Christmas sales at Argos slumped by £150 million as cash-strapped shoppers cut back on computer games and gadgets.
Teddy Duddy, Chief Executive of Home Retail-which also owns commercial property retailer Homebase-said £100m of the collapse was due to a vast drop in demand for “consumer electronics”.
Like-for-like sales at the commercial property retailer fell by 8.8 per cent in the 18 weeks to December 31. The group now expects to make £100m profit for the year.
That is less than half the £225m it made the previous year and the £200m it forecast at the start of 2011. speaking of the drop in sales, Mr Duddy stated: “When you are a big player in a market such as computer games and that is down 20% you can’t be immune. Sales at Argos were down by £150m and two thirds of that was consumer electronics, mainly audio and computer games.”
The commercial property group announced some measures aimed to cut costs and preserve cash, however Duddy ruled out a more radical restructuring of the business demanded by some city specialists.
Around 180 of the 175 Argos stores have contracts due to run out over the next four to five years, including 25 this year. Duddy says, while none of the outlets are losing money, he may be forced to shut them unless landlords cut him a deal on rents.
Home Retail Group also added it will also close trial stores of its HomeStore & More home wares format at Aylesbury, Abingdon, Cambridge and Harlow.
The commercial property group said trading at Homebase outlets was more robust, with like-for-like sales down by 2.6 per cent to £475m in the last 18 weeks of 2011, amid subdued demand for “big ticket” items.
Around 140 staff will lose their jobs due to that decision; however Duddy hopes to offer many staff work in nearby Argos stores.
The commercial property group also revealed it would reduce its final dividend pay-out to shareholders to save as much as £50m.
Terry Duddy, Chief executive described the trading environment as both unstable and demanding and said the company will continue to plan cautiously.
Analyst Philip Dorgan, at Panmure Gordon, said he believed the company needed to go through a: “Costly, hard and painful restructuring operation, involving significant store closures” as more sales went online. Another specialist went further claiming the firm was in danger of becoming a “showroom for Amazon”.
Duddy said over 40% of the group’s own sales were online, a total he hopes to grow to 50% within three years. He also pointed out that Amazon’s e-reader; The Kindle was a huge seller for Argos at Christmas.
The commercial property firm also had a lot of success with Check & Reserve, which allows customers to buy online and collect from their local store. Mr Duddy added: “We may not need 750 but closing loads of stores that make money and support Check & Reserve would be financial madness.” Mr Duddy also denied suggestions that shareholders were calling for his head.
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