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LONDON, June 9 (Reuters) - Home Retail's Argos reported its best quarterly sales performance in two years onThursday, indicating the distraction of a yet to completetakeover by supermarket Sainsbury's has not damagedtrade.
The firm said Argos' total sales rose 2.6 percent to 868million pounds ($1.3 billion) in the 13 weeks to May 28, itsfiscal first quarter, with sales at stores open over a year up0.1 percent. Gross margin did, however, fall 1 percentage point.
"Argos delivered good total sales growth together withpositive like-for-like growth, representing its strongest salesgrowth performance in eight quarters," said Chief Executive JohnWalden.
He noted the outcome was achieved against the challengingbackdrop of constrained seasonal product sales due to poorweather, on top of a deflationary pricing environment.
Home Retail agreed a 1.4 billion pounds takeover deal withSainsbury's in April. The transaction is currently beingconsidered by the competition regulator, which said last monthit would decide by July 25 whether to launch a fullinvestigation.
Walden said Home Retail was on track to complete the deal inthe third quarter of 2016, echoing Sainsbury's comment onWednesday.
"Given the natural distraction that a transaction such asthis can be for our colleagues...I am particularly pleased withour performance in the quarter," he added.
Shares in Home Retail, up 62 percent so far this year,closed Wednesday at 161 pence.
Home Retail also said it would need to increase a provisionto redress financial services customers where erroneous excessfees were collected by 30 million pounds.($1 = 0.6893 pounds) (Reporting by James Davey; editing by Kate Holton)
