Now Argos beats £100m

Click to follow
The Independent Online
BY MARTIN FLANAGAN

Argos, the catalogue shopping group, burst through the £100m profits barrier in 1994 for the first time since being floated independently by BAT Industries five years ago.

The company also revealed yesterday that it had narrowed its search for an acquisition to "a few targets" as a possible outlet for its year-end cash pile of £354m.

It has made an acquisition a priority, although it is also seeking authority at the May annual meeting to be able to purchase its own shares - another move mooted for the cash pile.

Last year the company pushed up taxable profits to £100.2m (£83.5m) on sales up 13.3 per cent to £1.2bn.

City analysts were impressed that the performance was achieved despite the fragile consumer recovery, negative price inflation of minus 0.8 per cent, and a fall in Argos's average ticket price of 1.1 per cent. The average selling price is £15, a fact many observers believe underpins the group's resilience in a difficult high street.

Despite a 0.16 per cent fall in gross margins, higher turnover and improved efficiency meant net return on sales improved from 6.9 to 7.3 per cent.

The market also liked a 31.3 per cent leap in the total dividend to 10.5p via a 7.85p final. All product ranges except DIY/gardening showed sales growth. Top performers were furniture, textiles and toys. During 1994 Argos overtook Toys R Us and Kingfisher's Woolworths chain to become Britain's number one toy retailer. Argos Direct, the home delivery operation, boosted sales by 37 per cent to £51m, and sales linked with Argos Premier Incentives were up 20 per cent at £79m.

While like-for-like sales growth was 6.3 per cent in 1994, the store opening programme also continued apace. A total of 31 new stores were opened, including 10 superstores, taking the total number of outlets to 347 at year-end.

Argos said it was on target to open a further 20 to 30 a year, with overall potential for 600.

Like-for-like sales growth in the first 10 weeks of the new year was about 3.5 per cent compared with 9 per cent growth in the very strong first quarter of 1994.

Analysts predict profits of about £112m this year. One said: "The group has proved a classy operator at the cheaper end of the retailing market.

"Even with a wage award of 3.5 per cent in 1994, its labour costs to sales ratio of 9.49 per cent is up to 4 per cent below its rivals'. It looks a tight ship."

David Donne, the outgoing chairman, said he believed the company was well-placed for further advances - despite a retailing environment that he forecast would remain difficult.

Comments