Home Retail Group (HRG), owner of retailers Argos and Homebase, saw its profit before tax (PBT) plummet £73.6 million over the first half of its financial year, it was announced today.
Anaemic trading, particularly at variety goods specialist Argos, meant the group’s PBT dropped from £103 million in the first half of last year to just £29.4 million in the 26 weeks to August 28th 2011, a decline of 75 per cent.
Last month HRG revealed that like-for-like sales had dropped 3.1 per cent and 9.1 per cent respectively at Homebase and Argos during the period, and CEO Terry Duddy has today warned that Christmas trading could prove to be just a tough.
“Homebase delivered another robust performance in its peak trading period,” Duddy explained.
“Core customers at Argos have continued to be under greater pressure and there were ongoing challenging conditions across several product categories, most notably consumer electronics.
“As we now enter our busiest trading period market conditions remain both weak and volatile, and in these early weeks of the second half we have not seen the improvement in sales that we had anticipated.”
Total sales for the group were down six per cent year-on-year in H1 and cash gross margin fell seven per cent to £970 million, whilst cost cutting offset inflationary pressures and investments in new initiatives to keep operating and distribution costs broadly flat at £944 million.
Along with the acquisition of the Habitat brand, a product extension into children’s books and the launch of Argos TV during the half, HRG has today announced a new deal with Chinese retail giant Haier Group.
HRG will own 49 per cent of the joint venture with the world leading home appliance manufacturer, which will see an Argos-branded multichannel, general merchandise retail business launched in mainland China.
Expansion into multichannel and international markets will help offset the loss of trading in the UK, caused by squeezed consumer spending and an increase in non-food trading by the major supermarkets, and will be vital to the future of the struggling business.
Duddy added: “We are well positioned operationally and we will continue to shape the future of shopping for our customers, ensuring we bring unrivalled convenience and value to customers’ every day lives, whether shopping at home or on the move.”