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Argos sales plummet, but Homebase trading grows

Home Retail Group today reported mixed results for its first quarter, with Argos like-for-like (LFL) sales falling 9.6 per cent year-on-year but Homebase LFL trading up 1.6 per cent over the same period.

In an interim management statement for the 13 weeks from February 27th to May 28th 2011, the group said that a weak consumer electronics market severely impacted sales at the multichannel retailer, but good weather helped the home & garden specialist to grow sales.

Argos held its market share in March and April, buoyed by positive trading in laptops, toys and seasonal products such as garden furniture and barbeques, but the decline of its key category, consumer electronics, resulted in total sales dropping 8.1 per cent to £817 million.

Fewer sales and the net impact of adverse currency and shipping costs together with stock clearance activity resulted in a gross margin decline of approximately 75 basis points.

The retailer’s internet channel, often considered one of the best in the industry, accounted for one-third of overall sales, which was slightly up on the same three-month period last year.

Terry Duddy, CEO of Home Retail Group, remarked: “Trading conditions, particularly at Argos, have proved to be more difficult and volatile than anticipated.

“For Argos, the consumer electronics market represents a substantial proportion of its sales and has experienced a further significant decline.

“The difficulty of this market, together with the volatility of overall sales, has made the balance of the year more difficult to predict.”

Although LFLs were up at Homebase, total sales dropped 0.1 per cent to £458 million and gross margin was down by around 50 basis points.

Seasonal related categories, such as garden furniture, plants and exterior decorating performed very strongly, but much like its competitors, trading was marginally down in the big ticket category.

Today’s results come after rival B&Q reported last week that LFLs increased 1.5 per cent year-on-year in its Q1, but sales of big ticket items for inside the home slumped ten per cent.

Commenting on the performance of Homebase, Duddy said favourable weather and “the strong execution of its seasonal offer” helped its LFL performance.

He added: “While we remain cautious for the balance of the financial year, we are focused on our operational performance while continuing to invest across the businesses.”

Source : Ben Sillitoe - Retail Gazette

10 June 2011
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