Many retail businesses decided to implement turnaround schemes following tough trading during the recession, and now with consumer confidence on the rise the effects of these plans are beginning to be seen. One of the most impressive turnarounds has been that of the Home Retail Group, which owns both Argos and Homebase.
This week, the group released a report which showed rising sales across both businesses, largely due to consumer enthusiasm for home improvements leading to an increase of purchases in big ticket items. Total group sales rose by 3 per cent to £2.59 billion in the six months to the 31st August, with sales at Argos up 2.3 per cent and Homebase charting an impressive 5.9 per cent climb when compared to the same period last year.
Although pre-tax group profits fell to £14.2 million from a re-stated £46.7 million last year, underlying profit actually rose by an unbelievable 53 per cent to £27.4 million when the effect of one-off items was stripped out. This includes aspects such as the sale of commercial properties and the marketing of assets.
Home Retail chief executive, Terry Duddy, believes that these are the first real positive indicators that the turnaround plans are working, although he is careful to emphasise that he is not over-confident regarding the consumer market.
He says; “Argos and Homebase are making good progress with their investment plans, and remain on target to deliver their long term strategic objectives.
“As we look ahead to the second half of the year, we expect consumer spending will remain subdued, and whilst some macroeconomic indicators are improving, these have not yet led to an increase in household disposable income.”
The summer heat wave certainly played into the hands of Homebase, which struggled hugely last year due to heavy rain dampening consumer demand for items such as garden furniture and barbecues. However, this year demand soared, taking like for like sales up by 5.9 per cent – the strongest growth since Home Retail acquired the chain in 2002.
Argos’ aim to increase online sales similarly paid off, with underlying sales climbing from £3.3 million at this point last year to £7.7 million now. According to Mr Duddy, internet sales now make up 43 per cent of total sales at Argos, while smartphones and tablets hold a 16 per cent share.
Yet this strengthening of Argos’ online presence is to once more be increased, with the news that the retailer has struck a deal with e-tailing giant eBay. Starting soon, consumers will be able to order goods from selected eBay sellers online and collect their items in their nearest Argos store, furthering the click and collect incentive which was the pivotal point in the retailer’s turnaround plan.
Do you think that more high street retailers would benefit from aligning themselves with e-tailers in a mutually beneficial deal, or do you think this new plan by Argos will not be as popular as Mr Duddy hopes?
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