KEY POINTS:
■ Better than expected trading at Argos
■ Homebase hit by poor spring weather
■ Full-year pre-tax profit guidance of around £67m
Shares in Home Retail Group leapt 25 per cent after it reported better than expected first-quarter trading at its catalogue business, Argos. Its like-for-like sales fell just 0.2 per cent against analysts' expectation of a 3.9 per cent drop, thanks to strong demand for tablets and laptops, and multi-channel initiatives, which now account for over half of sales. However, although management said it would deliver its full-year profit forecast of £67m, we still think it's too early to suggest the group's problems are behind it.
Analyst Philip Dorgan at broker Panmure Gordon agrees, suggesting that Argos has too many stores, and that, with a high fixed-cost base, it will lose money in 2014 as competitive pressures mount. The group's other business, Homebase, is also facing challenging conditions. Its like-for-like sales fell 8.3 per cent in the quarter, partly the result of the impact of poor weather on seasonal lines, but also because of lower levels of big-ticket item sales.
