Argos reports flat Q3 sales

Home Retail Group, the UK’s leading home and general merchandise retailer, today publishes a trading statement for the 18 weeks from 31 August 2014 to 3 January 2015.

Total sales at Argos grew by 0.8% to £1,822m. Net new space contributed 0.7% as a net nine stores were added in the period as part of the previously announced trials, including seven Argos digital concessions within Homebase stores and three small format digital stores. The Argos portfolio now comprises 756 stores.

Like-for-like sales increased by 0.1% in the period. There was further growth in sales of electrical products as a whole, principally as a result of strong sales performances in video gaming, TV’s and mobiles, partially offset by a market driven decline in tablets. These sales increases were principally offset by a sales decline in jewellery.

The week of 'Black Friday' was Argos’ highest sales week of the period, with sales being particularly volatile in the weeks surrounding this event. Whilst experiencing strong trade on ‘Black Friday’, Argos adapted its trading stance both during this event and during the period in general, in order to protect both its gross margin and its cost base, as the highly promotional and high volume nature of this event threatened profit in this key period.

Internet sales for the period represented almost half of total Argos sales at 49%, up from 46% for the same period last year. Within this, mobile commerce sales grew by 40% to represent 28% of total Argos sales, up from 20% in the prior year. Sales via Check & Reserve represented 80% of internet sales in the period.

The approximate 25 basis point gross margin improvement was driven by a reduced level of promotional activity reflecting the more cautious trading stance adopted, together with the anticipated impact of favourable currency and shipping costs, partially offset by an adverse sales mix impact from the growth in margin dilutive electrical products.

John Walden, Chief Executive of Home Retail Group, commented:

“I am pleased with our overall performance during our important peak trading period, having managed through a volatile trading environment with good control of both gross margin and costs. This year's adoption of ‘Black Friday’ promotional events generally by the UK market significantly impacted the shape of Argos’ sales over its peak trading period. For example, on the day alone sales at Argos were up by 45%, while at the same time, it received over 13.5 million visitors to its digital channels, three times last year's visitors, with mobile channels representing 71% of visits and 61% of digital sales. The draw of discounts affected trade both before and after that busy weekend as consumers satisfied their Christmas shopping lists with bargains.

"In anticipation of volatility in trading patterns and the profit pressure caused by aggressive promotions, Argos pursued a more cautious trading stance over the period. This resulted in broadly flat like-for-like sales, but achieved both improved gross margins and good cost management. Argos also made good progress during the period on its Transformation Plan to reinvent itself as a digital retail leader, as sales through digital channels increased to represent half of Argos’ total sales.

“As a result of our trading strategy in the period, we continue to expect Group benchmark profit before tax for the current FY15 financial year to be in line with the current market consensus.”

Click here to view the full publication: http://www.insightdiy.co.uk/articles/home-retail-group-q3-trading-update/622.htm

Source: Home Retail Group
http://www.homeretailgroup.com/