Argos owner Home Retail Group in 'brutal' payout cut after profit plunge
Wednesday 02 May 2012
The owner of catalogue retailer Argos pulled the plug on its
shareholder dividend today after revealing a 60 per cent plunge in annual
Home Retail Group's decision to cut the payout - described as "pretty brutal" by one City analyst - triggered a further 12 per cent slump in shares of the beleaguered retail chain, which also owns Homebase.
The board said trading conditions, which caused a 20 per cent decline in the market for consumer electronics in the year, contributed to the removal of the full-year dividend as it looks to focus resources on its turnaround.
Profits for the group were £90.2 million in the year to February 25, which compares with £426 million in the 2008 financial year. Argos has dropped to £94.2 million from £376.2 million over the same period.
The results have fuelled speculation over whether Home Retail plans to cull any of its estate of 748 Argos shops and 341 Homebase outlets.
The chain has brought in consultants OC&C to help new managing director John Walden assess the Argos business but insisted that widespread store closures were not planned, given there were just seven loss-making Argos stores.
Philip Dorgan, an analyst at Panmure Gordon, said Home Retail needed to be "much more radical if it is to survive in an online world" and Argos would need a "significant store closure programme".
The group said around 230 Argos store leases were up for renewal in the next five years, meaning they could be relocated or closed, while 10 would close this year.
In a further shift of focus towards the internet, the group plans to launch a revamped Argos website ahead of Christmas.
It will also boost its product offering, with 24,000 lines available in its spring/summer catalogue and an additional 9,000 online-only products.
Meanwhile, Home Retail said a programme to refurbish its Argos store network was "progressing well", with a further 200 stores revamped during the period.
The group stressed that stores remained a "key component" of the Argos model, with collections on internet orders meaning nearly 90 per cent of all Argos sales involved shops in some way.
The group said multi-channel sales now made up 48 per cent of total sales at Argos, with 39 per cent from online, and mobile shopping accounting for 6 per cent.
The majority of Argos's 7.7 per cent decline in sales to £3.8 billion was down to the consumer electronics market, particularly televisions and video games, although laptops and tablets, such as Apple's iPad, continued to grow.
Nick Bubb, independent retail analyst, said it had been "another disastrous year for Argos" and scrapping the final dividend was "pretty brutal".
He was also disappointed at the lack of detail on future store plans.
Freddie George, analyst at Seymour Pierce Research, said: "We remain concerned that the decline in profits is structural and set to continue."
He added that Mr Walden would have to "adopt a restructuring programme reducing the number of stores", which would hit the company's strong balance sheet.
Homebase saw its like-for-like sales drop 2 per cent in the year, while operating profits plunged 50% to £22.8 million in the same period.
Big ticket sales such as new kitchens and bathrooms were lower at Homebase, the group said, as consumers continued to rein in spending.
- 1 Migrant crisis: Greek soldier saved 20 people singlehandedly off Rhodes beach
- 2 Sofyen Belamouadden murder: The inside story of a crime that horrified Britain
- 3 UK weather: Britain braced for snow as arctic air mass moves in
- 4 Aaron and Melissa Klein: Oregon anti-gay bakers ordered to pay $135,000 after refusing to make cake for same-sex wedding
- 5 'Isis' schoolgirls: Missing British teenager tweets picture of her Syrian takeaway
Migrant crisis: Greek soldier saved 20 people singlehandedly off Rhodes beach
Ian Brady: Moors murderer announces his support for Ukip and the SNP
Aaron and Melissa Klein: Oregon anti-gay bakers ordered to pay $135,000 after refusing to make cake for same-sex wedding
UK weather: Britain braced for snow as arctic air mass moves in
Power of Nepal earthquake was equivalent to 20 huge atomic bombs
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband
The sickening truth about food banks that the Tories don't want you to know
Migrant boat disaster: Ukip candidate mocks victims in sickening Twitter post
Nigel Farage wants the BBC to stop making programmes like Doctor Who, Strictly Come Dancing, and Top Gear
Global warming: Scientists say temperatures could rise by 6C by 2100 and call for action ahead of UN meeting in Paris
General Election 2015: Britain would become a 'communist dictatorship' under Ed Miliband and Nicola Sturgeon, claims wife of Michael Gove
iJobs Money & Business
£20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...
£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...
£25 - 30k: Guru Careers: We are seeking an Application Support Analyst / 1st L...
£45K - £55K (DOE) + Benefits: Guru Careers: We are seeking a full stack .NET D...