DIYWEEK.net

Homebase will shed 80 more of its stores over the next three years, parent Home Retail Group (HRG) said today as it released its results for the 26 weeks to August 30 2014.
Both Homebase and sister retailer Argos enjoyed a good first half, with like-for-like sales up at both retailers and a 13% rise in pre-tax profit at HRG.

HRG sales increased by 3% to £2,669m, with like-for-likes up 2.9% at Argos, and 4.1% at Homebase. Benchmark pre-tax profit rose to £30.9m and cash gross margin increased by 2% to £981m.

A comprehensive review of the Homebase business was completed, and a further 11 trial stores were refitted, to include Habitat concessions and improvements to the DIY and home offer.

But the retailer also continued to reduce the size of its estate. And HRG says 30 more of its branches will close in the current financial year, with a quarter of its 323 outlets - around 80 - set to be shut down over the next three years.

"Although economic indicators have more recently improved, several structural factors continue to affect home improvement retailing, including an excess of retail space, the rise of a generation less skilled in DIY projects, and the growth of non-traditional digital and multi-channel competitors," said HRG.

Meanwhile, the half year saw Argos complete the national roll-out of the 'hub and spoke' network, enabling same-day collection of around 20,000 products, and the start of the roll-out of online payment and fast track collection in-store. Thirty-two digital stores are now trading across three different formats.

Online now accounts for 43% of Argos sales, including mobile commerce, which grew by 45% and delivers 22% of sales.

Commenting on HRG's first half, chief executive John Walden said: "Argos continued to build on its sales growth from the previous financial year, increased its benchmark operating profit whilst also making good progress with its transformation plan.

"Homebase delivered a good peak trading period, performing well throughout the half despite being up against the tough comparators of a strong second quarter last year."

However, HRG's performance failed to meet expectations, according to Cityindex.co.uk chief market strategist Joshua Raymond.

"Home Retail saw first-half profits rise 13% on the back of strong sales growth at Argos and Homebase but the result was in fact worse than the market expected," he told diyweek.net. "Profits came in at £30.9m compared to forecasts of £34.6m.

"However, any lingering fears over the full-year performance were calmed somewhat by the retailer confirming that it expects to report profits of £127m, in line with consensus estimates.

"That being said, the firm's ability to meet these targets will rest on the shoulders of its Christmas trading period and sales at Argos. With consumer spending still hampered by weak earnings growth in the UK and new headwinds emerging from a weaker Eurozone economy, Argos could be well placed to sweep up shoppers looking for discounts this Christmas."

The plan to transform Argos into a digitally-led retailer over the next three years remains HRG's strategic priority, and a multi-million pound Argos advertising campaign now airing underlines that shift. The ads will continue until the run-up to Christmas.