Argos Sees Best Quarterly Growth In Two Years

Despite the distraction from its pending takeover by Sainsbury’s, Home Retail’s Argos chain has reported its best quarterly sales performance in two years.

During the 13 weeks to 28 May, total sales at Argos grew by 2.6% to £868m with like-for-likes edging up 0.1%. However, the group said that the cannibalisation impact from new space added in the previous financial year was around 1% and therefore Argos’ underlying like-for-like sales increased by approximately 1%.

Sales grew in both electrical and non-electrical product categories during the quarter, with the growth in electricals said to be principally driven by performance of TVs, mobiles, computers and tablets, partially offset by a sales decline in white goods. Growth in sales of non-electrical products was largely driven by furniture and general sports, partially offset by weaker sales of seasonal products.

Thanks to its ongoing focus on multichannel retailing, the chain’s internet sales grew by 16% in the quarter and represented 49% of total Argos sales, up from 44% for the same quarter last year. Within this, mobile commerce sales grew by 17% to represent 29% of total Argos sales, up from 25% in the same quarter last year.

However, the group revealed that gross margin declined by 100 basis points, principally due to the impact of adverse currency and shipping costs and an adverse sales mix impact mainly attributable to the improved performance of margin dilutive electrical products.

John Walden, Chief Executive of Home Retail Group, commented: “Argos delivered good total sales growth together with positive like-for-like growth, representing its strongest sales growth performance in eight quarters. This was achieved against the challenging backdrop of constrained seasonal product sales due to poor weather, on top of a deflationary pricing environment.

“Many of the digital capabilities we are building, as we pursue the Transformation Plan to reinvent Argos as a digital retail leader, are positively impacting our business.”

He added: “We remain on track to complete the proposed transaction with Sainsbury’s in the third quarter of this calendar year. Given the natural distraction that a transaction such as this can be for our colleagues, on top of the recent sale of Homebase, I am particularly pleased with our performance in the quarter.”

NAM Implications:
  • All looking good for a smooth transition to Sainsbury’s ownership, subject to a possible CMA enquiry (the CMA has until June 25 to decide whether it will launch an inquiry into the deal).
    • One minor distraction for the stakeholders might prove to be the setting aside of at least £30m to compensate store card customers who were charged “excess” fees for late payments, according to The Telegraph