Argos drags down profits at Home Retail Group

Store closures on the cards for Argos as HRG reports a 60% drop in annual earnings.

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013
The downturn in high street spending has caused full-year profits at HRG to plunge to £90.2m, down more than 60% on the £265.2m profit in 2011.  Argos has been the main agent of HRG’s decline. Consumer electronics sales at the 748-strong chain have dried up, mostly due to fierce competition and discounting online, with television and video game lines performing particularly poorly.

But it’s not just Argos failing to bring home the bacon. Homebase, with 341 stores, has pulled in just half the profit of the previous year, making just £22.8m. In a blow to shareholders, Argos owner Home Retail Group has been forced to scrap its final dividend for shareholders as it focuses on a new restructuring strategy.

To try and stem the tide, HRG is to scout out new tenants for up to 230 Argos store leases as they come up for renewal over the next five years. In some cases, outlets will be relocated to cheaper property, but many stores will probably end up being closed. HRG expects to offload around 10 stores this year. Interestingly, Argos’ ambitious store refurbishment programme is still going ahead. Around 200 shops were given a makeover last year, and another 350 will get a new look in 2012.

As the high street business shrinks, new Argos managing director John Walden is hoping to scale up the online operation. It’s a fast-growing niche for the retailer, with multi-channel sales making up 48% of total sales: 39% from online, and 6% from mobile shopping. By Christmas, Argos’ new all-singing, all-dancing website should help the retailer compete more effectively with rival brands. Or so Walden hopes.

HRG shares plunged more than 9% following this morning’s announcement, and they’ve lost more than 50% of their value in a year. The future looks bleak for its much-loved laminated book of dreams…

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