Argos owner raises profit forecast after festive boost
Shares in Argos owner Home Retail Group rocketed more than 15pc after it upped its full-year profit forecast on the back of a strong Christmas trading period.
Home Retail chief executive Terry Duddy said the company had a "good peak trading period" over Christmas and added that internet sales now accounted for 42pc of total sales at Argos.
The upbeat message on the performance of Argos is in stark contrast to the dire results the unit posted just last October, when first-half profit at the retailer had slumped 37pc.
The division had been hit by lower consumer spending, particularly among its dominant low-income customer base.
Mr Duddy said then that he wanted to transform Argos into the UK's "digital retail leader".
The latest trading period provided investors with optimism that the retailer is heading out of the woods. Total sales at Argos in the 18 weeks to January 5 rose 1.6pc to £1.74bn (€2.08bn), while like-for-like sales were 2.7pc higher. Sales at the group's Homebase unit fell 4.5pc to £453m.
"As a result of good operational management and cash generation over the peak trading period, we now expect group benchmark profit before tax for this financial year to be about £10m ahead of the current market consensus of £73m," said Mr Duddy.
He added that Home Retail Group's cash balance at the end of the financial year was expected to be around £300m.
"We have been too harsh in our previous profit assumptions," said Panmure Gordon analyst Philip Dorgan. "This is a better than expected statement."
Meanwhile, electrical retailer Dixons, which trades as PCWorld and Currys, said like-for-like sales in the UK and Ireland rose 8pc in the 12 weeks to January 5.
Sales of items such as computer tablets over Christmas were "phenomenal", said chief executive Sebastian James. That boosted the sales performance, but somewhat at the expense of margins. The collapse of rival Comet also helped Dixons.
Analyst Joseph Robinson at Conlumino said the performance was "impressive" given the headwinds facing the sector, highlighted by the collapse of HMV, Comet and camera chain Jessops.
Shares in the company were up over 2pc by mid-afternoon.