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The week ahead: Argos expected to announce lower profits

Argos logo

The City will focus on retailers ahead of the key Christmas season. Argos is expected to see its half-year results fall, amid its ongoing revamp, while Debenhams is forecast to see profits edge up.

Argos owner Home Retail Group is expected to post a fall in profits on Wednesday, despite its efforts to turn itself into a cutting-edge digital retailer.

The City expects the group, which also owns DIY chain Homebase, to report pre-tax profits down by 1.9% to £30.3 million, as Argos struggles to boost revenues from electrical products and big ticket items.

The firm said last month comparable store sales at Argos dropped 2.8% in its second quarter after a disappointing August, although this was marked an improvement on the 3.9% slide over the previous three months.

Argos said sales of electrical products, as well as white goods such as fridges and dishwashers, continued to come under pressure, although toy sales were strong over the summer.

Like-for-like sales across Argos over the half year as a whole were 3.4% lower.

The figures are in stark contrast to those of rival Dixons Carphone, which cheered like-for-like sales growth of 10% in the UK in the 13 weeks to August 1.

Home Retail saw overall trading buoyed by Homebase as like-for-like sales across the DIY chain lifted 5.9% in its second quarter, although this was partly driven by stock clearance sales as it closed eight stores over the summer.

Like-for-like sales at Homebase over the half year as a whole were 5.6% higher.

Last October the group embarked on a three-year plan to close about 80, or a quarter of its 323 stores, after it said consumers have "fallen out of love with DIY".

It has so far closed around 27 stores in this financial year, and plans to close 35 more next year.

Analyst Freddie George at Cantor Fitzgerald said the group has so far sold off stores that were too large or based in poor locations, making the remaining estate more attractive.

Mr George said: "Homebase is a contender to be sold over the next 12 months," strengthening the group balance sheet and giving it the room to make acquisitions, possibly in online retail.

The group added it saw ''encouraging early results'' from new stores opened under a digital makeover of Argos after it launched more than 50 digital concessions in Homebase and Sainsbury's.

It is also refitting a raft of Argos stores to include fast-track collection and ordering from iPads rather than catalogues.

Earlier this month Argos stepped up its advance into digital shopping with the launch of a same-day delivery service in the UK, putting it in competition with US giant Amazon.

Argos said its Fast Track service will be available in four time slots throughout the day until 10pm, for a flat fee of £3.95

However, many critics say Argos' traditional dowdy image will see it struggle to thrive in the current online sales environment.

Home Retail shares have lagged its peers falling around 28% this year.

Source : Express & Star

16 October 2015

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