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Home Retail Group's shares rise 17 per cent

Investors' confidence boosted by strong Argos sales, despite the wettest April in a century.

Home Retail Group, which owns Argos and Homebase, has reported strong results despite earlier fears that the wettest April in 100 years would significantly dampen sales. 

During the 13-week trading period ended 2 June, Argos ratcheted up total sales of £819m, down 0.2 per cent on a like-for-like basis. Investors viewed the figure's relative steadiness as a cause for celebration: after all, the City had predicted a drop of 4 per cent. Shares rose 17 per cent on the news.

Homebase's sales, meanwhile, fell more than 8 per cent to £421m.

Two Argos stores closed in the quarter, reducing the store portfolio to 746; Homebase's portfolio is unchanged at 341.

At Argos, consumer electronics saw an improved performance, driven by growth in laptops and tablets, which offset declines in the TV, audio and video-game categories.

Sales via the online check-and-reserve service grew 24 per cent and represented 29 per cent of total Argos sales. Total internet sales grew 17 per cent, now making up 41 per cent of the total. Multi-channel sales represented 51 per cent of Argos sales, up from 46 per cent a year earlier.

Like-for-like sales at Homebase, which represent about 40 per cent of total sales, were down by around 15 per cent, largely due to the impact of poor weather conditions.

Homebase's gross margin improved by approximately 225 basis points, while that of Argos declined by 25 basis points.

Terry Duddy, chief executive of Home Retail Group, said: 

Over a particularly volatile trading period, Argos had a solid start to the year supported by its multi-channel performance, while at Homebase the poor weather conditions adversely impacted seasonal product sales.  At this early stage of the financial year we are comfortable with current market expectations for full year benchmark profit.

We will continue to plan cautiously, managing robustly both the cost base and the cash position of the group while prioritising our investment in the ongoing development of our multi-channel capabilities.

Photo: Getty Images
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How can Britain become a nation of homeowners?

David Cameron must unlock the spirit of his postwar predecessors to get the housing market back on track. 

In the 1955 election, Anthony Eden described turning Britain into a “property-owning democracy” as his – and by extension, the Conservative Party’s – overarching mission.

60 years later, what’s changed? Then, as now, an Old Etonian sits in Downing Street. Then, as now, Labour are badly riven between left and right, with their last stay in government widely believed – by their activists at least – to have been a disappointment. Then as now, few commentators seriously believe the Tories will be out of power any time soon.

But as for a property-owning democracy? That’s going less well.

When Eden won in 1955, around a third of people owned their own homes. By the time the Conservative government gave way to Harold Wilson in 1964, 42 per cent of households were owner-occupiers.

That kicked off a long period – from the mid-50s right until the fall of the Berlin Wall – in which home ownership increased, before staying roughly flat at 70 per cent of the population from 1991 to 2001.

But over the course of the next decade, for the first time in over a hundred years, the proportion of owner-occupiers went to into reverse. Just 64 percent of households were owner-occupier in 2011. No-one seriously believes that number will have gone anywhere other than down by the time of the next census in 2021. Most troublingly, in London – which, for the most part, gives us a fairly accurate idea of what the demographics of Britain as a whole will be in 30 years’ time – more than half of households are now renters.

What’s gone wrong?

In short, property prices have shot out of reach of increasing numbers of people. The British housing market increasingly gets a failing grade at “Social Contract 101”: could someone, without a backstop of parental or family capital, entering the workforce today, working full-time, seriously hope to retire in 50 years in their own home with their mortgage paid off?

It’s useful to compare and contrast the policy levers of those two Old Etonians, Eden and Cameron. Cameron, so far, has favoured demand-side solutions: Help to Buy and the new Help to Buy ISA.

To take the second, newer of those two policy innovations first: the Help to Buy ISA. Does it work?

Well, if you are a pre-existing saver – you can’t use the Help to Buy ISA for another tax year. And you have to stop putting money into any existing ISAs. So anyone putting a little aside at the moment – not going to feel the benefit of a Help to Buy ISA.

And anyone solely reliant on a Help to Buy ISA – the most you can benefit from, if you are single, it is an extra three grand from the government. This is not going to shift any houses any time soon.

What it is is a bung for the only working-age demographic to have done well out of the Coalition: dual-earner couples with no children earning above average income.

What about Help to Buy itself? At the margins, Help to Buy is helping some people achieve completions – while driving up the big disincentive to home ownership in the shape of prices – and creating sub-prime style risks for the taxpayer in future.

Eden, in contrast, preferred supply-side policies: his government, like every peacetime government from Baldwin until Thatcher’s it was a housebuilding government.

Why are house prices so high? Because there aren’t enough of them. The sector is over-regulated, underprovided, there isn’t enough housing either for social lets or for buyers. And until today’s Conservatives rediscover the spirit of Eden, that is unlikely to change.

I was at a Conservative party fringe (I was on the far left, both in terms of seating and politics).This is what I said, minus the ums, the ahs, and the moment my screensaver kicked in.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.