Argos half year results

Argos half year results covering the 26 weeks to 1 September 2012:

Sales: £1,686.4m (26 weeks to 27 August 2011: £1,675.7m)
Benchmark operating profit £3.3m (2011:£3.4m)
Benchmark operating margin 0.2% (2011:0.2%)

Total sales in the period increased by 0.6% to £1,686m. Net space sales change was flat with nine store closures reducing the store portfolio to 739. LFL sales grew by 0.6%. Consumer electronics delivered an improved sales performance driven by strong growth in tablets and e-readers, which together with good growth in white goods offset the market driven sales declines in the video gaming and audio categories and the weaker trading in seasonal products.

Total operating and distribution costs decreased by £5m with the impact of underlying cost inflation pressures being more than offset by further cost savings. Benchmark operating profit was £3.3m, a £0.1m or 3% decline on the comparable period last year.

OPERATIONAL REVIEW

MULTI-CHANNEL LEADER:
Multi-channel sales participation has continued to grow and now represents £867m or 51% of Argos’ total sales. Total internet orders, including Check & Reserve, grew to reach 42% of Argos’ total sales, with the remaining 9% of multi-channel sales comprising products either ordered in-store for home delivery, or by telephone. The fastest growing channel continues to be online Check & Reserve, which grew to represent 30% of total sales.

Argos is the second most visited internet retailer in the UK, with over 440 million website visits in the last 12 months, an increase of 6% over the previous 12 months. The mobile website and the Apple iPhone and Android apps are driving the rapid growth in mobile shopping. During the period, the proportion of total sales from mobile shopping was around 7%, up from 3% last year meaning that sales using a mobile phone were in excess of £100m in the period.

Stores continue to be a key component of the Argos multi-channel model where, consistently for the last five years, nearly 90% of all sales have involved the store. Over the next five years, Argos has around 235 store lease renewals or break clauses due. With this flexibility, Argos will focus on improving its store network by relocating or closing some older stores and opening some new stores if attractive sites become available. In the current financial year, it is expected there will be around ten store closures, with no new store openings planned. It is likely that Argos will close or relocate at least 75 stores as their leases come to an end over the next five years.

PRODUCT LEADERS:
Own brands continue to offer excellent value and further choice with Alba, Bush, Chad Valley, Hygena and Schreiber having around 2,000 product lines in the Autumn/Winter 2012 catalogue. The Habitat range was launched with 1,000 product lines in the Autumn/Winter catalogue, with products available for immediate collection in around 50 stores.

STRENGTHENING VALUE:
Argos is a leading value retailer and remains highly price competitive, supported by the Group’s sourcing scale and infrastructure advantages, together with the benefit of Argos’ low-cost operating model. Argos continues to retain an overall competitive price position which is measured weekly using internet price comparisons while maintaining a price position better than the competition on its highest volume lines.

IMPROVED SERVICE FOR OUR CUSTOMERS:
Argos continues to deliver strong performances in its store mystery shop results. Feedback received from around 8 million customers last year, as well as market research, is being used to better understand and serve existing customers, as well as acquire and convert new customers. Customers continue to access Argos products, share ideas and discover engaging content through the growing Twitter and Facebook communities.

Source : Home Retail Group
www.homeretailgroup.com/news-and-media/news.aspx?smlbus=1690&article=4548