Home Retail Group results show two speed high street

The depressing state of many parts of Britain’s high street was illustrated by a 13 percent slump in Home Retail Group shares, owner of Argos and Homebase, to 87.5p after disappointing results and a dividend cut. 

Investors in Home Retail who has 748 stores have seen their shares tumble from a 52 week high of 228p, a 60 percent fall in the last year.

The company announced the closure of 10 stores, compared with expectations of around 100 as management pointed out that ongoing rental payments would overshadow any savings. With around 300 store lease renewals over the next five years, many stores could be closed or relocated and the final dividend would not be paid., the interim dividend was 4.7p.

Pre-tax profits fell to £90.2m in the year to 25 February, sales were down 6% to £5.58bn. Cash gross margin fell 7% to £2.02bn while operating profits fell almost 60% to £94.2m.

Management’s focus appears to be shifting from the “bricks and mortar” model to online but can Argos and Homebase really compete with Amazon on price or service? I doubt it!

Visiting Home Retail  stores is a rather disheartening experience, with rather shabby stores which shout out lack of investment.

I fear that without a radical revamp of the group, Home Retail could go the way of other British retailers like Mothercare (shares also down over 60% in the last year) and Comet (not owned by turn around specialist Opcapita after a sale by Kiesa for £2) or even worse suffer the fate of Game Group.

Contrarian Investor UK