Trading Statement

RNS Number : 1896D

Home Retail Group Plc

11 September 2008

 



11 September 2008

Home Retail Group plc

Second Quarter Trading Statement

Home Retail Group, the UK's leading home and general merchandise retailer, today publishes an update on trading in its second financial quarter and the first half overall.

Terry Duddy, Chief Executive of Home Retail Group, commented:

'The performance of Argos and Homebase in the latest quarter was reflective of a difficult consumer environment. However, the Group's focus on cost control should result in benchmark profit for the half-year being in line with our expectations; the Group has also had further good cash generation. Profits for the financial year as a whole are, as ever, dependent on the key Christmas trading period, though the Group's operating model and financial strength will see us well positioned to compete in challenging conditions.'

		Q1 (13 weeks from 2 March to 31 May)				Q2 (13 weeks from 1 June to 30 August)				H1 (26 weeks from 2 March to 30 August)
Argos
Sales		£929m				£927m				£1,856m
Like-for-like change in sales		0.0%				(5.8%)				(3.0%)
Net new space contribution		4.0%				4.2%				4.1%
Total sales change		4.0%				(1.6%)				1.1%
Gross margin movement		Down c.125bps				Down c.25bps				Down c.75bps
Homebase
Sales		£440m				£389m				£829m
Like-for-like change in sales		(12.0%)				(8.3%)				(10.3%)
Net new space contribution		7.0%				8.0%				7.4%
Total sales change		(5.0%)				(0.3%)				(2.9%)
Gross margin movement		Up c.125bps				Up c.125bps				Up c.125bps

Argos

Total sales at Argos declined by 1.6% to £927m in the second quarter of the financial year. Net new space contributed 4.2%; there were nine openings and two relocations, taking the portfolio to 718 at 30 August 2008 (up from 685 stores a year earlier).

Like-for-like sales declined by 5.8% in the quarter; while growth remained positive in consumer electronics, it was at a lower rate than the previous quarter. Furniture and homewares continued to show declining sales in challenging market conditions. Online Check & Reserve orders for immediate store collection grew by over 40% and represented 13% of total Argos sales, with a further 9% of sales being internet orders for home delivery. The approximate 25 basis point gross margin decline reflected the product mix.

Homebase

Total sales at Homebase declined by 0.3% to £389m in the second quarter of the financial year. Net new space contributed 8.0%; there were four openings and two closures, taking the portfolio to 345 at 30 August 2008 (up from 311 stores a year earlier).

Like-for-like sales declined by 8.3% in the quarter. Seasonally-related categories overall performed broadly in line with the company average. Last Autumn's national rollout of the kitchen installation service continued to generate sales growth in this area. All other product categories continued to see a generally difficult trading environment. The approximate 125 basis point gross margin increase was led by further sourcing and supply chain gains.

In light of market conditions, the carrying value of Homebase's assets, including goodwill, will be assessed as part of the half-year audit review. This is expected to lead to substantial write downs which would be recorded as exceptional items and therefore excluded from benchmark profit measures.

Enquiries

Analysts and investors (Home Retail Group)

Richard Ashton               Finance Director                              01908 600 291

Stuart Ford                    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 half-year results on Wednesday 22 October 2008. An Interim Management Statement covering the 18 weeks from 31 August 2008 to 3 January 2009 will be announced on Thursday 15 January 2009.

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.

 

END

 

 

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