Feeling at Home with profits beating market hopes

The retailer said profits were likely to be around 290m in the year to February 27, slightly ahead of current City expectations.

Argos sales in the year rose 1.5 per cent to 4.35bn, including a 6.6 per cent drop in the final eight weeks of the period after snow disruption and the later launch of its spring catalogue caused same-store sales to slump 9.4 per cent.

At DIY chain Homebase, sales were flat at 205m for the eight weeks to the end of February, down 0.6 per cent on a like-for-like basis. Across the year, Homebase sales were 3.9 per cent higher at 1.57bn. Home Retail has also been battling the impact of the weak pound, which has increased the costs of imported goods and affected margins.

It has looked to offset the challenging trading conditions by keeping a tight control of costs. Home Retail also increased its profits guidance in January, when it added 20m to fore-casts.

Home Retail shares rose 3 per cent and helped a clutch of other retail stocks to make progress.

Seymour Pierce retail analyst Freddie George said like-for-like sales at Argos and the gross margin decline at Homebase were worse than expected, but Argos performed better than hoped on the margin front.

He added: "Looking ahead, results in 2010/11 are likely to be affected by a more difficult medium trading outlook, competition intensifying particularly from the food retailers ramping up their effort and from recent weakness in sterling."