14 September 2006
Home Retail Group (formerly Argos Retail Group), the UK's leading home and general merchandise retailer which is part of GUS plc, this morning issues an update on trading to coincide with the publication of its prospectus later today.Terry Duddy, Chief Executive Officer of Home Retail Group, said:
“Home Retail Group has made good progress against varied conditions in our product markets. While remaining cautious on the outlook for the UK consumer in the near-term, we look forward to continued success as a separately listed company.”
| Five months to 31 August 2006 | % | |
| Argos | - total | 13 |
| - like-for-like | 5 | |
| Six months to 31 August 2006* | % | |
| Homebase | - total | 1 |
| - like-for-like | (3) |
* Homebase's year-end is the end of February to avoid distortions relating to the timing of Easter
For the early part of the financial year, the non-food, non-clothing market in the UK was stronger than expected. However, with continued weakness in certain product markets, Home Retail Group remains cautious on the outlook for a sustainable recovery in the rate of growth of consumer spending in the near-term.
Like-for-like sales increased by 5%, boosted by an outstanding performance in the first three months of the period. In the lead up to and during the course of the World Cup, sales of flat panel TV packages and set top boxes grew particularly strongly. Video game systems and bedroom furniture continued to perform well throughout the period. There was also strong growth in child safety and other nursery-related lines, and in seasonal products boosted by the warmer weather in July.
The overall strong sales performance in the period was, however, substantially offset by a related reduction in gross margin particularly in the first three months of the year. This was driven by the shift in the product mix and by the popularity of Argos ' promotional offers, partially countered by the benefits obtained from supply chain initiatives.
Argos Direct, the delivery to home operation, grew by 13% in the period and accounted for 25% of Argos' sales. Within this, Internet orders for delivery to home rose by 46%, representing 8% of total sales. An additional 10% of sales were reserved by phone or the Internet for later collection in store (the service known as Check and Reserve), which was 61% ahead of the same period last year. The Autumn/Winter catalogue was launched on 29 July with about 17,000 lines available to customers across all stores and channels.
Like-for-like sales declined by 3%. Sales of furniture and kitchens continued to show strong growth throughout the period, while core DIY and decorating ranges remained weak. The improvement in sales in the later months of the period was largely driven by warmer weather encouraging purchases of seasonal categories, particularly air conditioning and horticulture. As planned, gross margin was ahead of the previous year due to a reduced level of promotional activity in the earlier months of the period, together with the benefits obtained from supply chain initiatives.
As announced last month, a joint venture with Barclays Bank PLC will develop an Argos credit card proposition and new personal loan products for Argos and Homebase. Home Retail Group's existing Argos and Homebase store card operations are not impacted by this arrangement.
| Richard Ashton | Finance Director | 020 7495 0070 |
| Stuart Ford | Head of Investor Relations | |
| Rupert Younger | 020 7251 3801 |
| Rollo Head | |
This announcement is available on the Home Retail Group website, www.homeretailgroup.com, and the GUS website, www.gusplc.com.
All financial information in this Trading Update is based upon unaudited management accounts. 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.