Home Retail Group warns on profit amid 'uncertainty' over Black Friday
Home Retail Group, the owner of Argos and Homebase, has warned that its full year profits may be slightly below current market expectations due to uncertainty over the effects of this year's Black Friday.
In the 26 weeks to 29 August, group sales were down 2% to £2.6 billion while benchmark profit before tax increased by 10% to £34.1 million.
John Walden, chief executive of Home Retail Group, said: "We look forward to an improved sales performance for both Argos and the group in the second half. However, as I have previously stated, trading at Argos during this year's important Christmas season seems less predictable than usual, as both retailers and customers determine whether to repeat last year's unusual Black Friday patterns.”
He added: “The combination of this trading uncertainty, an increased level of investment in the launch of Fast Track and the underlying profit reduction from Argos' challenging first half, mean that at this stage of the financial year we expect the group's full-year benchmark profit before tax to be slightly below the bottom end of the current range of market expectations of £115 million to £140 million."
During the period, like-for-like sales at Argos declined by 3.4% while total sales fell by 1.5% to £1.7 billion. As anticipated, sales of electrical products declined compared to last year, driven principally by TVs, tablets and white goods. These declines were partially offset by growth in mobiles and toys. Benchmark operating profit was £6.4 million compared to £12 million a year earlier.
Walden said: “Argos continued to make good progress with its Transformation Plan, delivering strongly against its digital store opening programme. Argos also substantially completed the technology and operational steps necessary to launch ‘Fast Track’ – its new home delivery and store collection propositions. Argos is investing significantly in the launch of Fast Track and although the rate of customer take-up cannot be certain, we are confident that customers will increasingly embrace this market leading service over time.”
Meanwhile, total sales at DIY chain Homebase dropped by 2.2% to £816 million as the retailer closed 25 stores in the period to reduce its store estate to 271. Like-for-like sales increased by 5.6% with growth broadly across all product categories, but particularly in big ticket kitchen, bathroom and furniture products. Benchmark operating profit grew to £34.3 million from £27.8 million in the same period last year.
Walden added: “Homebase delivered a good first half, with like-for-like sales growth and an improvement in operating profit. It also made good progress with its Productivity Plan and the store closure plan in particular, which helped Homebase to achieve further cost reductions.”
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