Argos slumps again - but Halfords provides ray of cheer

Some very contrasting retail figures today: Argos sales fall by 10%, but Halfords' full-year profits jump by nearly 8%...

by Elizabeth Anderson
Last Updated: 06 Nov 2012
Today's snapshot of the high street was a distinctly mixed picture. Argos posted pretty dismal first quarter results, with like-for-like sales down 9.6% after a slowdown in sales of consumer electronics. By contrast, car parts and bike retailer Halfords reported a healthy 7.7% rise in full year profits to £118.1m. Which one is the more representative?

Halfords’ rather cheery results come as a bit of a surprise, given that in April the company gave a rather downbeat view of consumer spending and predicted that profits would fall. This gloomy outlook was predicated on a tough Christmas trading period, when bike sales plummeted due in part to the cold weather, and the rise in VAT to 20% in January – both of which contributed to a 6.8% sales drop early this year. 

But the 466-store retailer was boosted by a hot spring and the succession of bank holidays, which pushed up demand for bikes and travel products:   Like-for-like sales in the nine weeks to 3 June were up 0.8%.  Nevertheless, it’s not all good news: life was clearly pretty tough throughout the year, since overall retail sales fell by more than 5%. 

This consumer squeeze is being felt even more painfully by Argos, where like-for-like sales fell 9.6% to £817m in the 13 weeks to the end of May. Home Retail Group, which owns Argos, blamed a fall in sales of electronic goods - TV sales fell by a fifth and video games a quarter during the period.  But CEO Terry Duddy stressed this wasn’t due to increasing competition from rivals, suggesting the slump was felt across the industry (Argos apparently still sells one in five TVs in the UK, would you believe). 

Sadly, there's no sign of light at the end of the tunnel. Argos is expecting a tough second quarter compared to the same time last year, when the World Cup helped boost TV sales.  And it’s not only Argos that will struggle: the consensus is that trading conditions across the retail sector will remain tough for the rest of the year.  High inflation, flat wage growth and job insecurity means consumers will continue to tighten their belts - so there'll be plenty more grim results where these came from. 

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today