Argos sales slump

Terry Duddy, chief executive of parent company Home Retail Group, admitted that the figures are bad but said investors, while disappointed, are not yet calling for him to go.

In the period from 28 August to the end of December, Argos sales fell nearly 9% to £1.7 billion.

Asked how long they could keep tumbling at that rate, he replied: "They can't. You would hope it would bottom out."

At Homebase, which has a wealthier customer base, sales were down 2.6% to £475 million.

Although Home Retail is debt free and expects to end the year with cash on the balance sheet of £140 million, it still intends to slash the dividend payment to preserve cash, it announced today.

It is also closing its Homewares trial "HomeStore&More" at a cost of £10 million. Retail analyst Nick Bubb said: "Terry Duddy is under pressure."

The company guided today that profit for the year will be "around the mid-point" of the present analyst range of £78 million to £125 million.

Critics say that Argos is little more than a showroom for Amazon, a grip that Duddy argues shows a misunderstanding of the business.

"One of the things that people don't understand is that there are lots of things we sell that Amazon do not. The overlap is not as big as you think it might be," he said.

The internet accounts for 41% of Argos sales in any case, he says.

"Argos is the model of a business for the future," he added.

Duddy hopes to appoint a managing director to run Argos shortly, reducing his own workload.
The company says that investors have been spoken to and are supportive. Schroders, the biggest shareholder, is said to back Duddy.

Home Retail Group has been seen as a takeover candidate for some time.

Freddie George at Seymour Pierce said: "We have concerns that the Argos business will continue to be impacted by market conditions for the company's core categories while competition intensifies further, particularly from the food retailers. We are also sceptical re the takeover rumours while trading is so weak."

David Jeary at Investec said: "Our prevailing view that Argos is suffering from structural as well as cyclical pressures continues to shape our investment view. The shares have recovered from their lows in November, when the equity value equated to the net receivables and forecast year end cash - in other words, no value was ascribed to the combination of Argos and Homebase. This reflects investor fears of a drawn out 'Woolworth-esque' decline at Argos."

The shares fell 3.4p to 83.85p.