The chief executive of Home Retail Group, John Walden, has said that he is “pleased” with the performance of the Argos chain, despite moves to reposition the business within an already volatile market impacting sales.
In the 18 weeks to August 31st, total sales at Argos increased 0.8%, up 0.1% on a like-for-like basis.
Despite a “more cautious” stance taken by the chain, behind the scenes HRG has been working to reposition the business as a “digital retail leader” and decrease its reliance on its traditional catalogue system.
Changes during the period include trial digital concessions within Homebase stores and three small format digital stores.
The week of 'Black Friday' was Argos' highest sales week of the period, despite sales being particularly volatile in the surrounding weeks. Whilst experiencing strong trade on 'Black Friday' itself, Argos adapted its trading stance both during this event and during the period in general in order to protect both its gross margin and its cost base, as the highly promotional and high volume nature of this event threatened profit.
Sales at Argos’ HRG stablemate, Homebase, declined 2.7% in the period, due principally to a reduction in net space of 3.3%. There were 12 store closures in the period, resulting in a total of 19 closures year to date. The Homebase portfolio has therefore reduced to 304 stores and it remains on track to close a total of around 25 stores in the current FY15 financial year. Like-for-like sales increased by 0.6% in the period.
John Walden, chief executive of Home Retail Group, commented: "I am pleased with our overall performance during our important peak trading period, having managed through a volatile trading environment with good control of both gross margin and costs.
"This year's adoption of 'Black Friday' promotional events generally by the UK market significantly impacted the shape of Argos' sales over its peak trading period. For example, on the day alone sales at Argos were up by 45%, while at the same time, it received over 13.5 million visitors to its digital channels, three times last year's visitors, with mobile channels representing 71% of visits and 61% of digital sales. The draw of discounts affected trade both before and after that busy weekend as consumers satisfied their Christmas shopping lists with bargains.
"In anticipation of volatility in trading patterns and the profit pressure caused by aggressive promotions, Argos pursued a more cautious trading stance over the period. This resulted in broadly flat like-for-like sales, but achieved both improved gross margins and good cost management. Argos also made good progress during the period on its Transformation Plan to reinvent itself as a digital retail leader, as sales through digital channels increased to represent half of Argos' total sales.
"As a result of our trading strategy in the period, we continue to expect Group benchmark profit before tax for the current FY15 financial year to be in line with the current market consensus."
