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IRUK Top500 The Customer Report: 2018

IRUK Top500 The Customer Report: 2018

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Argos warns on profits ahead of unpredictable Black Friday and Christmas trading

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Argos warns on profits ahead of unpredictable Black Friday and Christmas trading
Argos warns on profits ahead of unpredictable Black Friday and Christmas trading
Argos parent company Home Retail Group today warned profits could well be lower than previously expected, and said that Black Friday and Christmas trading seemed "less predictable" than usual.

Home Retail Group reported revenue of £2.62bn in the 26 weeks to August 29, 2% down on last year's £2.66bn. Pre-tax profits of £23.4m were 10% up on the £13.5m reported at the same time last year. Within that, Argos reported operating profits down by 47% on sales of £1.7bn, 1.5% down on the last time last year, and down by 3.4% in like-for-like terms: the store estate stood at 840 at the end of the period, compared to 747 at the same time last year. Argos, an Elite retailer in the IRUK500, now has 148 digital format stores, up from 32 a year ago. Some 45% of sales took place online, while mobile commerce grew by 13% to represent 25% of total sales.

Chief executive John Walden warned that full-year pre-tax profits were likely to come in below expectations.

"Trading at Argos during this year's important Christmas season seems less predictable than usual, as both retailers and customers determine whether to repeat last year's unusual Black Friday patterns," he said. "The combination of this trading uncertainty, an increased level of investment in the launch of Fast Track and the underlying profit reduction from Argos' challenging first half, mean that at this stage of the financial year we expect the group's full-year benchmark profit before tax to be slightly below the bottom end of the current range of market expectations of £115m to £140m."

The uncertainty is despite new same-day Fast Track delivery services designed to capture high levels of Christmas trade from those wanting fast delivery.

"Argos is investing significantly in the launch of Fast Track and although the rate of customer take-up cannot be certain, we are confident that customers will increasingly embrace this market-leading service over time," said Walden.

Walden said that Argos' profit and sales were hit by falling sales of electrical and seasonal products. But he said the company continued to progress well in its transformation plan, while also opening new digital stores, such as that pictured within a branch of Sainsbury's, and in the new Fast Track same-day home delivery service.

Homebase, a Leading IRUK500 retailer, reported sales of £816.4m, which were 2.2% down on the same time last year, but 5.6% up in like-for-like terms, which take into account ongoing store closure plans. Homebase was trading from 271 stores at the end of the period, compared to 316 a year earlier.

The company said sales of its Habitat brand, which trades online and through 68 concessions, were more than 30% up on the same time last year.
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