Argos sales drop by 8.5%

The struggling retailer has dragged down profits at its parent company, Home Retail Group.

by Emma Haslett
Last Updated: 06 Nov 2012
Good news and bad news from Argos and Homebase owner Home Retail Group: on the bright side, its profits for the year to February 25 should meet analysts’ expectations of about £99m – but unfortunately that’s way below last year’s £254m. HRG blamed consumers’ lack of enthusiasm for spending – although critics reckon the problem may be more endemic than that.

To Argos first, where sales at stores open at least a year fell by 8.5% in its final quarter. Oddly, that seemed to be driven by video games sales, which fell by more than a third. Could the nation’s youngsters have discovered the great outdoors? Internet sales over the year grew slightly – they now account for 40% of the chain’s total, up from 36% the year before. But falling high-street sales were reflected by the 12 stores it closed, while it said another 35 leases will come up for renewal in the next year.

You can understand Argos’ difficulties: after all, many of its customers have a low income, and are thus disproportionately affected by the downturn. The same can’t be said of Homebase’s customers, though: in fact, DIY stores should, by rights, be doing rather well as consumers choose to do up their homes, rather than buy new ones. Nevertheless, like-for-like sales at the chain dropped by 6.5% in the year to the end of February – despite the fact that gross margin was up by 175 basis points.

So what’s going on? Obviously, the lethargic economy is partly to blame – but there are also concerns the group (and Argos in particular) is suffering from Woolworths syndrome – ie. it’s not really sure what it’s trying to do. Or, as James McGregor from consultants Retail Remedy put it: ‘When it comes to their identities, both are clutching at straws.’

What’s encouraging is that new Argos CEO John Walden – formerly of Sears and Best Buy – has been given a free rein to ‘examine all the options’ (that’s putting it delicately) to save the business. Whether that means a lot more store closures as it moves online, a la the rest of the retail world; or simply a drastic change of image (goodbye tiny blue pens?) is difficult to say. Presumably, it’ll involve a combination of both.
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