SHARES in Home Retail Group plunged after profits at its Argos catalogue chain were hammered as shoppers put off buying TVs and computer consoles.
Argos scraped a profit of £3.4m in the 26 weeks to August 27 – down from £54.4m a year ago – as sales of big ticket items and electrical items stalled.
Shares closed 20.2p lower at 99.5p on the FTSE 250 as the group admitted there had been no let-up in the grim consumer mood in recent weeks as it approaches the key Christmas trading period.
News that Argos will offset some of the turmoil in the UK by opening in booming China next year failed to ease investors’ nerves.
The dire performance at Argos pushed the group’s bottom-line profits down by 70% to £28m, although its home wares chain Homebase also suffered a squeeze in sales and margins.
Like-for-like sales at Argos, which operates 750 stores in the UK, fell by 9%. It said its core customers bore the brunt of the current squeeze in living standards, adding that with many not being home owners they had not benefited from low interest rates.
Argos’s operating margin was squeezed to 0.2% from 3% as it was forced to discount to shift stock and as it battled higher shipping costs and the weakness of the pound. It is also fighting competition from online retailers such as Amazon.
Mr Duddy said: “Core customers at Argos have continued to be under greater pressure and there were ongoing challenging conditions across several product categories, most notably consumer electronics.
“As we enter our busiest trading period, market conditions remain both weak and volatile and in these early weeks of the second half we have not seen the improvement in sales that we had anticipated.”
Like-for-like sales at Homebase, which operates 342 stores, were down by 0.6%, as sales of big ticket items remained challenging – although sales of bedroom furniture and bathrooms benefited from new ranges and installation services.
Homebase grew its share of the home improvement market, which has been badly hit in recent years amid falling house prices. But the chain’s operating profits fell by 35% to £29.9m.
The group’s profits disappointed the City, which had forecast £30m.
Analysts cut full-year profits forecast from £135m to £125m.