Home Retail Group

Argos owner Home Retail Group (HOME) has reported a 8.8% slide in like-for-likes in its Argos outlets amidst what it calls a 'demanding' environment.

The fully-listed outfit saw like for likes decline over the 18 weeks to 31 December with like for like sales at Homebase falling by 2.6%. The group remarked that Argos continues 'to be impacted by the market decline in consumer electronics categories' adding that Homebase had seen more 'resilient' sales. It declared that profits are to be in the 'mid-point' of analyst forecasts between £78m and £125m. A 'significant cut' in the full year dividend was also announced.

Argos itself saw total sales fall by 7.8% to £1.72bn with Home arguing that 'in particular video gaming and audio (This refers to hi-fi equipment, MP3 players, etc)' were weak though laptops and tablets were said to be 'strong performers'. At DIY and garden specialist Homebase, big ticket sales were 'down and continued to be impacted by a challenging market' with other categories described as 'flat'.

Analysts at Numis cut their profit forecast for 2012 from £115m (EPS: 9.8p) to £94m (EPS: 7.9p) on sales of £5.5bn for the year to February 2012. In 2013 profits of £47m (EPS: 4p) on sales of £5.46nn are pencilled in.

Growth Company Investor recommended selling shares in Home Retail Group last June at 179.4p and again in October at 103.9p. They have lost 54% since our sell rating last June, and are currently trading at 82.5p. A company that generates a considerable proportion of its revenues from consumers on lower incomes, the tough economic environment has heaped further pressure on the group as customers avoid splashing out on new televisions and electronic items, while the dearth of new video games consoles has not helped matters..

Homebase too remains under pressure, with hopes for the business probably best focused on the possibility of flat sales for the foreseeable future. We retain our sell rating for now.