Home Retail profit slumps by 60pc
Home Retail, the country’s biggest household goods retailer, posted a 60 per cent slump in year profit and axed its final dividend as its cash-strapped consumers bore the brunt of the economic downturn.
The owner of catalogue-based Argos stores and the Homebase do-it-yourself chain said on Wednesday it remained cautious about the consumer outlook and warned it is operating in a particularly difficult trading environment.
“Prospects for the 2012/13 financial year remain uncertain as consumers’ disposable income is impacted by ongoing inflationary pressure, together with low levels of consumer confidence,” Home Retail’s Chief Executive Terry Duddy said.
The company said it was likely to close 10 Argos stores over the next financial year, relocate several more to better locations and focus on selling goods to customers via multiple channels, including through mobile phones and the internet.
The firm made an underlying pretax profit of £102m in the year to 25 February.
That compared with analysts’ average forecast of £100m, according to a company poll of 23, and £254m made in the 2010-2011 year.
Total sales fell 6 percent to £5.49bn, with sales at Argos stores open over a year down 8.9 percent and like-for-like sales at Homebase stores down 2.0 percent.
Many British retailers are struggling as consumers’ disposable incomes are squeezed by rising prices, muted wages growth and government austerity measures, and as they fret about job security and a shaky housing market.
Argos has been particularly hard hit because its mainly low-income customers have suffered most in the economic downturn and because it also faces stiff competition from supermarket chains, specialists and internet players like Amazon (AMZN.O).
American John Walden started as Argos’s new managing director last month and has been given a free rein to examine all options for the struggling business, including closing some of its near 750 shops.
The company had warned in January that its dividend would be cut significantly for the first time since it listed in 2006.