Home Retail Group, owner of Britain's Argos and Homebase stores, reported poor Christmas sales growth today, but said tight cost controls would help profits come in at the top end of expectations.
"A less promotional stance, together with good operational control, proved successful in a market that showed little or no growth until just before Christmas," it said in a statement.
Home Retail shares rose 2.3 per cent to 417-3/4 pence by 8.05am. valuing the group at around £3.8 billion ($7.46 billion).
Like-for-like sales rose 0.2 per cent at Argos in the 14 weeks to January 6th, but fell 2.9 per cent at Homebase.
Electrical goods sold strongly, driven by televisions and video games. Jewellery, which is usually a big seller at Christmas, sold weakly.
Analysts had been forecasting a group underlying pre-tax profit of around £336 million to £363 million in the year to March 2007.
Analyst Charles Nichols at Bridgewell Securities said his initial reaction was to upgrade his forecast by around 3.5 per cent to £360 million pounds.
"Our stance on the shares remains neutral," he said in a research note. "While we see a reasonable valuation case on the shares, we are concerned that trading in 2007 will be more difficult than currently assumed and hence believe the risk to forecasts is on the downside."
Argos, one of Britain's biggest Internet retailers, increased online sales by 37 per cent in the third quarter. The Internet now provides 19 per cent of Argos' overall sales.
Argos also opened eight new stores, where consumers shop via catalogues, bringing the total to 681 and boosting overall sales by 4.3 per cent.
Homebase opened two new stores, bringing the total to 307 and offsetting most of the decline in like-for-likes.