Argos reports sharp drop in sales

 

The owner of Argos blamed the weak consumer electronics market today for another sharp drop in sales at the catalogue retailer.

Home Retail Group, which also owns Homebase, said like-for-like sales at Argos fell by 8.8% in 18 weeks to December 31, with the majority of the decline due to poor demand for video gaming and audio products.

It is the latest poor trading performance from the Argos business, which barely made a profit in the half year to August and is closing a number of stores in the coming weeks as leases expire.

Home Retail added it will also close trial stores of its HomeStore&More homewares format at Abingdon, Aylesbury, Cambridge and Harlow.

The group said trading at Homebase outlets was more resilient, with like-for-like sales down by 2.6% amid subdued demand for "big-ticket" items.

Cost cuts have kept it on course to meet the City's forecast for profits of around £100 million in the year to February 28, but the company warned investors to expect a significant cut in the full-year dividend payment.

Chief executive Terry Duddy described the trading environment as both volatile and demanding and said the company will continue to plan cautiously.

Home Retail shares were 4% lower after the dividend warning.

Seymour Pierce retail analyst Freddie George said the update was broadly in line with depressed City forecasts, although he still cut his forecast for full-year profits from £125 million to £75 million.

He said: "We have concerns that the Argos business will continue to be impacted by market conditions for the company's core categories while competition intensifies further, particularly from the food retailers."

Argos, which has just under 750 stores, achieved 41% of its total sales online, compared with 38% a year ago.

PA

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