Argos sales fall hits Home Retail Group

Argos and Homebase owner Home Retail Group (HRG) has said its annual profits will be at the bottom end of forecasts following disappointing sales at Argos.

Like-for-like sales at Argos fell 2.2% in the 18 weeks to 2 January.

HRG said annual profits were now set to be at the bottom end of current expectations of £92m-£118m.

On Wednesday, HRG - which rejected a takeover bid from Sainsbury's last year - said it was in talks to sell Homebase to Australia's Wesfarmers for £340m.

HRG said that it began discussions with Wesfarmers in September, with a firm offer resulting in November.

Wesfarmers owns Australia's biggest home improvement retailer, Bunnings, as well as the Coles supermarket chain.

Name change

In its own stock market announcement on Thursday Wesfarmers said that, if its bid is successful, the Homebase brand would be replaced.

It described the planned deal as: "The first step in a programme which would invest in the Homebase team and reinvigorate core Homebase assets to build an exciting new Bunnings branded business over three to five years."

Like-for-like sales at Homebase rose 5.0% in the 18 weeks to 2 January, HRG said, although that was still slightly lower than analysts' forecasts.

Shares in Home Retail Group added 2.2% to 152.7p.

Last week, Sainsbury's said HRG had rejected a takeover approach in November.

On Wednesday, Sainsbury's said it could shut up to 200 Argos stores and relocate them within its supermarkets if it bought HRG.

The supermarket group said it was considering its options after its initial bid approach was turned down.

Digital transformation

Home Retail Group chief executive John Walden, said he believed the sale of Homebase to Wesfarmers would "provide good value to shareholders" and allow HRG to focus on its efforts to improve Argos' balance sheet and overall financial position.

HRG said Argos had made meaningful progress towards its reinvention as a "digital retail leader".

Mr Walden added: "I continue to believe that the capabilities being develop in the Argos transformation plan will position Argos as a retail leader in an increasingly digital future."

The group added Argos had experienced its best ever sales day on Black Friday, with total sales up 41%. Online sales were up 45% in the week leading to Black Friday and accounted for 62% of total sales compared with 52% a year earlier.

For the entire period online sales grew 9%, representing 53% of total Argos sales compared with 49% a year earlier.