Argos enjoyed a hugely successful third quarter of trading thanks to a busy Christmas period. The catalogue-based retailer looked to be a possible high street casualty only a few months ago, when mounting debt and a string of non-profitable stores seemed likely to sink the popular chain.
However, thanks to the huge demand for tablet computers and a revamp of its internet business, parent company Home Retail has now managed to raise its forecast full-year pre-tax profits as a result of Argos’ performance.
Home Retail now predicts its annual profit to come in at around £73 million, which is £10 million more than the most recent forecasts released by industry experts.
Much of this is due to the more digitally friendly business plan adopted by Argos in recent months, with the click and collect option proving hugely popular with harried consumers over the Christmas trading period.
Internet sales accounted for an impressive 42 per cent of all sales at the chain in the third quarter, with sales made using the smartphone app and mobile sales site growing by 125 per cent.
This contributed greatly to the 1.6 growth in total sales, which amounted to £1.7 billion for the quarter. However, this growth increased to 2.7 per cent in the 18 weeks to the 5th of January thanks to Christmas shoppers taking advantage of the improved accessibility the chain now offers.
Chief executive of the Home Retail group, Terry Duddy, was predictably pleased with Argos’ impressive performance during the festive period. Yet despite this success, he remains cautious about the future of a brand which is still taking steps to improve its recent poor fortunes.
He says; “Whilst we anticipate consumer confidence will remain subdued in the coming year, we are focused on delivering the transformation plan to reinvent Argos as a digital retail leader and the on-going development of the Homebase proposition.”
Argos, it appears, has managed to escape the dreaded administration process, yet equity analyst Keith Bowman of Hargreaves Lansdown Stockbrokers believes that it must partially thank one chain which did not fare so well for its recent boom in sales.
He says; “Argos has enjoyed a good Christmas. As a result, profit guidance has been increased.
“Consumer desire to shop online, the demise of competitor Comet and management’s new strategy to move from a catalogue orientated to an internet driven business looks to have underwritten performance.”
Do you think Argos’s move to a more internet driven retail strategy will result in the company occupying fewer commercial properties or will they still require a significant high street presence? Share your thoughts with us below.
