Home Retail hikes profit guidance again after strong fourth quarter

After signalling higher-than-expected full-year profits earlier in the year, Home Retail, the owner of Argos and Homebase, further raised its guidance on Thursday after reporting a strong end to its financial year.

The company said that the final eight weeks of the financial year ended March 2nd have been a "good outcome to a challenging year".

Profit before tax is now expected to come in at £90m for the year as a whole. This follows the company's statement in January which said that the figure would be £10m ahead of the current (at the time) market consensus of £73m.

Furthermore, Home Retail said that its net cash position has increased by around £200m on the year to £395m, well ahead of the previous guidance for cash "in excess of £300m".

An improvement in like-for-like (LFL) sales growth at both Argos and Homebase in the final eight weeks of the year has boosted the full-year growth rates.

ArgosTotal sales at Argos rose by 4.3% in the eight-week period to £501m despite two stores having closed. With the closed space reducing the top line by 0.9 percentage points, sales were up 5.2% on a LFL basis. This compares with the 2.7% increase seen in the third quarter, pushing the full-year LFL growth rate to 2.1%.

The company hailed its increasing exposure to the internet, with online penetration increasing to 43% of total Argos sales, up from 40% a year before. This was helped by the mobile commerce channel where sales surged by 117% year-on-year.

Terry Duddy, Chief Executive Officer of Home Retail, said: "Against a backdrop of subdued consumer spending for the new financial year, we will continue to invest and are focussed on delivery of the transformation plan to reinvent Argos as a digital retail leader and the Homebase proposition.

HomebaseSales at Homebase fell 2.8% to £191m during the eight-week period, though this division was also impact by reducing selling space after one store closed. The LFL change year-on-year was -1.5%.

Full-year LFL sales fell by 4.9%, though this was an improvement from the 5.4% year-to-date decline registered at the end of the third quarter.