Argos hit by weak demand for electricals
SLOWING demand for televisions following last summer’s football World Cup and price falls in tablets and computers have triggered a 3.9 per cent slide in first-quarter same-floorspace sales at Argos.
The chief executive of Home Retail Group (HRG), the parent of the catalogues retailer, in the process of reinventing Argos as a digital business in a long-term turnaround, said he also expected that the second quarter would be tough.
John Walden said the Argos sales fall in the 13 weeks to 30 May was a result of challenging market conditions, rather than the rate of the subsidiary’s turnaround.
He said a rise in sales of mobile phones failed to offset the decline in electrical goods. Walden said: “The performance at Argos in the quarter was broadly in line with both our expectations and previous guidance, with sales being adversely impacted by market declines in key electrical and seasonal product categories.
“We continue to expect that sales will be challenging during the first half at Argos, but we look forward to a stronger second half as we progress the transformation plan and introduce new propositions more broadly to the market.”
More positively, HRG said same-store sales at its DIY chain Homebase lifted 5.4 per cent in the quarter, driven by sales of big-ticket and seasonal items.
Homebase closed 17 shops in the period after it said in October it would shut a quarter of its 323 home improvement stores, or about 80 outlets, by early 2018 as DIY demand fell. It currently runs 279 Homebase outlets. By contrast, the group opened a net 33 Argos stores in the latest quarter, with the retailer two years into a five-year revamp which is introducing newly-designed shops and iPads for ordering products instead of catalogues.
It opened 32 Argos concessions within Homebase, and two within Sainsbury’s as the supermarket forges partnerships with other retailers to fill under-used shop floor space
City retail analysts noted that Argos’s trading came in stark contrast to the recent strong performance at rival Dixons Carphone – the group behind Carphone Warehouse and Currys PC World.
Dixons Carphone last week posted UK and Ireland same-store sales up 13 per cent in the 17 weeks to 2 May, as the business built on momentum seen in Christmas trading. The figure was more than twice City forecasts for the group, formed from the merger of Dixons and Carphone last summer.
Last year Argos customers experienced delays and disruption while its technology struggled to cope with “extreme” online demand.
But Walden said these problems “were not a big deal” in the context of the size of its overall sales. He added: “We are pretty pleased with the progress we are making at Argos. We are optimistic on the impact they will have on the business.”
Walden put Dixons Carphone’s growth down to its comprehensive mobile phone products and services, which are much greater than that offered by Argos.