No mass Argos store closures, pledges owner

Argos, which currently has 748 stores, said like-for-like sales declined 8.5 per cent in the eight weeks to February 25, driven by weak demand for TVs and a 35 per cent slide in sales of video games as rivals slashed prices. It opened one new store and closed 12 in the period as leases expired and said a further 35 leases would come up for renewal in the next year, but denied it had plans for widespread closures.

City analysts have questioned whether new Argos boss, the former BestBuy executive John Walden, will need to shrink the estate in order to safeguard profits.

However, the group said it will meet City profit hopes of £100m for the year to February 25, despite a deterioration in sales at sister business Homebase.

It suffered a 6.5 per cent decline in like-for-like revenues, which was significantly worse than the previous period.

Home Retail admitted that profits are likely to fall in the next year as like-for-like sales continue to come under pressure.

Home said it was impossible to say how many of the 35 stores would be closed over the next year because some of them were profitable and landlords might offer lower rents on others.

Chief executive Terry Duddy said: “On balance we will be net closing stores over the next couple of years but whether it’s five or 10 a year will be impossible to say.”

The group said there had been a significant fall in the market for audio, video games and TV, with estimates it has fallen 20 per cent over the past year. However, it said ‘core electricals’ items such as kettles and toasters returned to growth in the period, while internet sales rose to 40 per cent of the chain’s sales, up from 36 per cent the previous year.

Homebase, which has 341 stores, bore the brunt of weakening demand for ‘big ticket items’, such as kitchens and bathrooms, which make up a large proportion of its sales in the final quarter of its year.

However, profit margins at the chain increased as a result of better stock management.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said the update was disappointing and that profit estimates have already been revised down by around 60 per cent, resulting in a 50 per cent cut to the dividend.