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Argos owner HRG sees shares surge despite fall in sales | |
(about 6 hours later) | |
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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