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Home Retail Group sees profits nosedive 60%

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Weak trading at both Homebase & Argos has led to a significant drop in their owner Home Retail Group’s (HRG) profitability over the last year, results released today show.

HRG’s benchmark profit before tax declined by 60 per cent to £102 million in the 52 weeks to February 25th 2012, as total sales fell six per cent year-on-year.

Variety goods retailer Argos produced the poorest performance of the period with like-for-like (LFL) sales down 8.9 per cent, following a drop of 5.6 per cent in LFLs during the previous financial year, while its operating profit fell 57 per cent.

Amid rumours of an internal review assessing potential store closures, HRG has confirmed that around ten outlets are likely to close in the current financial year and that as many as 230 of its 700+ UK shops will be coming up for lease renewals in the next five years.

Definite successes in the multichannel operations of Argos have been achieved, for example it is now the second most visited internet retailing site in the UK & its multichannel trading now represents 48 per cent of total sales, but doubts still linger about how the business will boost its core brick & mortar division.

Commenting on the results, CEO of HRG Terry Duddy said: “In a particularly difficult trading environment, we have managed our costs and cash effectively.

“While we remain cautious about the consumer outlook over the short term, we are well positioned operationally and we will continue to prioritise investment in our leading multi-channel capabilities to shape the future of shopping for our customers, ensuring we bring unrivalled convenience and value to customers’ everyday lives, whether shopping at home or on the move.”

Homebase, HRG’s home & DIY retail business, performed better than its sister organisation over the full-year period but was still not immune from the wider economic environment.

It posted a two per cent slump in underlying trading whilst overall sales were dented by a further 0.6 per cent thanks to store closure during the second half of the last financial period.

Gross margins at Homebase were maintained during the period but operating margin was did decline and its operating profits were down 52 per cent year-on-year.

Much like its plans for Argos, HRG sees the future for Homebase in multichannel sales supported by a large store base, and notes that during the year the retailer saw visits to its website grow by 15 per cent and its ‘reserve & collect’ service increase its activity by 35 per cent over the period.

In regards to Argos, HRG says that stores are involved in around 90 per cent of all sales at the business and it says that it is open to the idea of opening more outlets if attractive locations become available.

Published on Wednesday 02 May by Editorial Assistant

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