Sales top hopes at UK’s Home Retail

Home Retail Group, Britain's biggest household goods retailer, on Thursday posted better than expected second-quarter sales at both its Argos and Homebase businesses.

"Argos and Homebase performed well, delivering cash margin ahead of our expectations," said Chief Executive Terry Duddy.

"Combined with exceptionally good cost management, this means we now expect group benchmark profit before tax for the first half (to Aug. 29) to be broadly in line with last year's 121 million pounds ($200.2 million)."

Like-for-like sales at the 739-store Argos business, the group's town centre catalogue-based retailer, fell 1.4 percent over the 13 weeks to Aug. 29, while underlying sales at the 350-store home improvements retailer Homebase increased 1.6 percent.

Gross margin was down by 125 basis points at Argos and down 400 basis points at Homebase.

Analysts were expecting like-for-like sales to fall 1.6 percent at Argos and fall 2.5 percent at Homebase, with gross margin down 1.35 percentage points at Argos and down 2.20 percentage points at Homebase, according to a poll of analysts provided by the company.

At Argos a strong performance in televisions and personal computers offset weakness in the video gaming market. At Homebase sales were stimulated by promotions, with growth led by big ticket items, particularly kitchens.

Shares in Home Retail have increased in value by 32 percent over the last three months on recovery hopes, outperforming the DJ Stoxx European retail sector index by about 12 percent.

The share price closed on Wednesday at 328 pence, valuing the business at 2.88 billion pounds.

Kesa Electricals, Europe's third largest electricals retailer, also reported better than expected trading on Thursday.

On Tuesday Kingfisher, owner of DIY retailer B&Q in the UK, forecast higher than expected first-half profits, while last week DSG International, Europe's second-biggest electrical goods retailer, posted a smaller than expected fall in quarterly sales.