Home Retail Group news

First Quarter Interim Management Statement

14 June 2007

Home Retail Group, the UK's leading home and general merchandise retailer, is today publishing its first Interim Management Statement as required by the FSA's disclosure and transparency rules. The statement relates to the first 13 weeks of the new financial year, representing the period 4 March 2007 to 2 June 2007.

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

“We have had a strong start to the financial year in a highly competitive market. Homebase has seen good sales growth in its peak season to date, while Argos achieved like-for-like sales growth against a highly successful period last year. Gains in gross margin were achieved in the quarter, with both businesses benefiting from group sourcing. We remain cautious given the uncertain consumer outlook and our expectations for the full year are unchanged at this early stage.”

% change in sales year-on-year		13 weeks to 2 June
Argos
Sales		£893m
Like-for-like change in sales		0.9%
Net new space contribution to sales change		3.6%
Total sales change		4.5%
Gross margin movement		Up c.150bps
Homebase
Sales		£463m
Like-for-like change in sales		2.7%
Net new space contribution to sales change		2.5%
Total sales change		5.2%
Gross margin movement		Up c.300bps

Argos

Total sales at Argos grew by 4.5% to £893m in the first 13 weeks of the financial year. The contribution to sales growth from net new space was 3.6%; three stores were added to reach 683 as at 2 June 2007. The like-for-like sales increase of 0.9% was driven by further strong growth in flat panel TVs and video games systems, with seasonal categories also seeing good performances. Weaker categories included audio, VCR/DVD and landline phones. Total Internet orders grew by 29% and represented 18% of total sales, around half of which were reserved for in-store collection. Home delivery overall grew to represent 25% of total sales.

Gross margin was ahead by approximately 150 basis points, even after prices on reincluded lines were approximately 3% lower. The gross margin gain was driven by ongoing supply chain initiatives and foreign exchange benefits. It is anticipated that there will be an even greater level of investment in lower prices for customers during the peak trading period, which we expect will lessen the gross margin gain for the full year.

Homebase

Total sales at Homebase grew by 5.2% to £463m. The contribution to sales growth from net new space was 2.5%; there were two store openings and one closure during the period, taking the store portfolio to 311. The like-for-like growth was 2.7% for the period overall, with strongly positive sales growth achieved in March and April that then reversed significantly in May. The performance in the earlier part of the period was driven by the benefit of warm weather on sales of seasonal categories, with trading then becoming more difficult during the latter weeks of the period. Kitchen sales continued to have good growth.

Gross margin increased approximately 300 basis points, driven by ongoing supply chain initiatives, foreign exchange benefits and a lower amount of clearance activity in seasonal categories. This level of gross margin gain is likely to lessen through the remainder of the year.

Home Retail Group will announce details of trading for the 13 weeks of 3 June 2007 to 1 September 2007 on Wednesday 12 September 2007, and its half year results on Wednesday 24 October 2007.

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.

View the full PDF version of First Quarter Interim Management Statement

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