Pressure mounts on Argos owner

The pressure on Argos and Homebase owner Home Retail Group intensified this week when respected retail analyst Philip Dorgan slashed his forecasts for the group's profits performance in this financial year and next.

The Panmure Gordon analyst has a sell rating on the stock and said that in the absence of store closures at Argos he would be downgrading profit forecasts by 34 per cent and by 45 per cent respectively for the next two years.

Dorgan believes Argos's like-for-like sales will continue to fall in both years, with resulting pressure on margins.

He urged the new chief executive of Argos, the former BestBuy executive John Walden, to consider reducing the size of the estate in the face of competition from online rivals such as Tesco and Amazon.

Argos has suffered falling sales since 2008 and most recently blamed the weak consumer electronics market for an 8.8 per cent drop in like-for-like revenues over its Christmas quarter. It barely made a profit in the half year to August.

The business, which sells products through 750 stores as well as online and through a television channel, generates annual sales of more than £4 billion.

On Thursday, it is due to update the City on trading for the last eight weeks of its financial year, when figures should be assisted by comparisons with last year's VAT rise.

Cost cuts have kept it on course to meet the City's forecast for profits of around £100million in the year to February 28, but the company has warned investors to expect a significant cut in the full-year dividend payment.

Source : ThisIsMoney.co.uk
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