Britain’s biggest household goods retailer, Home Retail Group, warned of slower second half growth despite a forecast-beating 40 per cent rise lifting its shares by five per cent, media reports said.
However, it cut prices ahead of the upcoming important Christmas trading season to counter uncertain consumer sentiment.
The retailer reported benchmark pretax profit of 149.8 million pounds ($306 million) in the 26 weeks upto September one belying analysts’ expectations of 142 million pounds.
“Although we remain cautious given the uncertain consumer outlook, as we move into the key seasonal period both businesses continue to enhance their customer offers,” Chief Executive Terry Duddy said in a statement.
Finance Director Richard Ashton said margins at catalogue-based Argos stores would be slightly lower following increased price cuts of around 5 per cent from the normal range of 3 per cent, while Homebase is likely to show slowed margin growth of around 200 basis points.
In the first half, Home Retail raised Argos margins by 125 basis points and Homebase by 300 basis points, as it cut costs by sourcing products from cheaper overseas markets and improved stock management.
Shares in Home Retail, which have outperformed the UK retail sector by around 9 per cent this year, rose 3.6 per cent to 400-3/4 pence helped by a ratings upgrade by Panmure to buy from hold and the above-expected result.
“This was a solid result, towards the top end of guidance. However, there was little of substance in the outlook statement,” Seymour Pierce analyst Andrew Wade said.
British retailers expect a tough Christmas trading season as competition heats up, with top retailer Tesco launching an online and home shopping service, and debt-ridden shoppers reluctant to increase spending following five interest rate rises over a year and ongoing credit market turmoil.