• Like-for-likes flat due to cannibalisation
  • Total sales growth strongest in eight quarters
  • Boss Joh Walden confident Sainsbury’s deal will go through in third calendar quarter

Home Retail Group reports sales at Argos levelled off, although total sales growth was the most significant for eight quarters.

Like-for-like sales at Home Retail Group grew by just 0.1% while total sales grew 2.6% to £868m during the 13 weeks to May 28, which comprised the group’s first quarter.

The owner of Argos said that new space added in the previous year had a cannibalisation effect of around 1%, and that Argos’ underlying like-for-like sales therefore stood at 1%.

Home Retail Group chief executive John Walden said in a statement that it remained “on track to complete the proposed transaction with Sainsbury’s in the third quarter of this calendar year”.

His comments echo that of Sainsbury’s Mike Coupe, who said yesterday that he was confident the deal would go ahead as planned despite a late probe the from Competition and Markets Authority (CMA).

At Argos, online sales grew 16%, the strongest quarterly growth for more than three years. Online sales accounted for nearly 50% of total Argos sales in the quarter. Mobile commerce grew 17% and represented almost 30% of all sales.

Both electrical and non-electrical categories grew during the quarter. TV, mobile, computer and tablet sales grew while white goods sales shrank. In non-electrical sales, furniture and sports grew but was offset by weak sales of seasonal products.

Walden said: “I am pleased with our performance in the first quarter. This was achieved against the challenging backdrop of constrained seasonal product sales due to poor weather, on top of a deflationary pricing environment.

“Many of the digital capabilities we are building, as we pursue the transformation plan to reinvent Argos as a digital retail leader, are positively impacting our business.”

On Sainsbury’s he said: “Given the natural distraction that a transaction such as this can be for our colleagues, on top of the recent sale of Homebase, I am particularly pleased with our performance in the quarter.”

The group’s financial services division identified that it had overcharged late payment fees to some customers while implementing new governance and risk management processes.

While it reported this in its full-year results in April, the group has now said that it will cost around £30m more to compensate customers. It is undertaking a detailed review.

Home Retail Group now operates 843 Argos stores.