Christmas cheer at Argos boosts Home Retail Group

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Argos expects half of its sales to be online from the next financial year as the Home Retail Group-owned retailer reported its best Christmas performance in a decade.

Like-for-like sales at the retailer rose 3.8 per cent for the 18 weeks to January 4, as demand for electricals, particularly tablets, in the run-up to Christmas boosted sales.

Extra sales of goods such as tablets and TVs weighed on the group’s gross margin, which was 50 basis points lower than at this time last year, due to their lower margins.

Internet sales grew to represent 46 per cent of total Argos sales, up from 42 per cent for the same period last year. This growth was supported by a strong performance in mobile commerce sales, which represented 20 per cent of total Argos sales during the period.

Argos’s strong performance came as HRG confirmed that John Walden – the current head of Argos – will become chief executive of the entire group when current chief executive Terry Duddy steps down later this year.

Sales rose 4.7 per cent at HRG’s DIY Homebase division, ahead of a 2.5 per cent gain forecast by analysts. Mr Duddy said that both Argos and its Homebase division had delivered good trading performance “despite a challenging consumer environment”.

“Economic improvement is not passing through into household incomes and their expenditure,” said Mr Duddy.

A slack housing market has weighed on DIY groups such as Homebase. While a housing recovery is expected, it is not here yet, said Mr Duddy.

“We’re not waiting for it. We are doing something about growing the business,” he said.

HRG has been revamping its Homebase stores and transforming Argos from a catalogue company to a digital business to stem almost five years of declining profits. The group is targeting a 15 per cent rise in sales to £4.5bn by 2018.

HRG now expects to report full-year profits at the top end of the £90m-£109m range forecast by analysts, it said.

Analysts at Oriel upgraded the retailer following the results. “Whilst we are concerned about the Argos margin outlook in the long term and feasibility of hitting its full year 2018 targets, we acknowledge that the strength of the business’ multi-channel credentials offers support for continued growth over the medium term,” wrote Alistair Davies.

Shares in HRG rose 1.9 per cent to 204.8p.

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