Argos sales in decline on cuts fears

ARGOS-owner Home Retail Group yesterday warned of a significant consumer slowdown in the next 12 months after it was forced to issue a profit warning.

The firm, which also owns the Homebase chain, said annual pre-tax profits for the year to 26 February were likely to be between 250m and 255m, down from its previous estimate of 263m and a 13-15 per cent decrease on the previous year.

Chief executive Terry Duddy warned that shoppers were already cutting back on non-essential items - in particular video games and audio products - in anticipation of forthcoming public sector job losses, cuts in government spending and an increase in Bank of England interest rates,

"Even some of the promotional activity is not prompting a positive response," Duddy said.

The firm's customers, which tend to be at the lower end of the income scale, are also feeling the pinch from January's VAT rise coupled with increases in fuel and food prices.

In the eight weeks to 26 February, like-for-like sales at Argos tumbled 4.6 per cent while they fell 5.6 per cent over the full year to 4.2 billion.

Homebase performed better, with sales up 3.8 per cent at the start of this year and a marginal 0.3 per cent decline over the last 12 months.

Shares in the retailer fell 6 per cent, or 12.4p, to 198.5p yesterday as it also forecast further sales declines at Argos.