Home Retail Sees Subdued Spending as Homebase Margin Narrows

Home Retail Group Plc said it expects consumer spending to remain “subdued” this year after sales slowed at the Argos catalog chain and higher promotions at Homebase led it to cut profitability outlook for the unit.

Sales at Argos stores opened at least a year rose 1.9 percent in the 13 weeks ended June 1, the Milton Keynes, England-based retailer said today in a statement. That’s less than the median estimate of 3 percent from 9 analysts compiled by Bloomberg. Finance Director Richard Ashton said full-year margins at the Homebase home-improvement chain will narrow by

0.5 percentage point. The stock fell as much as 7.4 percent

The retailer said last month it was more optimistic about the summer as it expands online and mobile sales, adds more products to its range like Habitat furniture and refurbishes stores. Still, the retailer said today Homebase was “slightly behind our expectations,” as cold weather hurt sales of seasonal items while the Argos chain suffered from market declines in video gaming and audio categories.

“Whilst we expect consumer spending to remain subdued, we are on track with delivering our investment plans to drive the long term development of both Argos and Homebase,” Chief Executive Officer Terry Duddy said in the statement.

Same-store sales rose 1.4 percent at the Homebase home-improvement chain, compared with the 2 percent decline estimated by analysts. The unit’s gross margin narrowed by about 2 percentage points, Home Retail said.

The stock traded 5.8 percent lower at 135.70 pence at 8:18 a.m. in London as the benchmark FTSE 100 Index declined 1.2 percent. The stock has climbed 7.1 percent this year.

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