Argos lifted as people keep taking the tablets

Home Retail, which owns the 737-store business, said like-for-like sales at Argos increased by 1.9 per cent in the quarter to June 1, with total sales up 1.2 per cent at £828m.

Chief executive Terry Duddy said the figures represented a good start to the financial year for Argos, although the company’s Homebase DIY business traded slightly below company expectations due to the poor weather.

Homebase grew sales by 0.2 per cent to £422m, with the figure excluding changes in store space up by 1.4 per cent in the quarter. Argos returned to profits growth earlier this year amid a drive for more online and mobile sales and the roll-out of click and collect services.

Consumer electronics maintained its positive sales performance in the most recent quarter, alongside continued growth in white goods and core electricals.

This was offset by declines in the markets for video gaming and audio categories as well as the weaker performance in seasonal products.

The greater mix of sales from the ultra-competitive consumer electronics market had an impact on Argos’s profit margin, down by just under one percentage point compared with a year earlier.

Home Retail shares were more than seven per cent lower as analysts also noted a two percentage point margin decline at Homebase as a result of an increase in promotional activity against an unusually low level a year earlier. Analysts said the Argos sales performance was slightly below market expectations, particularly given easier comparatives with a year earlier.

Investec analyst Bethany Hocking said the Argos numbers were a touch below consensus, while the performance of the group’s DIY chain Homebase was significantly better, giving further evidence that it was winning share from rival B&Q.

She stuck with her ‘buy’ recommendation, but reduced her target price to 159p from 173p, and noted that it was a high-risk stock. “Our ‘buy’ case is based on the potential turnaround of Argos, and this statement does not change our views,” she said.

Britain’s retail sales saw the biggest fall in a year in April, with sales volumes down 1.3 per cent. The Office for National Statistics said the cold weather hit sales of barbecue food and garden furniture especially hard.