homebase's big ticket sales have held up, but that sales in the remaining categories were lower overall.
Broker Seymour Pierce expects full-year pre-tax profits of £260m, giving EPS of 21.6p (2010: £293m/23.4p).
HOME RETAIL (HOME) | ||||
|---|---|---|---|---|
| ORD PRICE: | 217p | MARKET VALUE: | £1.81bn | |
| TOUCH: | 216-217p | 12-MONTH HIGH: | 326p | 202p |
| DIVIDEND YIELD: | 6.8% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 319p* | NET CASH: | £327m | |
| Half-year to 26 Aug | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 2.80 | 117 | 9.0 | 4.7 |
| 2010 | 2.72 | 103 | 8.8 | 4.7 |
| % change | -3 | -12 | -2 | - |
Ex-div:10 Nov Payment:19 Jan *Includes intangible assets of £1.63bn, or 196p a share | ||||
