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Multichannel drives sales, but dents profits, at Argos

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Multichannel was key to driving Argos’ sales growth in its latest financial year, its parent company said today. But investment in its digital future hit bottom-line profits at its parent, the Home Retail Group .

The general retailer’s sales rose to £4bn in the year to March 1, from £3.9bn at the same time last year, while sister company Homebase’s sales rose to £1.5bn, up from £1.4bn last time.

In all, Home Retail Group saw annual sales of £5.66bn, up 3.4% from sales of £5.47bn last time. But pre-tax profits, at £71.2m, after exceptional charges of £41.4m were down 41.1% from £120.9m at the same time last year. Exceptional items included a charge of £25m in relation to the selling of payment protection insurance and one of £27.8m related to the costs of Argos’ programme to transform itself into a digital leader. There was also a credit of £11.4m related to a former warranty programme.

Argos’ internet sales accounted for 44% of total sales, including mobile commerce which grew by 89% to account for 18% of total sales.

The company said it had now trialled its hub and spoke distribution model in 49 stores, and piloted six digital concept stores. The hub and spoke trials, said the company, “provided good operational and customer insight and equipped Argos for further expansion of the model in future.”

Walden said Argos had delivered like-for-like sales growth, with categories including electricals doing particularly well. “Growth in these categories more than offset small sales declines in furniture, homewares and jewellery,” he said. “Argos’ multi-channel performance, particularly in mobile commerce, was a key factor in this growth.”

Meanwhile, Homebase grew multichannel sales by 53%, which now account for 7% of total sales, and launched next-day delivery. “Digital channels and multi-channel experiences are no less important for Homebase, as the role of the internet in the shopping journey for both DIY and home enhancement products is beginning to develop,” said Walden.

Looking to the future of the company, and of multichannel retail, Walden said stores would remain at the heart of the business.

“The group’s portfolio of 1,057 stores remains a core component of its multichannel offer,” he said. “The Argos national store network, with 734 stores that are smaller and more efficient than traditional stores, is a potential strategic advantage in a digital future. Increasingly customers will seek local product collection, and will appreciate face-to-face customer service.”

He added: “The group has delivered a good performance in what remained a challenging market. Both retail businesses recorded positive like-for-like sales for all four reporting periods, resulting in 27% growth in group benchmark profit before tax. We also made good progress with our strategic plans in both businesses, which will become increasingly important in a competitive retail environment where shopping behaviours are changing rapidly.”

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