Argos' sales and eBay tie-up boost HRG

Home Retail Group will head towards the festive season full of cheer after recording an excellent 53% first-half pre-tax profit rise to £27.4 million.

Once again Home Retail Group’s (HRG) star pupil is Argos, which accounts for 70% of the group's profit, despite questions being raised over its long-term viability only a few years ago.

The shifting demographics of retail consumers have very much aided the company. Argos’ internet sales now account for 43% of total sales, and more importantly sales from mobile devices have grown by 124% and this now makes up 16% of the total.

In September Argos announced a tie-up with eBay, offering online shoppers the ability to ’click and collect‘, and this mentality of buying online but picking up in store appears to be particularly popular with UK shoppers.

eBay says customers in the US use click and collect for 7% of purchases, compared to an average of 40% in the UK. At the moment it's still too early to tell what cross-selling advantages might materialise for Argos from the increased footfall of eBay customers into its stores. 

HRG’s share price has been helped along by Argos reporting improving profit for five quarters in a row. However the dividend yield is still some way off the FTSE average at just 0.54%, and it looks like investors are viewing this as a capital rather than income play.

Home Retail Group plc (DFB) chart

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