‘Eventful’ period for Argos and Homebase says owner Home Retail Group

Home Retail Group, the owner of Argos and Homebase, has described the trading period for the 18 weeks from 30 August 2015 to 2 January 2016 as ‘eventful’, with a varied performance from both retailers.

John Walden, chief executive of Home Retail Group, commented: “This has been a very eventful period for the Group.  Argos traded through a challenging market while launching significant new propositions.  During the period we also commenced and progressed discussions for the sale of Homebase to Wesfarmers Ltd., and received an approach from J Sainsbury plc for the potential acquisition of the Group.

“Against this backdrop, whilst Argos trading performance was mixed, I’m pleased that we made material steps forward in the Argos Transformation Plan (to reinvent Argos as a digital retail leader).”

Total sales at Argos in the period grew by 0.9% to £1,837m.  Net new space contributed 3.1%, mainly as a result of 95 digital concession stores in Homebase and Sainsbury’s stores added within the year. The store portfolio increased by a net 4 stores to 844 and like-for-like sales declined by 2.2% in the period.

On a category basis, like-for-like sales in electrical products continued to decline, principally driven by declines in video gaming, tablets and white goods, partially offset by growth in mobiles. Argos achieved positive like-for-like performances in a number of non-electrical product categories such as toys and furniture, while sales in homewares and jewellery declined. 

Home Retail Group said they were affected by volatile trading patterns resulting from particularly strong sales during Black Friday week, a shift in consumer demand from both the weeks before and after Black Friday, growth in digital transactions, reduced store footfall particularly on the high streets, and the continuing effects of price deflation. 

The week of Black Friday had a disproportionate effect on trading patterns during the period.  Argos performed well, achieving total sales growth of 41% on Black Friday itself (its highest ever sales day) and 23% growth during the week of Black Friday. 

Digital sales increased by 45% for the same week, with digital participation accounting for 62% of total Argos sales in the week versus 52% last year. 

During December, Argos experienced a 13% reduction in traditional store walk-in sales, exacerbated in high street and shopping centre stores, while digital sales overall increased 10%.

Argos like-for-like sales decreased 2.2% in the period, while new digital concession locations added in the past year contributed 3.1% to growth.

In October Argos introduced FastTrack for both same-day home delivery and store collection. For the months of November and December, internet sales grew 13% versus the same months last year, and represented 55% of total Argos sales, up from 50% last year.  There was a strong take-up of the FastTrack delivery offer, such that one-man home delivery grew 82% for these months versus the prior year with customers being offered same-day slots at on average 90% availability. FastTrack delivery also achieved the highest customer satisfaction scores amongst Argos’ channels.

For the entire reporting period, internet sales grew 9% and represented 53% of total sales, up from 49% last year. Within this, mobile commerce sales grew by 9% to represent 31% of total Argos sales, up from 28% in the prior year. 

John Walden said: “FastTrack, together with our now-proven store concession model and improvements in digital channels, drove increases in digital sales, digital participation and home delivery.  I continue to believe that the capabilities being developed in the Argos Transformation Plan will position Argos as a retail leader in an increasingly digital future.”

For Homebase, like-for-like sales grew by 5% while total sales declined by 4% to £434m as a result of an ongoing store closure programme. There were a net six store closures in the period, resulting in a total of a net 31 store closures for the year to date, thereby reducing the portfolio to 265 stores.  Closed space reduced sales by 9.0% in the quarter.

Like-for-like sales increased by 5% in the quarter with sales growth broadly across all product categories, but particularly in big ticket kitchen and bathroom products. 

John Walden noted: “The Homebase Productivity Plan, which includes an aggressive store closure program, overhead reductions and customer proposition improvements, has begun to position Homebase as a smaller, higher quality and more efficient business. 

“We have announced that we are in advanced discussions to sell Homebase, which would provide good value for shareholders and a growth opportunity for Homebase colleagues. 

“The potential transaction would allow the Group to focus on Argos and its Transformation Plan, with an improved balance sheet and financial position, which I believe would represent an even greater opportunity for building long-term shareholder value.”

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