Argos Stores Under Threat As Profits Fall

The owner of Argos has warned of possible store closures after the catalogue retailer saw a huge slide in full-year profits.

The 748-strong chain suffered a 9% drop in like-for-like sales and a near 60% plunge in operating profits to £94.2m in the year to February 25.

Its owner, Home Retail Group, said the leases on around 230 Argos stores will come up for renewal in the next five years, and some could be moved or shut down.

It expects to close about 10 outlets during the current financial year.

A company statement said: "With this flexibility, Argos will focus on optimising its store network by relocating or closing some older stores and opening some new stores if attractive sites become available."

Home Retail, which also owns DIY chain Homebase saw pre-tax plummet more than 60% to £90.2m over the last year. Total sales fell by 6%.

Homebase, which has 341 stores, saw its like-for-like sales drop 2%, while operating profits plunged 50% to £22.8m in the same period.

Big ticket sales such as new kitchens and bathrooms were lower at Homebase, the group said, as consumers reined in spending.

With its shares down more than 50% over the year, the group also dealt a blow to shareholders by saying it would scrap its final dividend.

"Future dividends will be set at a level which is sustainable and which reflects the trading prospects and financial position of the Group," added Oliver Stocken, chairman of Home Retail Group.

Earlier in the week Sky News City editor Mark Kleinman exclusively revealed that the new American boss of the Argos John Walden has launched a review of the business in an attempt to turn around its fortunes.

The group said multi-channel sales now make up 48% of total sales, with 39% from online, while total sales from mobile shopping were around 6%.

George MacDonald, deputy editor of Retail Week, told Sky News that Argos had "big problems".

"They need to take some action to take control of their own destiny a bit more," he told Jeff Randall Live.

But Mr MacDonald said the fact that 'multi-channel retail' was growing much faster than online only retail (with the exception of Amazon) would work in Argos's favour.

"The stores are not great places to go for the experience, they are not comfortable and a bit dingy often, but [Argos] has a great distribution centre," he added.

Andrea Felsted, senior retail correspondent at the Financial Times agreed that Argos was "under pressure" as shoppers experience squeezed budgets and move online.

She told Sky News: "Clearly Argos simply has too many stores.

"You would not build a chain now in Argos's line of business with 750 stores and clearly something needs to be done with their store base."

The tough retail trading environment was also demonstrated by clothing chain Next, which has reported a 3.9% fall in total sales in the 13 weeks to April 28.

With directory sales up and shop sales down - in line with market expectations - analysts said the trading update demonstrated the Britain's second biggest fashion retailer's "resilience".

There was better news for pub chain, JD Wetherspoon, which saw like for like sales rise by 2% in its third quarter.