End of Year Trading Statement
10 March 2011
Home Retail Group plc
End of Year Trading Statement
Home Retail Group, the UK's leading home and general merchandise retailer, today announces details of the final eight-week trading period for the financial year ended 26 February 2011.
Terry Duddy, Chief Executive of Home Retail Group, commented:
"There are clear signs of further pressures on consumer spending, with recent trading conditions, particularly at Argos, proving to be more difficult and volatile than we anticipated. As a result, Group benchmark PBT for the year just ended is now expected to be between £250m and £255m. Against the backdrop of the challenging economic environment, and taking in to account our most recent trading, we are now planning with increased caution for the year ahead. The Group has a strong financial position and we continue to focus on driving forward our operational performances while investing further across the businesses."
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|
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Latest period (8 weeks to |
|
H2 (26 weeks to |
Full year (52 weeks to |
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Argos |
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|
|
|
|
|
Sales |
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£520m |
|
£2,381m |
£4,194m |
|
Like-for-like change in sales |
|
(4.6%) |
|
(4.8%) |
(5.6%) |
|
Net space contribution to sales change |
|
1.5% |
|
1.7% |
2.1% |
|
Total sales change |
|
(3.1%) |
|
(3.1%) |
(3.5%) |
|
Gross margin movement |
|
Down c.150bps |
|
Down c.50bps |
Down c.100bps |
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|
|
|
|
|
|
|
Homebase |
|
|
|
|
|
|
Sales |
|
£208m |
|
£695m |
£1,551m |
|
Like-for-like change in sales |
|
3.8% |
|
0.2% |
(0.3%) |
|
Net space contribution to sales change |
|
(2.0%) |
|
(1.7%) |
(1.1%) |
|
Total sales change |
|
1.8% |
|
(1.5%) |
(1.4%) |
|
Gross margin movement |
|
Up c.300bps |
|
Up c.150bps |
c.0bps |
Argos
Total sales at Argos declined by 3.1% to £520m. Net new space contributed 1.5%; over the full year there have been a net six openings, increasing the portfolio to 751 stores; in addition, six stores have been relocated during the year.
Like-for-like sales declined by 4.6% in the period. The video gaming market has continued to be weak and the audio market was also challenging. Laptops and tablets saw a strong performance and the white goods and toys categories remained in growth. The internet grew to represent 36% of Argos sales, up from 33% a year earlier; this was driven by the continued popularity of online reservations for store collection.
The approximate 150 basis point gross margin reduction was driven principally by an increased level of clearance activity.
Homebase
Total sales at Homebase increased by 1.8% to £208m. Net closed space reduced sales by 2.0%; over the full year there have been eight closures, reducing the portfolio to 341 stores.
Like-for-like sales increased by 3.8% in the period. There was further growth in 'big ticket' sales driven by bathrooms and bedroom furniture. Sales for the remaining categories were broadly flat.
The approximate 300 basis point gross margin improvement was driven principally by stock management benefits and a reduced level of promotional activity, partially offset by a sales mix impact.
Year-end net cash position
The cash outflow for the year just ended is expected to be approximately £5m before the £150m share buy-back programme. The Group's net cash position at 26 February 2011 is therefore estimated to be down approximately £155m at £260m versus £414m a year earlier.
The share buy-back programme announced on 28 April 2010 has been completed; 64,000,000 shares have been purchased at an average price of 233p and a net cash cost of £150m. The purchased shares represent 7.3% of the 877,445,001 issued ordinary shares at the 27 February 2010 balance sheet date.
Planning outlook
Taking in to account our most recent trading, we are now planning on a more cautious basis than previously anticipated for the 2011/12 financial year. At this very early stage of the new financial year, we believe that like-for-like sales performances could be a low-to-mid single digit percentage decline at Argos and broadly flat at Homebase. Our view on the potential gross margin movements is for a marginal reduction at Argos and a marginal improvement at Homebase. Increased operating cost inflation, together with ongoing investment in long-term growth initiatives, is also likely to lead to absolute costs being moderately higher year-on-year in both businesses.
Enquiries
Analysts and investors (Home Retail Group)
Richard Ashton Finance Director 01908 600 291
Tony Newbould Head of Investor Relations
Media (Finsbury)
Rollo Head 020 7251 3801
There will be a conference call for analysts and investors to discuss this statement at 8.30am this morning. The call can be listened to live on the Home Retail Group website www.homeretailgroup.com. An indexed replay will also be available on the website later in the day.
Home Retail Group will announce its full-year results on Wednesday 20 April 2011.
Information in this announcement is based upon unaudited management accounts. In addition, certain statements made are forward looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results referred to in these forward looking statements.
This information is provided by RNS