The retailer said Christmas trading was ahead of last year, despite Christmas Day and Boxing Day both falling on a weekend, traditionally its busiest rental days. In addition, the retailer said it suffered from rental price deflation. Bunching of new releases over the Christmas period also hit rental revenues.
Demand for rentals in summer was hit by the Euro 2004 football championship, followed by the Athens Olympics. However, lost rental revenues were recouped by gains in DVD and games sales, the latter despite hardware shortages over the holiday period.
Home Entertainment chairman Iain Muspratt said: 'It is quite clear that consumers are exercising greater caution than in previous years, the impact of which is difficult to forecast. Historically, this has benefited higher-margin rental activities, but the consequence of sales price deflation may negate this in future. Our own sales activities have remained very buoyant in both the run-up to Christmas and to date.'
Home Entertainment said it would open eight Choices stores and close two in the next half year.