Home Retail Group reported an expected 15 per cent increase in full year underlying pretax profit but said its Homebase home improvement business has made a 'weaker than anticipated' start to the new financial year.
The group which owns the catalogue retailer Argos blamed the shortfall on poor weather conditions in March and April which contrasted with very good weather conditions in the comparable months last year.
It said it is too soon to evaluate the impact of these weather conditions on the outcome for the current financial year (to end-Feb. 2009) as a whole as further key trading periods remain.
Home Retail said against the backdrop of the weakening consumer environment Argos has begun the year trading in line with internal expectations overall, notwithstanding a continued adverse product mix impact.
"The outlook for consumer spending looks weaker for the new financial year. A more difficult consumer environment is likely to result in a negative like-for-like sales performance in both businesses in the short term," the company said.
For the year to March 1st, 2008 the group made an underlying pretax profit of £433 million sterling.
This compares to analysts' forecasts of £395 million to £433 million, with a consensus of £430 million, and "£376.7 million made in the previous year.
Total sales increased 2.3 per cent to £5.99 billion. At Argos they increased 3.8 per cent to £4.32 billion. Like-for-like sales increased 0.7 per cent with gross margin up 50 basis points. Sales at Homebase fell 1.6 per cent to £1.57 billion. Like-for-like sales fell 4.1 per cent, while the gross margin was up 250 basis points.
Argos achieved record operating profit of £376.2 million, up 16 per cent. However Homebase's operating profit fell 16 per cent to £45.1 million.
Group operating expenses increased 4 per cent, of which underlying inflation was approximately 3 per cent. Year-end net cash was £174 million.
A final dividend of 10 pence was proposed, making a full year payout of 14.7 pence, up 13 per cent, payable from underlying earnings per share of 33.9 pence, up 16 per cent.