19 June 2012 – interim management statement
An Interim Management Statement covering the 13 weeks from 4 March to 2 June 2012 has been released. Total sales at Argos were up 0.2% to £819m, with like-for-like sales down by 0.2% in the quarter. There was continued strong growth in laptops and tablets, which offset the sales declines in the TV, audio and video gaming categories, which remained competitive. Sales through the online Check & Reserve service grew 24% and represented 29% of total Argos sales. Total internet sales grew 17% and represented 41% of total Argos sales. Total multi-channel sales represented 51% of Argos sales, up from 46% a year earlier. Argos is clearly making good progress with regards to the source of sales and is arguably adapting to challenges faced in the retail sector better than most.
Total sales at Homebase declined by 8.1% to £421m. Like-for-like sales declined by 8.3%, mainly as a result of poor sales of seasonal products due to the poor weather. Big ticket sales were also down in a market that continues to be challenging. On a more positive note, gross margins improved by 225 basis points.
Overall, it is clear that the retail sector continues to face serious challenges. Nevertheless, Home Retail’s share price has slumped to a level which could look illogical with the benefit of hindsight. The company holds a substantial cash balance and improved economic conditions could see the shares recover strongly. Although not without risk, we rate the shares as a BUY.