Argos owner reports sales slump

The owner of Argos heaped more gloom on the retail sector today as it revealed the catalogue chain saw same-store sales drop nearly 9% in the last three months.

The owner of Argos heaped more gloom on the retail sector today as it revealed the catalogue chain saw same-store sales drop nearly 9% in the last three months.

Home Retail Group said two-thirds of the steep decline in the 13 weeks to August 27 came from consumer electronics as it sold fewer video games, televisions and iPods at its 750 UK stores.

Elsewhere, Home Retail's garden and homewares chain Homebase saw a 3.1% drop in like-for-like sales as cash-strapped customers shied away from making big-ticket purchases such as fitted kitchens.

Argos and Homebase have suffered in recent months as waning consumer confidence and a squeeze on household incomes, driven by high inflation and meagre wage growth, led to sluggish sales.

Home Retail's update was marginally ahead of expectations, according to analysts, and helped shares lift nearly 9%.

But Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said overall, the outlook for Home Retail remains "extremely difficult".

He said: "Pressure on the group's low-income customer base shows no sign of abating, while moves over recent years by the supermarkets into the electrical arena have arguably increased over-capacity."

Argos saw total sales decline by 7.1% to £859m (€972.8m) in the second quarter and drop 7.6% to £1.7bn (€1.92bn) in the first six months of the year.

The retailer opened three new stores, closed four and relocated two outlets, while some 400 have been refurbished as part of a programme to revamp the business.

Home Retail said while most consumer electronic sales dropped, Argos did have a strong quarter for laptop sales. Outside of consumer electronics, homewares sales were up.

Looking ahead, the company said it was optimistic that sales of iPad 2 and 3D TVs would improve performance.

Internet sales now make up 34% of Argos's total sales. up from 32% a year earlier, Home Retail added.

Homebase, which has 342 stores in the UK, saw total sales decline by 3.8% to £382 million in the second quarter and drop 1.8% to £840m (€951.4m) in the first six months.

While fitted kitchens declined at the chain, bedroom furniture performed well, benefiting from the rollout of a new installation service.

Home Retail recently bought the rights for the Habitat brand in the UK, its website and three stores in central London for £24.5m (€27.75m) after the interior design retailer fell into administration.

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