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Homebase and Argos owner calls for tax cut to boost spending

Britain's hard-pressed consumers should be given a fillip in next week's Budget, the owner of Argos and Homebase urged as it reported trading worsened in recent weeks.

Home Retail Group (HRG), the UK's biggest household goods retailer, said the Government should take the opportunity to boost the nation's spending power.

"What we totally agree with is the increase in the personal allowance," said Terry Duddy, HRG's chief executive. "We think that's an important factor and would lead to an easing for the circumstances … where [people] have just seen disposable income falling."

The call for an increase in the personal allowance – the amount of income that is not subject to tax – came as HRG reported sales at Argos fell 8.5pc on a like-for-like basis in the eight weeks to the February 25, while sales at Homebase dropped 6.5pc.

HRG said annual profits for the year to the end of February should be in line with City expectations of around £100m, down sharply from £254m the year before. The company expects another, more modest fall in profits in the current financial year.

Management blamed the continued weakness in the consumer electronic markets for sliding sales at Argos and said the same problem in "big-ticket" sales – the pricier items such as furniture and sofas – was hurting Homebase.

The Government has already said it will increase the personal allowance from the current £7,475 to £8,105 for the coming tax year, but some are arguing that it should rise more swiftly.

The Treasury has been guiding against the possibility of giveaways in the Budget, pointing to Wednesday's night warning from rating agency Fitch that the UK's triple-A credit rating could be downgraded as evidence of why it cannot relax its austerity efforts.

None the less, Westminster watchers are not ruling out some action on the allowance.

Retail analysts however suggested that the problems at HRG are not confined to the pressures on the consumer.

James McGregor of retail consultants, Retail Remedy, said that while HRG's stores have been hit hard by the slow economy, they are suffering an identity crisis.

"Argos is caught in the middle of everything, not sure whether it is trying to be an online retailer, offer a traditional store environment or be a catalogue play," he said. "Homebase... doesn't seem to know whether its primary product offering is home products or DIY. Consumers are left unsure of what they are meant to be getting – a fence or a sofa – and because of this they find a way to stay away."

HRG reported that for the full year to the February 25, Argos like-for-like sales were down 8.9pc and Homebase 2pc.

The company did manage to boost its margins at Homebase, which were up by 1.75 percentage points over the last eight weeks of its financial year, driven by its stock management techniques. Margins were flat at Argos.

Source : Emma Rowley – The Telegraph

16 March 2012
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