Retail analyst Steve Davies at Numis noted that the group has focused on margins rather than sales over Christmas and therefore expects to post figures at the top end of City estimates.
Argos' like-for-like sales were flat compared with the Numis forecast of 2% growth but gross margins were some 50 basis points better than expected.
He said he would upgrade his forecast for full-year group profits from £339m by at least £15m. Even so, he remains cautious on HRG's prospects this year as both Kingfisher and HRG have said that they are planning for a flat DIY market at best.
"We share their caution in this respect. A buoyant housing market over the last 18 months has not filtered through into improved DIY sales and so it seems wrong to assume that things suddenly pick up from here. We assume flat like-for-likes in Homebase and that implies a further drop in operating profit."
