The real estate market has been recovering nicely since the financial crisis. Prices are on the rise, the number of house listings is at a decent level and the median age of a house on sale is significantly lower than it was in 2012. These broad economics forces mean good news for Home Retail Group.
The profits for the company has declined five years in a row. But in the most recent quarters, its two divisions, Argos and Homebase, have reported a rise in sales. In the six months before August 31, their total sales grew by 3%, with Argos netting 2.3% increase and Homebase netting 5.9%. Profits still have declined (because of the costs of structural changes in the company), but the increase in sales is good news. Operating profits (profits that doesn’t take investment costs into account), over six months, increased from £3.3m last year to £7.7m this year.
Home Retail Group has updated many of its Homebase store. But the success of the division has been accentuated by last summer’s heatwave, which caused an increase in demand for garden furniture. This was the strongest growth for the division since it was first acquired by Home Retail Group in 2002.
Home Retail Group has tried revamping Argos by focusing on its website. Internet sales now account for 43% of Argos’ total sales (with 16% coming from smartphones and tablets). Argos also announced a deal with Ebay, where people can order stuff on eBay and pick them up from an Argos store.
Chief executive Terry Dundy believes they’ve made good progress with their investment plans, and that they’re on track with their long-term strategic objectives. But he also added that the general retail climate can make his company’s recovery tough. While macroeconomics indicators look good in general, there still is the issue of households lacking disposable income.
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