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Home Retail Group puts aside 25m for PPI claims

The owner of Argos and Homebase has set aside £25m to compensate customers who were mis-sold payment protection insurance policies on household purchases ranging from televisions to kitchens.

The charge, which equates to 25% of Home Retail's profits this year, relates to PPI cover offered to shoppers who bought goods on credit through its financial services arm.

Although the store group has made similar provisions before, they were not made public as the amounts were thought too small to be material.

Terry Duddy, Home Retail's outgoing chief executive, said there was no certainty this was the end of the problem but added it was not in the same league as at the banks which together had paid out £22bn. Home Retail is writing to affected customers, it said.

The revelation took some of the gloss off the strong set of figures that marked Duddy's final outing as chief executive. The managing director of Argos, John Walden, is due to take the reins on Monday.

Like-for-like sales at Argos rose 5.2% in the eight weeks to 1 March, while underlying sales at Homebase jumped 9.3% as both chains benefited consumer confidence picking up. The shares closed up 5% at 215.4p.

Argos has been helped by the launch of new consoles, such as PlayStation 4, and strong demand for tablet computers, while Homebase has been buoyed by the rise in the housing market.

The stronger than expected figures led the group to predict that profits would be "slightly ahead" of the top end of analysts' forecasts, of £111m.

Duddy joined what was then the GUS retail conglomerate to run Argos in 2000. Six years later, when the business was broken up, he was appointed chief executive of the newly created Home Retail Group.

The recession proved to be a tough test of his leadership as the slump in consumer spending, particularly on its bread-and-butter home electronics business, meant underlying profits shrinking to £91m last year, compared with the profits of £433m five years ago.

With sales and profits back in growth Duddy denied he had timed his departure to leave on a high. "No I'm leaving when the business has got momentum – the high is yet to come," he said. "Both Argos and Homebase have well-defined plans and strong management teams in place to be leaders in both digital trends and changes in the way people shop."

While many traditional bricks and mortar retailers are struggling to respond to the threat from the internet, Argos is well on the way to reinventing itself for the digital age. About 44% of its annual £4bn sales are made through online bookings. Within this figure, orders from smart phones and tablets rose 89% to represent 18% of total Argos sales.

Greg Bromley, a Conlumino analyst, said: "As Terry Duddy prepares to leave Home Retail Group after 15 years he will be pleased to see both arms of the business on the right track. Despite being up against some poor comparatives, this healthy set of results indicates that the investment and hard work across the board are beginning to pay off.

"In Argos it has a catalogue retailer that is slowly becoming a digital retailer fit for the 21st century, and in Homebase it has an outdoor and DIY specialist, which is switching its attention to multichannel in favour of a bloated store portfolio."

Source : Zoe Wood - The Guardian

16 March 2014
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