UPDATE 1-Home Retail lifts profit forecast as Argos sales rise

Thu Jan 17, 2013 2:42am EST

LONDON Jan 17 (Reuters) - Home Retail, Britain's biggest household goods retailer, raised its full-year profit expectations after strong demand for tablets helped the group to better than expected third quarter sales at its Argos business.

The group, which in October unveiled a plan to reposition its Argos operation from a catalogue-led business to one that is digital, said on Thursday annual pretax profit would be 10 million pounds ($15.99 million) ahead of current market consensus at 73 million pounds.

Argos sales at stores open more than a year rose 2.7 percent in the 18 weeks to Jan. 5, its peek trading period, ahead of a consensus forecast of a 0.2 percent rise, and a 1.4 percent rise in its second quarter.

It said consumer electronics sales, particularly tablets, continued to grow strongly, with further growth in white goods and toys offsetting weaker trading in its homewares and jewelry.

A reinvented Argos is aiming to grow sales by 15 percent to 4.5 billion pounds by 2018, with a focus on online, mobile and tablet transactions to attract more shoppers and reverse a sharp decline in profit that slumped 37 percent in its first half.

Internet sales now represent 42 percent of Argos' total sales, within which mobile commerce sales grew by 125 percent. Total sales grew 1.6 percent to just over 1.7 billion pounds.

Like many British retailers, it has been under pressure as its mainly low-income consumers are squeezed by higher prices, muted wage growth and austerity measures, while it also faces big competition online and from supermarkets.

Hit by the economic downturn, British electricals retailer Comet collapsed late last year.

Underlying sales in the period at the group's home improvement retail arm Homebase fell 3.9 percent, worse than analysts' consensus of a 2.1 percent decline, as big ticket sales again struggled.

The group is also revamping Homebase, Britain's No.2 DIY retailer behind Kingfisher's B&Q and a business that is battling to win share in a crowded and contracting market. In November the firm said it would focus on store investment, online improvements and customer service.

Shares in FTSE 250-listed Home Retail closed at 121.5 pence on Wednesday, up 51 percent on six months ago, valuing the business at almost 988 million pounds.

For a FACTBOX-How UK retailers fared over Christmas.

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