Argos sees profits tumble as shoppers cut back

With sales down nine per cent on a like-for-like basis in the 26 weeks to August 27, Argos owner Home Retail Group said the chain’s profits slumped from £54.4m a year earlier as margins were also hammered by discounting.

Chief executive Terry Duddy said the company had not seen the sales improvement it had expected as it gears up for the Christmas season.

It hopes to offset some of the turmoil in the UK, where it has 750 stores, by setting up a joint venture to launch Argos in China. Home Retail Group’s bottom-line pre-tax profits slumped 70 per cent to £28m, as its homewares chain Homebase was also hit by a squeeze on its sales and mar- gins.

Argos said its core customers have borne the brunt of the current squeeze in living standards, adding that with many not being home owners they had benefited less from low interest rates.

They have cut back on buying non-essential items, particularly electronic items such as televisions and video games sys- tems.

Argos’s operating margin was squeezed to 0.2 per cent from three per cent as it was forced to discount to shift stock and it battled higher shipping costs and the weakness of the pound.

The chain will enter China next year through a joint-venture with Haier, which manufactures appliances such as fridges and freezers.

Like-for-like sales at Homebase, which operates 342 stores, were down 0.6 per cent, as sales of big ticket items remain challenging.