Home Retail Group has reported today that poor sales have continued at its operations since the turn of the year, but say that profits for its last 12 month period will be in-line with expectations.
The owner of retailers Argos & Homebase has published full-year results for the 52 weeks ending February 25th 2012 which show a sharp decline in trading for both of its businesses, and a trading update for the start of the new year which shows continuing declines.
Variety goods specialist Argos posted a like-for-like (LFL) sales drop of 8.9 per cent for the full-year period, while Homebase saw its LFLs drop two per cent over the period.
In the first eight weeks of 2012 sales have continued to be sluggish at Argos, down 8.5 per cent, while the performance of Homebase has worsened over this period with LFL sales down 6.2 per cent year-on-year.
Terry Duddy, CEO of Home Retail Group, said: “With trends in this short, low volume, trading period being broadly as we anticipated, group benchmark profit before tax for the 52-week period ended 25 February 2012 is expected to be in-line with current market expectations.
“Whilst we begin the new financial year in good operational shape, we will continue to manage robustly both the cost base and the cash position of the group, while prioritising investment in the ongoing development of our multi-channel capabilities.”
Margins are flat year-on-year at Argos at the start of this year and Homebase has actually managed to increase its gross margins by 175 base points, which represents improvement for both retailers from last year.
Internet sales have improved at Argos and now represent 40 per cent of its overall sales, however Neil Saunders, Managing Director of retail analyst group Conlumino, argues that it is the retailer’s bricks and mortar stores which are most holding it back.
“Argos has underlying issues which it needs to address. Foremost among these is making the shopping experience more compelling and engaging,” Saunders said.
“As others, such as the grocers, have invaded Argos’ territory they have eroded its USPs around price and convenience; this leaves Argos exposed and means it needs to add other elements to its proposition to both retain and gain customers.”
Saunders argues that Homebase has less challenges to overcome but says that it is being damaged by a consumer trend to hire professionals for DIY work, and that like Argos it is being hurt by the continued squeeze on consumer spending.
James McGregor of retail consultancy Retail Remedy argues that both retailers have fundamental issues with their identities which need to be address if Home Retail Group is to succeed in the new retail environment.
“Argos is caught in the middle of everything, not sure whether it is trying to be an online retailer, offer a traditional store environment or be a catalogue play. The result is that it is doing none of these successfully. It is in the no-man’s land of retail.
“Homebase is sending out a completely confused message to customers. It doesn’t seem to know whether its primary product offering is home products or DIY.”