Home Retail Group, sales down at Homebase but Argos looking good

Home Retail Group reported a sharp decline in sales at Homebase confirming that the summer has been a dead loss for DIY enthusiasts. Second quarter sales at Homebase fell by 8% on a like-for-like basis and by 6.2% to £391 million because barbecues and garden furniture were not purchased due to the wet weather.

The chief executive discarded fears about the strength of the DIY market, which has had a rocky time over the last few years. Things that are not dependant on the weather have performed well.

An analyst at Oriel Securities said that Homebase situation is not ideal but given its seasonal nature, we can give it the benefit of the doubt.

On the positive side, growth at Argos, the catalogue retailer helped lift the shares. Like-for-like sales grew by 1.8% in the 13 weeks to September 1, an improvement on growth in the first quarter of 0.9%. Total sales grew 4.8% to £942 million primarily due to the sales of flat panel TVs and video games as customers stayed indoors. It also experienced strong growth in mobile phones and satellite navigation systems.

Home Retail commented that continued progress on margins and cost-cutting exercises during the first half of 2007 meant it expected to see profits at Homebase ahead of 2006, while strong growth was expected at Argos.

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