Home Retail in line for profit warning

Kasmira Jefford
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HOME RETAIL Group’s profits for 2013 are expected to fall significantly short of expectations as sales at its troubled retailer Argos suffer from falling consumer demand and competition online.

Analysts believe chief executive Terry Duddy and John Walden, the new managing director of Argos who joined last month, will issue a profit warning “sooner rather than later” as Walden focuses on overhauling the group, analysts reckon.

“The risk of material downgrades at the company’s fourth quarter results on Thursday or at its full year results in May seem high,” one analyst told City A.M, warning the group could ditch its final dividend.

He predicts pre-tax profits for 2013 could fall as much as 25 per cent below City expectations of £84.1m.

Last week, Philip Dorgan, an analyst at Panmure Gordon, slashed his profit forecasts for the company by as much as 35 per cent citing the “continued management inaction on store closures”.

Alluding to interviews in which Walden said he had been given a blank piece of paper on Argos, Dorgan said “he needs to start writing a list of store closures on it.”

Duddy (pictured) has repeatedly defended Argos’ store portfolio of 759, arguing that none of them are losing money, while a big closure programme would come with a heavy restructuring cost.

He plans to review 180 stores as they come up for lease renewal or have break clauses over the next five years.

Duddy is likely to highlight tomorrow that the decline in sales in the fourth quarter slowed, after Argos reported an 8.8 per cent slump in sales over the 18 weeks to 31 December.

City analysts already expect a 60 per cent fall in pre-tax profits to £99m for the year to 25 February at Home Retail, which also owns DIY retailer Homebase, after a profit warning in January.

Shares in the company, which have lost over half their value in the last year, closed up five per cent at 110p.