Argos group blames profit alert on weak high street

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The Independent Online

Argos's owner, Home Retail Group, yesterday warned that sputtering consumer spending will leave the group's profits at the very bottom end of expectations for the year.

Pre-tax profits for the year to the end of February are now expected to be between £250m and £255m, rather than around the middle of the £250m to £275m range, as previously guided, the company's end-of-year trading statement says.

"Against the backdrop of the challenging economic environment, and taking into account our most recent trading, we are now planning with increased caution for the year ahead," Terry Duddy, the HRG chief executive, said.

"There are clear signs of further pressures on consumer spending, with recent trading conditions, particularly at Argos, proving to be more difficult and volatile than we anticipated," he said.

Argos and Homebase, HRG's other major chain, are facing difficult conditions. In the last eight weeks of the trading year, Argos saw sales fall a further 3.1 per cent to £520m, taking the group's second-half total down by 3.1 per cent to £2.4bn and the full year down by 3.5 per cent to £4.2bn. Although laptops and tablets continue to sell well, and white goods and toy sales have also clung on, sales of video games and audio equipment has dropped sharply, the company said.

Meanwhile, Homebase saw a 1.8 per cent boost to sales in the last two months of the year, giving a total of £208m. But while sales of "big ticket" items such as bathrooms and bedroom furniture have seen a welcome lift, sales over the second half were still 1.5 per cent lower than the previous year at £695m. Over the year as a whole, sales dropped by 1.4 per cent to £1.6bn.

The downbeat numbers from HRG are follow a slew of grim statistics from the High Street. Retail sales in February were at their lowest since May 2009, the British Retail Consortium said this week. Although the most recent consumer confidence barometer from GfK NOP showed a marginal month-on-month improvement compared with January, at minus 28 the index is still a grim 14 points lower than in February 2010.