UK-based home and general merchandise retailer Home Retail Group Plc (HOME.L) Thursday said it expects benchmark pre-tax profit for the financial year ended February 27, 2010 to be slightly ahead of current market expectations. In the final eight weeks of the year, total sales at Argos segment declined 6.6% while Homebase segment's total sales were flat with the prior year.
Chief Executive Terry Duddy said, "For the new financial year, we continue to plan cautiously given the uncertain economic outlook, but do so from our position of operational and financial strength."
For fiscal year 2009, the company expects benchmark pre-tax profit to be around GBP 290 million, slightly ahead of current market expectations. The company noted that final eight weeks saw volatile trading patterns, making it difficult to assess any changes in underlying consumer demand.
At Argos segment, total sales for the eight-week period declined 6.6% to GBP 537 million. Like-for-like sales declined by 9.4%, which included about 3% negative impact of the later launch of the Spring/Summer catalogue, as well as an adverse impact of poor weather in this short and low volume period.
Net new space contributed 2.8% of the sales, with three openings and two closures in the period, increasing the store portfolio to 745. Gross margin declined around 100 basis points due mainly to the anticipated net impact of adverse currency movements.
At Homebase segment, total sales for the eight-week period were GBP 205 million, in line with the previous year, with like-for-like sales down 0.6%, which included an adverse weather impact. Net new space contributed 0.6% of total sales, and there were 349 stores trading throughout the period. Gross margin declined about 425 basis points, hurt by the anticipated net impact of adverse currency movements.
The company said the actuarial valuation of its defined benefit pension scheme, as at March 31, 2009, has recently been completed, and has resulted in a deficit of GBP 102 million. As at February 27, the Group's net cash position is estimated to be around GBP 410 million, after the payment of the additional GBP 17 million pension contribution.
For the second half, total sales at Argos segment improved 1.4% year-over-year to GBP 2.46 billion, with like-for-like sales dropping 2.2%. At Homebase segment, total sales for the half year increased 3.2% to GBP 706 million, with like-for-like sales grew 2.6%.
For the full year, total sales at Argos increased 1.5% to GBP 4.35 billion, with like-for-like sales dropping 2.1%. At Homebase segment, total sales for the year rose 3.9% to GBP 1.57 million and like-for-like sales grew 2.7%.
HOME is currently trading at 275.00 pence per share, up 7.20 pence or 2.69%, on the London Stock Exchange.
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