A decent quarter for Home Retail Group

Last week’s update from retailer Home Retail Group was certainly on the positive side, as the company’s Argos and Homebase businesses continue to deliver strong performance.

For the 13 weeks from 2^nd March through 31^st May, total sales at Argos came in at £868mn, representing a 4.8% growth – up 4.9% on a like-for-like basis – over the same period the previous year.

The increase was thanks to growth in seasonal products as well as electrical products, such as TVs and video games, which helped offset declines in tablet sales, as well as a dip in demand for homewares, furniture and jewellery.

Total sales at Homebase were £445mn during the period, marking a 5.5% rise over the same period last year. The growth, which was 7.9% on a like-for-like basis, was helped – in part – by an increase in sales of so-called ‘big ticket’ products (which encompass items such as kitchens).

Home Retail saw gross margin declines across Argos and Homebase – 0.25% and 0.5% respectively – due to an ‘adverse sales mix impact’; though that’s a smaller decline than it was last year.

Looking ahead, the company sounded caution over year-on-year growth in the second quarter, given the strong performance it enjoyed in the second quarter of last year.

Turnaround momentum continues at Home Retail…

Home Retail’s prior struggles and subsequent turnaround initiatives have been highlighted here previously, and, it looks to be progressing well.

The company’s turnaround plan included transforming Argos – which makes up the bulk of Home Retail’s revenue (around 70% of group sales) – into an online player as the company looks to adequately combat competition.

That initiative certainly bodes well and has continued to gain traction, particularly on the mobile commerce side, which grew by 56% in the quarter and now represents 21% of total Argos sales (it was 18% in April).

Home Retail’s shares…

But despite the decent performance, shares of Home Retail closed down some 4% after the update on Thursday (12^th June) and have been trending lower since – the company’s shares have dropped around 18% since this year’s peak in March.

That said, the recent declines follow something of a good run over the last couple of years, which has seen Home Retail’s shares soar more than 90%. Still, the company’s turnaround is certainly bearing fruit and it has the wherewithal to continue with those efforts in a bid to capture further growth.