Bloomberg News

Home Retail Reports Argos Sales Slump, Expects to Cut Dividend

January 12, 2012

Jan. 12 (Bloomberg) -- Home Retail Group Plc, the U.K. owner of the Argos chain, forecast a slide in annual profit after holiday sales slumped at its Homebase and Argos stores, and said it plans a “significant cut” in the dividend.

So-called benchmark pretax profit, which excludes some items, will “be around the midpoint of the current analyst range” of 78 million pounds ($120 million) to 125 million pounds, the company said today in a statement. The retailer made 254 million pounds on the same basis in the previous year.

Revenue at Argos stores open at least a year fell 8.8 percent in the 18 weeks ended Dec. 31, according to the Milton Keynes, England-based retailer. The median estimate of 15 analysts compiled by Bloomberg was for a 9 percent decline.

Argos has been hurt by dwindling household incomes and competition from supermarkets including Tesco and Web retailers such as Amazon.com Inc. The chain was targeted by Wal-Mart Stores Inc.’s Asda in a holiday advertising campaign that compared prices on toys and responded by offering 50 percent discounts on 1,000 items, reducing profitability. The quarter over Christmas is Argos’s busiest period of the year.

“Argos sales continue to be impacted by the market decline in consumer electronics categories,” Chief Executive Officer Terry Duddy said, describing the trading environment as volatile and demanding. “We will continue to plan cautiously.”

Same-store revenue at the Homebase home-improvement chain fell 2.6 percent in the 18-week period, missing the median analyst estimate for a 1 percent decline.

Home Retail recently acquired the Habitat brand in the U.K. including three of the furniture retailer’s London stores. The retailer announced last year plans to start a multichannel operation in China via a joint venture with Haier Group.

--Editors: Paul Jarvis, David Risser

To contact the reporter on this story: Sarah Shannon in London at sshannon4@bloomberg.net.

To contact the editor responsible for this story: Sara Marley at smarley1@bloomberg.net


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