Shops in doubt as Argos profits dip

A weak consumer electronics market caused a huge slide in profits for Argos (Reuters)

Argos left the door open for future store closures today after a weak consumer electronics market caused a huge slide in profits at the catalogue chain.

Its owner, Home Retail Group said around 230 Argos store leases would come up for renewal in the next five years, which could be put up for relocation or closure.

In a blow to shareholders, Home Retail scrapped its final dividend as it revealed that the 748-strong chain suffered a 9% drop in like-for-like sales and a near 60% plunge in operating profits to £94.2 million in the year to February 25.

Home Retail, which also owns Homebase and has seen its shares plunge more than 50% in the last year, saw pre-tax profits slide more than 60% to £90.2 million in the period.

New Argos managing director John Walden has reportedly hired OC&C Strategy Consulting to look at the business, fuelling speculation over store closures.

In a sign that Argos will shift focus from stores to the internet, Home Retail said the chain would continue to develop its online and mobile offering, including a refreshed website ahead of Christmas.

The group said multi-channel sales now make up 48% of total sales, with 39% from online, while total sales from mobile shopping were around 6%.

Argos currently expects to close around 10 stores in the current financial year as it continues to roll out its refurbishment programme. A further 200 stores were revamped last year and the group aims to refurbish 350 stores by the end of the financial year.

The majority of Argos's sales decline was down to the consumer electronics market, particularly televisions and video games, although laptops and tablets, such as Apple's iPad continued to grow.

Homebase, which has 341 stores, saw its like-for-like sales drop 2%, 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 reined in spending.

PA