Only a couple of years ago, industry analysts were predicting a Woolworths-style exit from the retail industry for Home Retail Group’s Argos and Homebase brands. The recession, teamed with poor weather over the summer and a rise in popularity for internet shopping, saw both sales and profits tumble at the two chains, with the result that both were forced to close outlets and overhaul future plans in order to avoid administration.
Fortunately, this turnaround plan has worked so effectively that Home Retail Group is now considered one of the most stable retail companies operating in the UK by analysts. This week, the group has posted a 27 per cent rise to £115.4 million in pre-tax profits for the year to the 1st of March, while total group sales rose by an impressive 3 per cent to £5.7 billion.
Argos has always traditionally been the powerhouse of the Home Retail Group’s portfolio, bringing in around 70 per cent of the group’s revenue. However, somewhat surprisingly, Homebase was the victor in terms of sales increases during the financial year, growing by 5.9 per cent compared to Argos’ 3.3 per cent rise.
The secret to Homebase’s success appears to lie with the Government’s Help to Buy scheme, which has seen many British consumers take their first steps onto the housing ladder and in turn invest in personalising their homes. Big ticket items such as kitchens and bathrooms, in particular, contributed hugely to sales, while sales of DIY materials and garden furniture also rose comfortably.
These results will certainly be something of a confidence booster to the group’s new chief executive John Walden, who took the reins from Terry Duddy in January.
He said that both brands had delivered “a good performance in what remained a challenging market”, adding; “We made good progress with our strategic plans in both businesses, which will become increasingly important in a competitive retail environment where shopping behaviours are changing rapidly.”
While the full year results are very positive, Mr Walden has no intention of taking a step back from opportunities which could improve both brands even further. In fact, Argos remains fully committed to its £300 million investment which will see the traditionally catalogue-based business transformed into a digital leader on the high street.
Argos intends to utilise the new consumer preference for internet shopping by installing click and collect points in all of its UK stores, allowing consumers to quickly collect their orders rather than waiting in a queue. This, it hopes, will enhance the consumer experience and increase levels of repeat custom – especially when combined with further in-store improvements such as the replacement of its laminated catalogues with digital touch screens.
Although traditional British high street brands are once more returning to fortune, it remains to be seen whether this recovery will prove sustainable in the long run. Should Argos and Homebase continue to deliver results of this type, however, their futures should be relatively secure.
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