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Argos owner expects dividend cut after sales fall


Home Retail Group (HRG), which owns general merchandise retailer Argos and home & DIY specialist Homebase, today said it expects a “significant cut” in dividends for this financial year after poor sales in the 18 weeks to the end of the 2011.

The fiscal period, which included figures from crucial Christmas trading, saw Argos sales drop 8.8 per cent year-on-year on a like-for-like (LFL) basis and its gross margin fall 50 base points.

Argos revenues in the 18 weeks totalled £1.72 billion consumer, and the annual decline in sales was attributed to a weak consumer electronics market, in particular video gaming and audio.

Falling sales at Argos has been a feature of recent HRG trading statements for some time now, but the group’s smaller business, Homebase, has been more resilient in light of the tough economic conditions in the UK.

In the 18 weeks in question, LFLs at the DIY specialist dropped 2.6 per cent year-on-year to £475 million, but gross margins improved 25 base points. The end-of-year decline, which occurred despite more favourable weather conditions than 2010, was blamed on a lack of interest in sales of big ticket items.

Overall sales in the 44 weeks to the end of 2011 were down 8.9 and 1.3 per cent at Argos and Homebase respectively.

Terry Duddy, CEO of HRG, commented: “In a trading environment that has been both volatile and demanding, Homebase has again seen more resilient sales.

“Argos sales continue to be impacted by the market decline in consumer electronics categories, however we saw internet penetration reach over 40 per cent of total sales, with ordering service check & reserve being boosted by the development of mobile commerce as customers embrace our leading multichannel proposition.”

Online development remains a key focus for the group in the year ahead, but today’s statement suggested that the board will “robustly” manage the cost base and cash position of the business.

Duddy added: “We have managed the business tightly over the peak trading period and expect group benchmark profit before tax for this financial year to be around the mid-point of the current analyst range of £78 million to £125 million.”

Published on Thursday 12 January by Editorial Assistant

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