Argos owner HRG sees shares surge despite fall in sales

Home Retail Group

Last Updated at 27 Jan 2015, 11:30 ET *Chart shows local time Home Retail Group intraday chart
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Shares in Home Retail Group (HRG) soared after the owner of Argos said a decline in sales at the chain had slowed in recent months.

Stronger electronics sales meant the fall in like-for-like trading in 13 weeks to 2 June was 0.2% down, against an 8.5% drop in the previous quarter.

But bad weather was a dampener at another HRG division, Homebase, where comparable sales fell by 8.3%.

By midday, HRG shares were up about 23% on hopes the firm had turned a corner.

In a trading update, HRG highlighted better sales of consumer electronics at Argos, particularly laptops and tablet computers.

The analysts' consensus forecast for Argos's like-for-like sales during the quarter was for a 4% fall.

However, sales at the Homebase DIY stores were hit by the recent bad weather, falling 8.3% and extending the 6.5% decline seen in the previous quarter.

Analysts had forecast about a 4% fall at Homebase this time.

Seasonal products, which account for some 40% of sales, fell by about 15% after the wet start to the summer.

"People are not going to go and buy themselves a nice piece of garden furniture when it is 5C and pouring with rain," finance director Richard Ashton told a news conference.

Despite the surge in HRG's sale price, chief executive Terry Duddy was cautious about the company's prospects.

'Flash in the pan?'

"When you look at the hard numbers on macroeconomics, life has not changed that much; and when you look at the hard numbers as far as consumer confidence, that is still in a difficult place," he told reporters.

He said that HRG's guidance to the financial markets was that analysts' current forecasts for full-year profits are broadly in line with prospects.

"At this early stage of the financial year, we are comfortable with current market expectations for full-year benchmark profit," he said.

Investec Securities retail analyst David Jeary said: "We will review our investment case when we have seen the out-turn of Q2 (second-quarter) and can gauge whether the Q1 performance was a flash in the pan or a potential turning point."

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